Charles River shares dive on slashed outlook

The stock fell $7.73, or 22.8 percent, to $26.17 in afternoon trading. Shares reached $25.65 earlier in the session, their lowest point in more than five years.

The Wilmington, Mass.-based company said late Wednesday its third-quarter profit rose 4 percent to $44.7 million, or 63 cents per share, from profit of $42.8 million, or 62 cents per share, during the same period a year earlier. Excluding charges, the company said it earned 76 cents per share.

Revenue rose 9 percent to $342.2 million from $314 million.

Analysts polled by Thomson Reuters expected profit of 75 cents per share on revenue of $347.8 million.

Charles River cut its full-year profit guidance to between $2.83 and $2.87 per share from prior guidance of $2.94 to $3 per share, on lower sales growth expectations.

"Our clients are continuing to invest in drug discovery and development, but they are facing a range of unprecedented challenges from drugs losing patent protection to the availability of funding for small biotech companies," Chairman, President and Chief Executive James C. Foster said in a statement.

Many drug companies are cutting jobs and restructuring in an effort to trim costs. Meanwhile, the focus seems to be shifting to late-stage development, delaying studies and pushing work to 2009 from 2008, he added.

"We believe that these market conditions are temporary, and will improve as pharmaceutical and biotechnology companies refocus on the drugs in early development," Foster said. "In the meantime, we are aggressively managing expenses and capital spending, while maintaining an intense focus on supporting our clients with our unique portfolio of products and services which spans the development pipeline from early discovery through proof of concept."

Cowen and Co. analyst Doug Schenkel reaffirmed a "Neutral" rating on the company, citing the difficult outlook.