Charles River Laboratories International (CRL) 17 Feb 212020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to Charles River Laboratories International Fourth Quarter Earnings Conference Call and 2021 Guidance Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised today's conference is being recorded. [Operator Instructions] I'd like to hand the conference over to your speaker today Mr. President Relations Vice Charles Corporate Spencer, of with Investor River. Todd ahead. go Please

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basis the operating XXXX, declined RMS margin of to to XXX points almost entirely by XX%, impact the For due COVID-XX.

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we continue pandemic, and to to exceptional biotechnology organizations to conclusion, pharmaceutical exceptional their Our we value shareholders. government In deliver providing for enhance partner worldwide. scientific our and work and our commitment, goal thank as to greater our believe clients, and during especially, trusted By I want their our to companies, for for institutions support. will our the employees COVID-XX is shareholders a position value and academic non-governmental

Smith David XXXX acquisition additional guidance additional give of details details as Cognate. like our I'd to the on performance financial you and Now well as on

morning. and good Thank Jim, you,

refer other primarily focus guidance capital be also you and to comments our investment and and currency results, the I the related exclude excludes principally our which foreign may amortization speaking initiatives, non-GAAP acquisition-related efficiency acquisitions to items. my of charges, strategic begin, that I I'll Before performance excludes and other primarily XXXX, impact certain will costs Cognate other BioServices. of remind venture to which global which translation. on primarily will this morning My of discussion revenue Many organic growth, for impact financial our

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quarter, add closes end approximately outlook partial Assuming in to XX%. the is to acquisition the expected the of the revenue to XX% of a by Cognate first for revenue growth year resulting million $XXX

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comments. our That concludes

now We questions. take will your

[Operator question you. Thank is Coldwell Our with from Instructions] Baird. first Eric

Your line open. is

very thanks morning. much. Hey Good

two ones Just here. quick

be tell on some you're like term. this. exploring based for little what is there mix was I structure could probably in a First if options more what It comments. were And I'm we safety some the could what you the cost off using and capital us for those then mix could on secondarily, short to on the think going that might your But the Cognate David and related last triangulate on slightly being of of the deal? looks get XXXX? much. debt very the we Thanks comments detail curious and outlook into dis-favorable driver you

Yes.

it. in Eric your of around also I we for WACC, might our we use fund is question X%. So, invested terms which But how capital calculations, return of capital cost about the on think our is

know we finance looking how then we our to long-term structure holds, If might rates debt will Cognate. So, we the moment. interest at be are very to see that low the

the time rate on a interest But of few more come definitely to weeks a ought low think say to we'll cards yes, environment I do course we months' So, advantage of with in when that. or it's a take we that. that

we investment fund our keeping eye terms although actually revolver through longer for initially we'll in what might rates And do close and term the be interest we our do so markets a on will bonds. can of that

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to mix So, is fluctuate. to tend

in particular Sometimes have the it get like costs a beginning. ago portfolio to at we've load larger like off few had heavy a QX have that you like got and where we get the years on balances we studies occasionally the

move the well. Still striving I So, his in mentioned prepared we're the as Jim which with DSA. for potential to pleased think XX%, towards that remarks overall, very yes,

So, QX impact this is mostly transitory.

from with Your Windley next question comes Dave Jefferies.

Your line open. is

Hi, thanks. cell Good in question acquisition on Cognate wanted morning. two-parter. I in a and with Thanks focus I for to question. gene therapy your guess Jim my the taking my WIL want that to that there kind of acquisition, in at with decided it came along that sell CDMO decided to was small business. that a least you CDMO you didn't and be

more is attractive complementary is biologics a cetera, the River out space for your little now question business? Thanks. Part are bit A to at therapy or to this you CDMO that So, white the fill supply, opportunity B, Part pieces need Charles a is get cell on gene and additional the in capabilities you've to the And cell other your to And of of then little C&GT you complete your the elaborate feel you more are there with capabilities point, fairly a here why flesh little into. bit there more bit continuum? testing question assembled, that is that et of in into like, --

that Yeah. for Thanks Dave. Yes.

with work. like just were couple And that, it which Number since premier shareholders, to it done an last and industry. the analysis have very achieve desired would ago recall, of did. for was I was that with it And perhaps a possible up in we dramatically. scale. you'll exhaustive leader acquire we the conversations heated And in -- had there We years small good two told minimally of make I and out to you remain that we we us the with to at happened. overstated, did very, be CDMO. and And in and be, So, us, had was which decided that molecule over difficult -- brings best of thought we it a in business. leader -- it. opportunity player to kind Number many But us told a of things time, this to be a the you space. both, the potentially an if we CDMO that as entering has know, niche spaces play, we're we And other which in some And players. think years cell overtime. a the analysts exit, And space asset, big several we the one, perfectly we leader as therapy we gene

-- made. of that we the so with So that sort original we dovetails comments

investment got therapy. gene of this $XX cell You've and in billion

Phase you've over XXXX, and two-thirds that in X,XXX filed. majority got are in three Just or preclinical quarters been The have I drugs I. vast think

demand the up So heated has dramatically.

have lot inbound. We of a

that they Our clients, trust from they either have, us need they'd or getting requests us these, for derived or services incapable that M&A products like of to because from and is more they're elsewhere. unable

not we it very be feels like, done it would to their important cause outside drugs a had get it portfolio. manufactured. but go -- fills in So, to the clients gap this don't think I have to would lethal this,

continue answer question. So your We broad just portfolio. comment an extremely to now to, and second have

with before commercial and and purposes. drugs, be clinic development the We're We're clinic to going the able drug. to development. cells, drug, manufacture in to with able into and to test Discovery all that be drug, they're test process do that going be Safety us or the business. to going to able your to our of business you, is you're going the via for going marketplace. Biologics research literally starting So the obviously to We're for hopefully our And those

comprehensive So it's suite. very a very,

this to is XX%. X% from, about you our therapy in say, heard going revenues XXXX cell gene fiscal us and As to of deal consolidated move with

that So, strategically, our but for clients. it's entirely in response a we're doing us major to move

of So cell opportunity products, leading clients development is focused cell therapy gene player can therapy be us business, through an in this the particularly products, stay and with preponderance a this to and the the segment. of where

good. Very Thank good, sounds you.

Sure.

Kreger next William is Blair. John Your question from with

is line open. Your

to Thank the set years? are you. and kind this needs make comment you is Jim, investment what point, just scale I said, the the that next on just a that And Cognate doing of going you're -- on, follow-on up at you the can assume, business for you to clinical quick need work think over production? commercial few but is Thanks. footprint capital the maybe in you

the being as exist products into capacity, commercial, good want relatively that larger a which and right will It's worked geographic as Obviously, and in been, have into drugs also. cell clients US provide do although on to do a added which commercial gene the some domain, if obviously now. those many of Europe. definitely so got incremental do to that footprint. clinical that very They will have move They've commercial work Yeah. has to capacity trial lots. and both, therapy well, -- there's, recently, which And few period,

be be we CGMP see backgrounds from therapy and demand what's of strong owned of of a the it that production are in pleased the have think knowledge our clients goal company to of different and advance the the ability, equity growing demand. the Cognate's what's and Capacity all people of do strategy We be because future form the anticipating would businesses out technical certainly I investment to management being team that somewhat we and ability very from a there's having that the very as will portfolio. of hands, private in in certainly anticipate. So host like the important built come have the regulatory our there. will cellular uncertainty

producers. could clinic are makes should be commercial will high in it drugs of do who with have drug their I the progressing are clients confidence, a think working So that whose the now this we perhaps that company and degree nicely if

entry increased like with with our part portfolio. access and clients to footprint with of our overall a business their of here So point this we bunch sort that with being of

Great. Thank you.

Sure.

next with is Your Stanley. question from Morgan Ricky Goldwasser

is line open. Your

a Jim area. morning, at intent the our and year acquisition. about to completing know think conference it good congrats over talked and I your you Hi, enter the I Yeah. on

the in strategic that what of companies like equate seems opportunity. capacity to starting gave that own some and to were down own XX to like I they're the you years looking of which sort their hear was congratulations. workspace, it think profile. You long-term the from you about question expansion, expectations real around for like I'm the margin sounds So And everything by you of Clearly, But margin margin there's My is opportunity when year. working complexity a saw right? are projects I the a facilities it X, nice from we're their downsize even ago your of outsourcing talked which we talks kind on. hearing, kind exceeded that an about sort of coming

and Cognate that like about to we of And you goal, the and are we X-year given opportunity? should expansion be opens like kind how us opportunity? think growing So this those long-term here, especially acquisition it kind going new margin really when longer-term a or that goals give market of thinking is

dive throughout may on a with as drive to line we bottom David you a organized longer-term I'll our And of more comment. important leave guidance. until give subject are you general think all comment. overall give sort specific I think entirely this slightly I we we'll to you want deep give the proposition, But of efficiency a businesses.

the the load amongst also as efficiency. provide and I and basically also. all digital years. should of last There's -- biotech. to ability are to greater some our internally pricing our certainly which continues you work continue We're outsourcing possible with as externally, grow drive on the that alluding we've businesses, which that out will process time our be over could doing generate We've We keep demand. demonstrated better to connectivity front, are think returns few power more We to organized as take to G&A the we'll across and going flat demonstrated have to of sites certainly the our will business

pharma is principal our have capacity want growth. internal Biotech and is have of biotech no has well footprint. extraordinarily a and it. big funded to the We doesn't driver Biotech

business has meaningful continue more those company forward. businesses And acquisitions I DSA foremost, across I have some just is So we that still major have still in will improved We and biggest first business margin but would have bought efficiency nicely, all significant. think our be to going definitely say margin opportunity margin to opportunity. segment contribute. which The that that improved of have will

You've it has then RMS get got since back kind to should to particularly levels of see product And XXXX. to historical it. attractive I it improve to that cell think aspect

to think extraordinary. I quite being still opportunity XX% I growth. better. drive segment get always Biologics can there's the The We'll that, Manufacturing think to at Having that. say about how margins business are we in obviously the probably decide said see

remarks some see our on dive modest and and a should you we'll certainly in on that forward not-too-distant you going we in future. deep the give a prepared in improvement definitive basis, said So more as XXXX

we And to say more Day virtual would when for bases expansion expansion. we margin as term. do act to that, look the we in have deep margin always some about constantly that give a it's the feel the all where Jim we But add covered you've despite is Investor the the only think get thing, thoughts this And there, versus can we'll year. balancing medium spring. Jim. main I And I invest said, the comment

Thank you.

question with of Bank next is Your Avendano America. from Juan

open. is line Your

then do guess, has a Hi. by the last quarter to the been from export in came quarter bigger a multiple it towards Thank to and bit Research models, non-human and expected. primates I tracking. volumes that, supply the was a been smaller is I've related like research And that event? bans demand seeing I you foresee migrate might questions few it the absence China. Model Cellero of dynamic as the like models? severely a RMS. This a one sort of in clients Are pent-up of benefit seems lighter little And be is first your thing you on that, that impacted the in you. seems the to in, HemaCare the in than volumes have need COVID-XX revenue is on

a the donation centers? And if the impact leave it you're there. pandemic I'll so just curious, lingering from seeing you. on Thank

down opened Yes. some had still There's probably quarter. in social a we side you the for as May. There's always the some been improving distancing new It's government – it slight then through shutters lingering put and donors. fourth going it on on looking We steadily. impact and obviously, we're

coming some of probably slight out the So drag year.

improve the our operational the if as As becomes severe knowledge structure this a goal. way remarks, we both hopefully. that we in we'll said it anticipate But to continue that in prepared should feel we even, doesn't, to COVID achieve we less have we

we next had year's of is targets, So which north XX%.

will So participate grow nicely. – continue that to to

going In to fact, nonhuman you're ask another question on primate.

happening. demand, should which that's we species an think offline molecules the on – Work get think really the did I tightening around that adding think thought done large ask I that going that larger we supply job the we why of moving just exceptional can of is were sources to quality countries, the have for looking we're species one have results the multiple ask, constrained sources of multiple that supply species, So is I our The has be supply support I'll is world? an so on answer expanding done one, definitely that's for. the significant. that quite I you in sort up sort such to ensuring and answer don't you don't changing we've out to maybe and to conversation smaller on that.

think role. to I So a will NHPs continue critical play

through seen medical I centers academic – play In that RMS, basically demand that pent-up totally think or shut for terms geographic were three we've much partially of the of in in locals. all

had We lockdown. of Europe the – essentially they're Asia, believe go have go in all down US the opened. don't back going The infection level the and regardless with COVID of gone sorry that other laboratories are given to research they and all down. that agents is them too around down their and They're with shut that they important. usually work now to definitely

sale about that, we we're benefited our the both disruption what terms in enhanced not cadence we're talking grow. the some of saw. COVID the by is continues of the cadence normal But products products research we're normal competitors in I production of think that in back think principally services price of So models, think you're back to obviously I kind from a that which business and RMS in of for but to volume only cellular unaffected

you. Thank

is Your next Jones Robert Sachs. question with from Goldman

open. is line Your

instrument XXXX, in delayed revenue was Good like to comments improvement for saw Great. wanted you're growth question. to you affect some towards back morning. installations the of like but seems the I you Thanks to I the XXXX. the that It end Microbial. used Jim, go language well into think around seems it the expecting

faster EBIT in by enterprise to So overall just margins. what margins then look bit points basis basis installations start just gave improved XXXX margin? I a you the a these if points of commentary to relatedly, in to And kind little overall like to your installations? looks needs better that think, some see How understand on wanted in come to but reacceleration back front fact XX could the in segment, of mind to these client at XX change it

Yes.

pretty that we had told is larger to have in to what our an confident sure for this, it's to systems. a And clients able install basis. predict we feel imperfect some with on world most we accessing do our you have virtual cases and but complex this we've of a few So largest which in difficulty systems been

to us. course, the really And be facile needed of do the time and systems dedicate people do to virtually. these willing clients and had we and creative were to So were really to the with things --

and ourselves company regulatory that, virtually Now of clients had of the aspects audits other the in of we've all lots including we're some of and of done we've virtual things done having have said buying. XXXX FDA us the agencies all And year auditing process that. that

a in world. virtual we're So

a to what The rough cadence virtually people will to just will So to whether We is think going pretty it's hard things right virus it now predict they're comfortable get obviously. similar on. how doing want be wait. to we're or

So states our instance. limitations we systems in We're US and place which in many countries severe. in in not these into for many letting outsiders the of facilities, of work are the we the

the So of Accugenix systems. in of ID business. But we don't place some revenue every that large quite big which our extent importantly instances more are is some profitable. systems even they're one the as and large impact generate and They systems, of ASPs and got cartridges, that to than of that follows substantial amount reagents these

importantly systems associated we're these placed fiscal What been all going most in base the of are why systems And that on have surge have -- we a ones haven't small thousands demand of XXXX, of those placed confusing large losing get is to they're to you you all much of still and that year just people thousands in the probably much that revenue COVID relatively less of So they think But with large the understand get just smaller cell there small. pretty drugs couldn't of on before than was gene that more therapy. which weren't systems commentary sites out who use I and on which is by by market the there is their a opened somewhat installed saw XXXX. work all of end that more enhanced the that that's at of testing a of and for and I up cartridges people end readily. incremental that commentary of slightly and more these and out probably extent a into -- how

they below of the the answer be demand second systems. improvement in why do incremental have has the is revenue been projected -- steadily the your We'll and we business don't improvement it We to margins -- been But good question installed, in the as probably as the has not both the growth. best frustratingly And manufacturing are in now. business part Microbial, think and Having installing business get the whole which there capability of improved. well. lot that Biologics. slightly as the never in those the of Part to segment. improved a there's some exceptional margins has So created they are we're business in for as XX% our Microbial being can that, we that's said in the Manufacturing

So tuned. stay

Got it. Thanks.

Sure.

question next JPMorgan. from Tycho is Peterson with Your

is Your open. line

Thanks. here. we whether Cognate. CapEx. John If with follow-ups it's of back $XXX or Catalent out MaSTherCell range facilities. gene look I Thermo Brammer. of and with $XXX here cell Hey. not million and Jim couple to CDMOs some Kreger's of A to go other starting kind at of question the Paragon with million on for commercial building in are therapy to cost The the insignificant facilities want

significant the in follow-ups how then your about out be break was million, guidance. take know CapEx maybe can investments? $XX $XXX guidance of I context I'm And David it COVID more in just curious we contribution. if being quick curious your on willingness XXXX. should So any much two on thinking million for to I'm you -- more

what's And margins, the So a it couple potential of for in upside then to there's baked the here. on seem XXXX? does like drivers

sorry DSA you did from then suppressed tailwinds headwinds and the COVID installation recovering the levels RMS Manufacturing increase wearing flagged. have -- price off. You

seem those are if they that? improvement, offsets I'm modest but more that you meaningful of could get continue all just above there So like curious Thanks. would

this business. This our It be So don't be not growth if meaningful, be disproportionate potential the the this amongst CapEx will aspect highest but business. not growth we'll I think the to of be in of will insignificant business. will

business while some GMP of it's substantial there's And This is therapy of So said we'll ahead we're And have aspects that is principally as the a manufacturing. it secondarily, already of to CapEx substantial in DNAs. production contract substantial invest we've installed cell buying. earlier. less manufacturing. Obviously, plasmid the base

So businesses. Thermo with that we're head-to-head and going therapy not really gene manufacturing for are instance Catalent more

model give on and David, on returns deal. will substantial be? get it's you order be what will it won't a obviously get you second that through and take our that as soon the of we're clarity this one pretty we'll can magnitude question. it spend it close we've we'll They lower ours is but as what be -- confident difficult baked versus there to already So won't be sort of we insignificant,

sure. Yes Yes.

we and our a do sensible in is tailwind sort -- terms approach, short the COVID in guidance. of believe approach answer COVID of short the we've sensible So to contemplated headwind will least what here, a at

baked So in. that's

we Of course, we what don't know know. don't

bit. Just to a little that unpack

expected related we both expecting open keep U-turn, And still did in COVID So to we that. that other that eye we're significant and be aspects. DSA generated that vaccines at million revenue some that and go last obviously, broadly RMS. us losses we Not the exiting that to we We because year In behind away. not say an of was call out RMS be we to of all true. with a had $XX seem some particularly academics, the for COVID be clients believe in some do we'll of and will COVID but earnings

the baked We of into XXXX. also that's continue And see guidance. some into expect that to

broadly the a been looking we So way already instance there We've are behind just other there out been talking late. things COVID at it, for of Broadly, the got called that's are a feel bit headwind. us puts we've Microbial about that's we're than lit takes.

ahead margin Moving question. your with

cognizant out unallocated to call to corporate you're want Just opportunities. potential the that a of few costs. just I want make sure

XXXX. in a contemplating guiding much towards of we're investments year that And XX revenue. that of flat a process that as for seen we've percentage historically, or the improvement in. basis So reason we point pretty are This got have is the we some putting

those indeed, the one In strategic just essentially desire Jim's I in access the to talked of and put think in different real technology. our conference, imperatives help a mentioned imperatives clients moments best-in-class when strategic about five data technology should to scientific talked fact we JPMorgan few at was Jim ago, And champion time.

expect associated would the have XX% So we to that with but this had, costs basis means is there set-up is behind that cost year. not we've that, giving COVID unallocated historically some us that that points which

you. Thank Okay.

question Your next with is from Citi. Patrick Donnelly

line open. Your is

Can talk versus of you've there? And then some about share gains. for on the proved while resilient in much certainly taking How for taking you that this even customer share through behavior academic more increased has pandemic know in talked follow-up thanks quarters seen is just business. It you what lingered recent maybe Jim included competition? a Hey, the from RMS questions. the I changes here. one you penetration

this have were outsourcing from with COVID of business, a with definitely was we prematurely well service were a of really RMS We demonstrated capable so to change at open entirely against seen internally. of were in for our to facilities sector, almost of demand do this have that fact of do it for period been sort continuing the And and the research the significant up demand, I able who risk. that amount Yes. that we frailties were it this on doing of of shutting time, think them literally side it and academic the amount them

the quick either them second incremental meaningful initial meaningful time And of shut and amount were And we during -- sort outsourcing for has their some Safety incapable confident first them of it So had that outsourced. the which and services they the really points And gotten question pleased using contemplate a that we've of done who with Discovery the they period about speed we're of that there's a of facilities in were more side. the and no provide another for we was that contemplate was saw RMS, who feedback with and outbreaks historically. from question provider we're you based the internally stuck. upon caused done quarter well. this supporting work own the that Similarly seen highly clients in asked some either that be we've that as time to and clients these outsourcing the price and/or doing kind of definitely of COVID with just

our to work that by So there's was outsourced competition no clients they into question not is anybody the were share that share and RMS was an business where and some we've that certainly XXXX gain got. being available to incremental our themselves. to unable in aspects in share done both And And It's perhaps of numbers. that was expectation incremental continuing sure for do certain in baked that DSA of that. gain to

Jim. Thanks, Great.

Securities. Sandy next from Your is with Draper Truist question

open. is line Your

questions Most normal are the getting revenue on way been a Jim margin it level? quarters looking David just of return or testing. capacity -- just Thanks forward this and would I'm you a happen. about have bolus constraints to a up? to could to to what or then to start and when or for would just less pulled it follow-up is think and just at other put maybe through there where four there get level? asked so things And normal trying answered, trying this much. of than quick so you going think ship have think is it's sort maybe to go what fast to do any one out point and microbial only the I'm normalizes, my a but in be that Is people you can just but impact, out, clear of back higher so just Thanks.

who's to hooked base of be that installed whatever not that X will start delivered real. have to not or delivered think The utilize virtually clients to number then by or been the of either bolus Yes. be us waiting to have the there'll Obviously of be for letting don't have machines up and machines installed them. And I a in. probably most real to us clients activity. will

going every It in buying they are build to that month to As day, systems. suddenly gradual. will disproportionately beneficial, I larger we will because systems large disposables Obviously, once inventory I and week, going be they not be have install think use those they're our of earlier all and but to unlikely amount beneficial of They're It's will use enough at install the said they -- it will them at it's be to We're them, shape. associated expect be then a persistent. continuing sort once every disposables. those every don't once. we're

to associated problem going to steady, or quarter be you're inferring shape a accommodate don't in an or think a beneficial think that be But it's but to disposables. those in be I maybe demands would particular a is I slightly will I think going in I inventory two, it our there's be surge appropriate opportunity? demand. think

Great. much, Jim. Thanks so

Sure.

is with Your Brennan question Dan UBS. from next

Your is open. line

questions Thanks Great, taking the on questions. a two more then on Cognate. I've and and thanks. had for the Congrats margin quarter. follow-up one

two and XXXX? little help It's margins, could the On obviously comments. help XX%. you on some just then, the I margins. margins Any Are just Manufacturing, I but on was great us segment is know And above I know Manufacturing on And the a have RMS, numbers? I of we the exited for the level, unclear guidance XX%? at a similarly hoping about talked year follow-up. talking for on from well what the you I'm those deck a XX%, from wondering

Great.

we the we to in XXXX. Cognate, to be the if exited So margins Manufacturing, way in the expect would similar you exclude

Cognate bit However, a little will be drag. a of

that be the out, mid-XXs. Investor Day. expecting particularly be where more this will think in guidance we've to just go to the of say Cognate given we the going are somewhere with we the We'll about long-term that's in code ZIP for at So year which

we well of look that's above okay, year, on call terms the to last XX% RMS, Where's In fair little -- that? bit above the a if you XX%, were out. think XX%. I ceiling so at a last

mid-high say about I So right. somewhere sorry, in be -- would the mid-high be about teens XXs would would

maybe just positioning any competitive And Paragon Advanced here are then, all still David. Thanks, well. sure Okay. one the market, on MaSTherCell. give just us on obviously, I'm color a the and Cognate. more and could color as WuXi nascent any on big you wondering, -- it's players focused I'm

terms just just any then, on are I'm terms that you whether wondering, or senior just CMOs. you. on talent how of locked complex these of they is were clients, front? and front? So in expertise of given wondering that Cognate color run the to executives And be any what I'm just critical the give Thank up color it’d deal number can

that and to should that space we're our and comparable the in think should you number this of you Lonza the those and not principal business two. Thermo is And consider buying our Catalent. competitors business, WuXi being size So of one,

code. the same in ZIP So,

product teeing the from the if manufacturing totality with we bought we're sort to acquiring, in can Specifically, those the last continue players, gene we're year cell where two up capabilities continuum they cellular portfolio whole than you that services. more portfolio are to therapy, business across cell and regard with of capabilities therapy our now and at the this gene across that look our businesses, that use vastly of our and significant

And of proceeding to earlier I our we this the about get client our competitive be in Charles always contact. contracts in specifically our obviously, in leader been And So, we River's our we've place with that think in midst I feel answer as to part, probability -- and just aspirations the with successful key portfolio we good really CGMP and we'll deal. position. high someone's reputation that the to a regard could as the signed now management. larger question, leader entering I think be keeping a we're said management,

we'll we're confident keep So, team key quite place. in that the management

Jim. thanks, Great,

Sure.

Your Hooker next KeyBanc. question is with Donald from

is open. line Your

learning with with know discovery. I guess one the love lot a drug machine there and the had of of your big have partnership would great. asked Atomwise. I your intelligence position picture. maybe leadership in Jim a here, Hey, space the on of kind company questions topic artificial broader been of and called but you using kind perspective

other in the I'm if topic You ways. there? partnerships. I but just mentioned area of bunch your other have curious you're a you've not your on viewpoint has views in evolved? are evolving sure, if What dabbling know that in that past,

on technology we And increasingly drug development, some predictive. and it, quickly will is predictability animal We either highly tell. get may technology thousands many really have that utilize lot have access utilizing one trials adopt that world-class we is technology terms role, going internally on those aggressively that in an do in to how we by clients invest too a of that while we of work. artificial ways of and as definitely thousands the experts. use regulators you deals then successful multiple we're of the or done if invest practically is, we work the What a have bunch very a important money hard failed preclinical in that Yeah. to a and these And thousands wrong quickly succeeded -- small trials which design And it, this or we predictability and at of some careful and look utilizing, obviously, that have be on of a them how think our adoption molecules, combination and the make Theoretically embrace role human and data we We've intelligence take in different of can we shareholders' both think these and in a be technology which to not learning investments of prevails. just success data? How with to linkage have there's invest ongoing users robust how sort clinical and make of machine work assumptions in role have want in the between the the and of trials. of we prematurely. and in and may

a very measured, the in. on more we're continue to would it's use thoughtful we're that very it. that, And So, dabbling going don't really dabble. basis, say in word than to feel but I play I

-- with we're to that capabilities investigating forward. in we the we're AI tools. utilize will technology concert powerful think some I additional best I way seriously our partnerships suspect going AI have

you. Thank

Leonard from Your next Wells Dan is Fargo. with question

open. is line Your

Thank you.

the DSA typical side? DSA? you. a outlook larger of be messaging half first of than the you're comments to anything from proportion full your XXXX guide, Thank a in the quickly, given phasing for mindful your visibility first outlook, on year Is So half, on perspective your given

make year. often look give that of are pieces hint try the no, in that be the We point would don't to have big well. out other lot a give in to do case at gating bit We not see and of But And DSA DSA sometimes feel you incidents we things you quite the funky to that differences and little we in We the don't Biologics for nothing year. call as but could issue. a that other types there QX That on see a that, normally a DSA. throughout in of particular any that than like happen that's at with can mix calendar. than RMS,

Thanks. Okay.

And your with Meehan last from question Nephron is Research. Jack

is line open. Your

Good you. morning. Thank

there, little conclude, quarter strong, bit. the Just you to those but fourth on a models? hoping obviously, wondering, or full wages And points? color some of terms I just pressures XXXX was margins. seeing supply underperformed on either I of demand was you could inflationary DSA on the the out in little any given year more of amount was around Are give large the constraints for a embedded what's

So, what we've atypical from never in pressure. those like place that we've countries. really That takes out called wage had is

XX% have that, been to say. much country-by-country really So et than bring inflation get wage we've type or do for And a real there was when time. that surprises should felt there. called stay issue. cetera. competitive believe with of an to we've we there's And we Other in inflation was midyear, But out the costs, will continue we work River we be -- timing to mid terms wage we the call and QX more specific to start towards to try other that what that calling for working vis-à-vis out. on wanted of take nothing we already exception will -- And organization, which supply some Charles feel to a to out are there we than in very close don't that that look striving what's of in to said River wage Charles living terms feel we we XXXX in no going terms

you. Thank

Thank the Great. with upcoming investor this conference during We This conference us on you call look for morning. the joining call. you forward concludes speaking to conferences.

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