Sometimes, to get leaner and meaner, you have to let some things go. That's the playbook Charles River Laboratories (CRL) is running with a pair of major divestitures announced Wednesday. The contract research organization is selling off chunks of its business in a strategic shift designed to sharpen its focus and, more importantly, improve its bottom line.

The headline move is a two-for-one sale to private equity. Charles River has agreed to divest its contract development and manufacturing organization (CDMO) business and its Cell Solutions unit to GI Partners, an alternatives investment firm. Here's the interesting part: the deal is structured "primarily for future, contingent performance-based payments." In simpler terms, Charles River's payout is largely tied to how well these businesses perform after they're sold. It's a bet on their future success, not just a cash-in-hand transaction.

So, what exactly is it selling? The CDMO business helps produce advanced therapies, like those for gene-modified cell therapies and gene therapies, making things like viral vectors and plasmid DNA. The Cell Solutions business provides the human-derived cellular materials needed to develop and produce those cell therapies. The physical assets going to GI Partners include CDMO sites in Tennessee, Maryland, and the United Kingdom, plus a Cell Solutions site in California. Together, these units generated combined annual revenue of $143 million in 2025.

But wait, there's more. In a separate, more straightforward cash deal, Charles River is selling certain European assets within its Discovery Services business to IQVIA (IQV) for about $145 million. These assets—five sites specializing in lab-based drug discovery services—brought in $144 million in revenue last year. They focus on New Approach Methodologies (think high-tech lab tests) and have a small molecule AI platform, all geared toward accelerating drug discovery and supporting the growing demand for non-animal research methods. They have a solid track record, having helped over 100 molecules enter clinical trials, including several that are now commercially approved drugs.

Now, the big question: why do this? Selling businesses that brought in nearly $290 million in revenue last year seems counterintuitive. The answer is in the margins and the guidance. Charles River says these moves will reduce its reported revenue by slightly more than $200 million in 2026. That includes taking more than 50 basis points off its organic revenue growth guidance. However, the company expects the transactions to generate at least 100 basis points of incremental improvement in its adjusted operating margin for 2026. On the bottom line, it estimates the deals will add approximately 10 cents to adjusted earnings per share for the partial year they're owned in 2026.

This math led to an immediate update for investors. Charles River raised its fiscal 2026 adjusted earnings per share guidance. The old range was $10.70 to $11.20. The new range is $10.80 to $11.30. For context, the consensus estimate among analysts was $10.88, so the new midpoint of $11.05 sits above that. Both deals are expected to close in the second quarter of 2026.

The announcement comes as Charles River's stock has been under pressure, trading near its 52-week lows. It closed Tuesday at $166.06. Analyst sentiment remains mixed but generally positive on the name. The stock carries a consensus Buy rating with an average price target of $200.93. Recent analyst actions have largely involved target price reductions, including TD Cowen lowering its target to $235 while maintaining a Buy rating, Mizuho cutting its target to $175 with a Neutral rating, and Barclays reducing its target to $200 with an Overweight rating.

In essence, Charles River is making a calculated trade. It's swapping a chunk of revenue for higher profitability and clearer earnings per share growth. It's a classic case of a company deciding it's better to be a focused, high-margin player than a sprawling conglomerate, even if it means getting a little smaller on the top line first.