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Performance stabilization in 2025 was driven by global biopharma clients resuming pipeline urgency after 2024 spending pauses, alongside a late-year surge in biotech funding.
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DSA segment demand showed non-linear recovery, with net book-to-bill improving to 1.12x in Q4, primarily fueled by small and mid-sized biotech clients.
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Management attributed Q4 margin pressure to higher-than-anticipated NHP study demand, which forced expensive open-market sourcing to fulfill client requirements.
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The acquisition of KF Cambodia is a strategic move to internalize the NHP supply chain, aiming to secure most future annual requirements and reduce volatile sourcing costs.
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Discovery Services volume declines impacted DSA revenue, while pricing and mix remained stable across the broader segment.
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Manufacturing segment growth was hindered by the loss of a major commercial cell therapy client, though Microbial Solutions maintained strong performance across all testing platforms.
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Management views New Approach Methodologies (NAMS) and AI as long-term enabling technologies rather than immediate disruptors to regulated safety assessment environments.
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Guidance assumes a return to organic revenue growth in the second half of 2026 for both the DSA segment and the consolidated company.
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Operating margin expansion is predicated on the KF Cambodia acquisition, which is expected to contribute more than 100 basis points to DSA margins for the full year, with the margin improvement beginning to materialize in the second half.
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The 2026 framework includes at least $100,000,000 in incremental cost savings to offset annual cost inflation and protect margins during the revenue recovery.
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RMS revenue is projected to decline at a low-to-mid-single-digit rate due to the timing of NHP shipments and subdued CRADL occupancy from early-stage biotech.
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Capital allocation will pivot toward debt repayment and maintaining ‘dry powder’ for M&A in areas like bioanalysis and geographic expansion into China.
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A planned divestiture of businesses representing 7% of 2025 revenue is underway, with an expected $0.10 per share accretion for the partial year 2026.
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The CEO transition in 2026 will result in a $0.15 EPS headwind in Q1 due to the required acceleration of stock compensation expenses.
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The 2026 tax rate is expected to drop to 22%-23% following the enactment of the ‘One Big Beautiful Bill Act’ (OB3) and favorable geographic mix.
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Free cash flow is projected to decrease to $375M-$400M in 2026, impacted by higher performance-based bonus payments and CEO retirement-related deferred compensation.
