DEFA14A: Charles River Laboratories Urges Shareholders to Reject Proposal on Non-Human Primate Reporting

Charles River Laboratories files a supplement to its proxy statement, reiterating its opposition to a shareholder proposal requesting a report on non-human primates (NHPs) imported by the company, arguing that existing disclosures already meet and exceed the proposal's requests.

Summary

• Charles River Laboratories is urging shareholders to vote against Proposal Four at the upcoming Annual Meeting on May 8, 2024.
• Proposal Four requests a report on non-human primates (NHPs) imported by the company, including zoonotic data.
• Charles River believes the proposal is not in the company's best interest because they already published an annual NHP Report in March 2024, addressing the concerns.
• The NHP Report includes data on NHP supply, enhanced sourcing safeguards, details on supplier risk management, and a commitment to disclose when a country of origin exceeds 30% of globally sourced NHPs.
• For 2023, the company sourced greater than 30% but less than 50% of NHPs from Cambodia.
• The company also screens for zoonotic diseases with quarantines and tests in both the country of origin and upon arrival in the US, Canada, and Europe.
• The Board established a Responsible Animal Use Committee (RAUC) in June 2023 to oversee NHP importation practices.
• The company engaged with top shareholders, representing over 55% of shares outstanding, to inform the content of the NHP Report.
• Charles River believes further detailed disclosure of NHP figures by country would be detrimental to shareholder interests as it would benefit competitors.
• Glass Lewis, a shareholder advisory service, acknowledged that the NHP report addressed all of the matters requested.
• Charles River also published a Corporate Citizenship Report in March 2024, including information on animal welfare, training, and alternative methods to animal testing.
• The Board recommends voting against Proposal Four, stating that their actions and disclosures have met and exceeded the requests in the shareholder proposal.

Sentiment

Score: 7

Explanation: The document conveys a confident and proactive stance by Charles River in addressing shareholder concerns regarding NHP sourcing. While there are inherent risks associated with animal research, the company highlights its commitment to transparency, ethical practices, and alternative testing methods, resulting in a moderately positive sentiment.

Positives

• Charles River has proactively addressed shareholder concerns regarding NHP sourcing through the publication of the NHP Report.
• The company has demonstrated a commitment to transparency by disclosing data on NHP supply and sourcing practices.
• Enhanced safeguards and risk management processes are in place to ensure responsible NHP sourcing.
• The establishment of the Responsible Animal Use Committee (RAUC) demonstrates a commitment to oversight of animal welfare issues.
• The company has engaged with shareholders to gather input on the NHP Report.
• Charles River is investing in alternative methods to animal testing through the AMAP initiative.

Negatives

• The company believes that further detailed disclosure of NHP figures by country would be detrimental to shareholder interests as it would benefit competitors.

Risks

• Continued scrutiny of NHP sourcing practices could lead to reputational risks for the company.
• Changes in regulations regarding animal welfare could impact the company's operations.
• Dependence on specific countries for NHP supply could create supply chain vulnerabilities.
• Shareholder activism on animal welfare issues could divert management attention and resources.

Future Outlook

Charles River commits to annually disclose when a country of origin exceeds 30% of globally sourced NHPs.

Management Comments

• Charles River's mission is to create healthier lives.
• The stewardship of the research animals in our care, including their humane care and well-being, is a core value of our Company.
• The Board and management of Charles River strongly believe that our comprehensive actions and disclosure have not only met, but also exceeded, the requests for disclosure and transparency in the areas covered in the shareholder proposal.

Industry Context

The use of NHPs in research is a critical aspect of drug development, particularly for complex diseases. Charles River's role as a leading non-clinical drug development partner places them at the center of this debate, balancing the need for animal research with ethical considerations and shareholder expectations.

Comparison to Industry Standards

• Charles River's commitment to the 4Rs (Refinement, Reduction, Replacement, and Responsibility) aligns with industry best practices for animal welfare in research.
• Other companies in the contract research organization (CRO) space, such as Labcorp and Envigo (now Inotiv), also face similar scrutiny regarding animal sourcing and welfare.
• The level of detail provided in Charles River's NHP Report and Corporate Citizenship Report appears to be more comprehensive than some of its competitors, demonstrating a higher level of transparency.

Corporate Governance

Stakeholder Impact

• Shareholders: The document provides information relevant to voting on Proposal Four and addresses concerns regarding NHP sourcing.
• Employees: The document reinforces the company's commitment to responsible animal use and ethical practices.
• Customers: The document assures customers that Charles River is committed to responsible animal sourcing and welfare.
• Suppliers: The document highlights the company's enhanced supplier risk management process.
• The public: The document demonstrates the company's commitment to transparency and responsible animal use.

Next Steps

• Shareholders will vote on Proposal Four at the Annual Meeting on May 8, 2024.
• Charles River will continue to engage with shareholders on NHP sourcing and animal welfare issues.
• The company will publish an annual NHP Report.

Key Dates

Keywords

non-human primates, NHPs, animal welfare, shareholder proposal, Charles River Laboratories, sourcing, zoonotic disease, Responsible Animal Use Committee, Corporate Citizenship Report, proxy statement