“The CRO sector looks attractive,” says Goldman Sachs – here are 2 stocks to consider

Biotech stocks get a lot of attention, both from stock analysts and investors, but companies don’t exist in isolation. We all know about their notoriously high overhead costs, but we may be less familiar with the companies that, behind the scenes, streamline the process.

CROs, contract research organizations, are companies hired by health care-related companies – biotechnology researchers, pharmaceutical companies and medical device companies – to bring economies of scale to research activities, development and marketing. CROs can work for multiple clients, providing laboratory expertise at the preclinical and clinical levels, gene and cell therapy services, AI expertise – all essential skills that might be lacking in a small biotech.

In a recent note, Goldman Sachs analyst Matthew Sykes lays out the case for CROs, saying: “We believe the CRO space as a whole benefits from secular drivers…and that large, full-service CROs are positioned to benefit from outsized advantages as customers consolidate. their suppliers… We view margin expansion combined with revenue growth as a measure of operational excellence and believe they are among the most important fundamental valuation drivers in the industry.

Sykes also highlights the continued growth potential of this sector, adding: “CROs are currently trading at the mid to low end of their 5 and 10 year historical valuation and, relative to S&P500, where CROs tend to trade at a premium due to higher growth characteristics. We note that CROs are currently trading at a slight discount to the S&P 500, which is well below the historical average premium of 18%.

So let’s take a closer look at two of Sykes’ CRO picks, while adding a broader view with data from the TipRanks Platform.

Charles River Laboratories (LCR)

The first stock, Charles River Labs, has been in operation since the 1940s. From its headquarters in Massachusetts, the company operates facilities around the world: in the United States and North America, in the United Kingdom, in Europe, Asia, as well as Australia and South America. Charles River has more than 150 facilities and offices in 21 countries and has worked on more than 80% of all FDA-approved drugs over the past five years. The company describes its core strength as its ability to coordinate global resources and apply multidisciplinary perspectives to problem solving in the biotechnology field.

Charles River Labs works with clients across a variety of industries, including government agencies, academic organizations, biopharmaceutical companies, food and beverage companies, and chemical companies. The company’s services include research design and discovery services, safety assessments, biologics testing, laboratory services, cellular sources, microbial quality control solutions and even administrative services such as scientific staff and regulatory advice.

The story continues

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