DiscoveryDiscovery represents the earliest stages of research in the life sciences, directed at the identification, screening and selection of a lead compound for future drug development. Discovery activities typically last anywhere from 4-6 years in conventional pharmaceutical research and development timelines.

DevelopmentDevelopment activities, which follow, and which can take up to seven years, are directed at demonstrating thesafety, tolerability andclinical efficacy of the selected drug candidates. During the preclinical stage of the development process, a drug candidate is testedin vitro (typically on a cellular or subcellular level in a test tube or multi-well petri plate) andin vivo (in research models) to support planned or on-going human trials. WeWith our focus on early-stage drug development support, we view




early-stage clinical Phase I studies as an essential,a strategic component of our preclinical service offerings.

The development services portion of our PCS segmentbusiness enables our customers to outsource their critical, regulatory requiredregulatory-required drug and toxicology and drug disposition activities to us. The demand for these services iswas historically driven by preclinical development programs for the smallerof biotechnology companies, which traditionally have been outsourced, and key safety studiesalso by the selective outsourcing strategy of larger global pharmaceutical companies. Because of theThe necessary significant investments in personnel, facilities and other capital resources required in order to efficiently conduct and perform these activities we believemeans that participants in these industries will preferglobal pharmaceutical companies and biotechnology companies are frequently choosing to outsource their development activities, allowing them to focus on their core competencies of innovation and early drug discovery (for biotechnology companies) and in the case of the largerpromotion and market distribution (for pharmaceutical companies). Large pharmaceutical companies, targeted salesin particular, are increasingly closing facilities and marketing, andreducing staff, thus we believe the demand for our preclinical service offerings will continue to increase.strengthen.

We are one of the two largest providers of preclinical services worldwide and offer particular expertise in the design, execution and reporting of general and specialty toxicology studies, especially those dealing with innovative therapies and biologicals. We currently provide preclinical services at multiple facilities located in the United States, Canada and Europe.Europe, and are anticipating being able to offer expanded PCS services in China in the second half of 2008. As a result of increasing demand for outsourced preclinical services, we have recently conducted or are presently conducting significant facilities expansions orat our Preclinical Servicespreclinical facilities—one in Massachusetts which opened recentlyin 2007 and oneanother in Nevada at which we expect to begin phased-in occupancyopened in mid-Summer 2007,early 2008, as well as expansions at our Canada, Ohio, Pennsylvania (biopharmaceutical services) and EdinburghScotland PCS facilities. The Massachusetts and Nevada facilities, will eventually replace our legacy operations in those venues, and when fully built out, will more than double the size of the legacypre-existing operations. Our PCS segment represented 51%53% of our total net sales in 2006 (including the reclassified Phase I clinical services business)2007 and employed 55%56% of our employees.employees including approximately 450 science professionals with advanced scientific degrees.

We currently offer the following preclinical services, in which we include bothin vivo andin vitrostudies, supportive laboratory services, and strategic preclinical consulting and program management to support product development from inception to proof of concept.

Toxicology.Toxicology is one of our core preclinical competencies and a competitive strength. Once a lead molecule is selected, the stage of preclinical development begins where appropriate toxicology studies are conducted to support initial clinical trials. These studies are performed on animal models to understand the toxic effects that a compound has on an organism over a variety of doses and over various time periods, and focus on safety and potential harmful effects. Our toxicology services feature:

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all the standard protocols for general toxicity testing (genotoxicity, safety pharmacology, acute, subacute, chronic toxicity and carcinogenicity potential) required for regulatory submissions;

·submissions supporting "first-in-human" to "first-on-the-market" strategies;



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expertise in specialty routes of administration and modes of administration (e.g., infusion, intravitreal administration, and inhalation), which are important not only for the testing of potential pharmaceuticals, but also for safety testing of medical devices, industrial chemicals, food additives, agrochemicals, biocides, nutraceuticals, animal health products and other materials;

·       other services to fully evaluate the genotoxicity, safety pharmacology, acute, subacute, chronic toxicity and carcinogenicity potential to support “first in man” to “first on the market” strategies;

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market-leading expertise in the conduct and assessment of reproductive and developmental toxicology studies (in support of larger scale, human clinical trials);

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services in important specialty areas such as developmental/reproductive, ocular, bone, juvenile/neonatal, and immuno toxicology as well as photobiology and dermal testing;

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work in all major therapeutic areas;

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study design and strategic advice to our clients based on our wealth of experience in support of drug development; and




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a strong history of aiding our sponsors in reaching their regulatory or internal milestones for safety testing, including studies addressing stem cell therapies, DNA vaccines, recombinant proteins, standard small molecules and medical devices.

Our toxicology facilities operate in compliance with Good Laboratory Practices (GLPs) as required by the FDA as well as other international regulatory bodies. Our facilities are regularly inspected by U.S. and other GLP compliance monitoring authorities, as well as our own and our customers’customers' Quality Assurance departments.

Pathology Services.In the drug development process, the ability to identify and characterize clinical and anatomic pathologic changes (within tissues and cells)change is critical in determining the safety of a new compound. We employ a large number of highly trained pathologists who use state-of-the-art techniques to identify potential compound-related changes within tissues, fluids and cells, as well as at the molecular level. Pathology support is critical for regulatory driven safety studies, but also for specialized investigative studies, discovery support, and stand-alone immunohistochemistry evaluations for monoclonal antibodies. Key “go/no-go”"go/no-go" decisions regarding continued product development are typically dependent on the identification, characterization and evaluation of gross and microscopic pathology findings we perform for our clients.

Bioanalysis, Pharmacokinetics, and Drug Metabolism.In support of preclinical drug safety testing, our customers are required to demonstrate ample drug exposure, stability in the collected sample, kinetics of their drug or compound in circulation, the presence of metabolites, and with recombinant proteins and peptides, the presence of anti-drug antibodies. We have scientific depth in the sophisticated analytical techniques required to satisfy these requirements for a number of drug classes (including oligonucleotide and inhibitory RNAs). In the event that the sample analysis for preclinical study support translates to opportunities to analyze clinical samples for the same drug once human testing begins, we have opportunities to capture the benefits of bridging preclinical bioanalysis with later clinical development. Once the analysis is complete, our scientists evaluate the data to provide information on the kinetics (pharmaco-/toxico-)pharmacokinetics and/or toxicokinetics of the exposure to the drug, as well as

complete evaluation of the distribution of the drug or metabolites by radio-labeled techniques. Pharmacokinetics refers to understanding what the body does to a drug or compound once administered, including the process by which the drug is absorbed, distributed in the body, metabolized, and excreted (ADME); toxicokinetics refers to the same understanding as applied to potential toxic substances. Our clients require these studies for the full preclinical assessment of the disposition of the drug andthe results of which are used in the final preclinical safety evaluation of the compound.

Discovery Support.At the earliest stages of lead compound identification, our scientists are engaged in evaluating the activity and efficacy of drug candidates in several important therapeutic and support areas, including:

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oncology (through our tumor xenograft models);

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asthma (through our specialized disease model colonies);

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bone disease (using our state-of-the-art imaging and pathology capabilities);

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ophthalmology (using our models of neovascularization);

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general cardiovascular and device testing (using our surgical models); and

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early drug formulation and bioanalysis support and method development.

We also offer lead optimization strategies including early pharmacokinetic, metabolism, and toxicology support to help in early integrative drug selection criteria.

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Biopharmaceutical Services.

We provide specialized non-clinical quality control testing, characterization and small scale manufacturing services that isare frequently outsourced by bothglobal pharmaceutical and biotechnology companies. These services allow our customers to determine if their human protein drug candidates, or the processes for manufacturing those products, are essentially free of residual biological materials. The bulk of this testing is required by the FDA in order to obtain new drug approval, to maintain an FDA-licensed manufacturing facility or to release approved products for use in patients. Our scientific staff consultsdevelopers. We also consult with customers in the areas ofon process development, validation, manufacturing scale-up and biological testing. We also grow, store and characterize client cell lines for later development and manufacture of therapeutic proteins.

        Biopharmaceutical testing and characterization services allow customers to confirm that biologically produced drug candidates are correctly identified and stable and are produced consistently and essentially contaminant free. This testing is required by the FDA and other global regulatory authorities to obtain new drug approval, maintain a government licensed manufacturing facility and release approved therapeutic products for use in patients.

Phase I Trials in Healthy, Normal and Special Populations

The        Phase I clinical services business representstrials are usually short duration studies conducted on a growth opportunity for us that initially originated through our acquisitionsmall number (20-100) of the Clinical Services business of Inveresk, and which we have grown through our acquisition of Northwest Kineticshealthy human subjects (although special populations can be used) under highly controlled conditions. Testing is usually performed where trial participants can be closely monitored in October 2006. Combined, oura secure environment, such as at a clinic-type facility or hospital.

        Our clinical services capabilities encompass two premier, internationally recognized Phase I clinics—one in Europe (Edinburgh, Scotland) and the other in North America (Tacoma, Washington), with a combined capacity of over 300 beds. We focus our clinical services business on high-end clinical pharmacology studies in healthy participants and in therapeutic areas including: cardiovascular, oncology, ophthalmology, respiratory and infectious diseases.participants. From a strategic perspective, we believe that our clinical services business is positioned to benefitbenefits from pull-through from our preclinical and laboratory services particularly(particularly with our biotechnology customers). Correspondingly, our preclinical and laboratory services businesses benefit from the presence of our Phase I clinical offerings as we can take advantage of enhanced economies of scale as well as "pull-down" from existing clinical customers.

We offer a wide range of Phase I clinical research services designed to move lead pharmaceutical candidates rapidly from preclinical development through Phase I pharmacokinetic tolerability and pharmacodynamic assessment to explore human pharmacology. We can conduct studies across a wide

range of therapeutic areas, and have demonstrated experience in complex dose tolerance, radio-labeled, pharmacokinetics, pharmacodynamics and bioavailability studies. In addition, we provide customers with high-end “first-in-man”"first-in-human" studies for novel compounds, and expertise in complex drug-drug interaction studies. Participants at both clinics are evaluated through an intensive screening process to ensure study suitability. We employ quality assurance unitsclinical regulatory compliance staff at these facilities to monitor the conduct and reporting of Phase I trials and to assure management that these trials are conducted in compliance with appropriate regulatory requirements.

Our Strategy

Our objective is to be the premierpreferred strategic global company advancingpartner for our clients in accelerating the search for drugs, devices and therapies fromtherapies. From discovery through proof of concept. Theconcept, our goal is to provide products and services which we provide our customers are essential to thefor drug discovery and development, process, andwhich are almost universally mandated by law. Our business is primarily driven by the continued growth of research and development spending by pharmaceutical and biotechnology companies, the federal government and academic institutions and of outsourced services. According to a reportreports by the Biomedical Industry Advisory Group, it takes 11 to 16 years and costs in the range of $180 million to $1.65 billion, with an average cost of approximately $900 million, to bring a new drug to market. Similarly, a separate 2007 report by the Pharmaceutical Research and Manufacturers of America estimate that it takes 10 to 15 years and costs in excess of $800 million to develop a drug ($1.2 billion for a biologic).

As the pressure to develop a strong pipeline of innovative new drugs increases, so does the pressure to contain costs, to implement research in multiple countries simultaneously and to identify, hire and retain a breadth of scientific and technical experts. In order to facilitate and speed their research (as well as to convert largely fixed costs into variable expenses), our pharmaceutical and biotechnology customers are increasingly making strategic decisions to increasingly outsource services which can be provided by high-quality service providers like us. For instance, many of our larger customers—particularly those in the pharmaceutical industry—have announced plans to rationalize their workforce and facilities and/or increase outsourcing in order to concentrate on their core businesses and new product research and identification. In the past year, we believe that the increase in these actions and the necessary growth of outsourcing is being driven by a unique confluence of events, including:

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the current outlook for drugs coming off patent protection and resulting threats from generic drug manufacturers, which are expected to affect a large percentage of these companies' existing revenues in the intermediate future;



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the reduction over the past decade in frequency of drugs gaining approval;



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increased pressure to find drugs to cure critical diseases, including many which are complex and chronic where development will be both risky and costly;



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continued productivity and cost containment pressures on the medical device, diagnostics and biopharmaceutical industries due in part to escalating global healthcare costs, increasing concentration of buying power attributable to larger payors and governments, while simultaneously needing to manage increased financial focus on operating margins and returns;



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increasing globalization of drug development (particularly increased research and development activity in the India and China markets);



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heightened regulatory authority scrutiny worldwide, particularly concerning drug safety; and



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enhanced urgency to push the growing number of new compounds through the drug pipeline.

Outsourcing allows our customers to concentrate their internal expertise and resources on early drug discovery, while continuing to advance their most promising products through the development pipeline. This creates opportunities for companies such as ours that can help speedoptimize our clients' programs and assist in accelerating the drug discovery and development process. Our strategy is to capitalize on these opportunities by continuing to build our portfolio of high end,premium, value-added products

and services through internal development and investment, augmented by strategic “bolt-on”"bolt-on" transactions.

In today’stoday's business environment, we believe there is a particular advantage in being a large, global, high-quality provider of services throughout the drug discovery and development process.continuum. Many of our customers, especially large pharmaceutical companies, are attracted to Tier 1 contract research organizations with a full breadth of capabilities, and choose to establish preferred provider relationships with only a small number. We are focused on being recognized as a premier preferred provider and maintaining long-term relationships and strategic partnerships with our customers. Accordingly, with many of our largest customers, we have entered into global provider agreements that span both segments of our business.

        Furthermore, in response to our clients' requests that we provide increased yet flexible services specifically designed for their individual needs, we have expanded our commitment and focus to develop Charles River Dedicated Resources (CRDR) arrangements. CRDRs are broad-based multi-year partnering arrangements, generally involving financial commitments from the customer, which tap into the broad array of physical and/or service resources that we provide. Examples of the type of accommodations we can provide in CRDRs include dedicated space within existing facilities, building out space to a particular specification, or even establishing a new facility. These CRDRs represent a meaningful, and we expect growing, percentage of our business.

We intend to continue to broaden the scope of our products and services primarily through internal development, which will be augmented, as needed, through focused acquisitions and alliances. We believe ourOur approach to acquisitions is a disciplined one that seeks to target businesses that are a sound strategic fit and that offer the prospect of enhancing stockholder value. This strategy may include geographic expansion of existing core services, (particularly in Asia if the appropriate opportunities present themselves), strengthening of one of our core services or the addition of a new product or service in a related or adjacent business.

We believe that we are well positioned to exploit both existing and new outsourcing opportunities. As strategic outsourcing by our customers increases, we believe that our expertise in areas previously addressed by our customers' in-house capabilities allows us to provide a more flexible, efficient and cost-effective alternative for them. In short, because these products and services are the core of our business, we are able to build and maintain expertise and tap into economies of scale that are difficult for our customers to match with their internal capabilities.

We intend to focus our marketing efforts on, among other things, stimulating demand for further outsourcingoutsourcing. As a result of these efforts, we expect to be better positioned to gain additional market share to take advantage of promising opportunities which are available to us as a result of continued growth of outsourced services.this continuing trend, as well as broader based collaboration across thein vivo discovery to first-in-human continuum. In 20062007 we invested heavily in expanding our facilities capacity, and we intend to continue the capital expansion activity in 2007.2008. Similarly, we are investing in our information technology systems and resources in order to better serve our customers, harmonize our data, and streamline our processes.

Customers

Our customers continue to consist primarily of all of the major pharmaceutical companies, many biotechnology companies, animal health, medical device, diagnostic and other life sciences companies, and leading hospitals, academic institutions, and government agencies. We have stable, long-term relationships with many of our customers. During 2006,2007, no single commercial customer accounted for more than 6% of our total net sales.

For information regarding net sales and long-lived assets attributable to both of our business segments for the last three fiscal years, please see Note 1512 included in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K. For information regarding net sales and long-lived assets attributable to operations in the United States, Europe, AsiaCanada, Japan and other

countries for each of the last three fiscal years, please review Note 1512 included in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

Sales, Marketing and Customer Support

We sell our products and services principally through our direct sales force and account management teams, the majority of whom work in North America, with the balance working in Europe and Japan. Our primary promotional activities include organizing scientific symposia, publishing scientific papers, making presentations and participating at scientific conferences and trade shows in North America, Europe and Japan. We supplement these scientifically based marketing activities with trade advertising, direct mail, newsletters and our website.are currently developing a new website for launch in 2008. The direct sales force is supplemented by international distributors for our products.products, particularly with respect to our In Vitro technology business.

Our internal marketing/product management teams support the field sales staff and account management teams while developing and implementing programs to create close working relationships with customers in the biomedical research industry. We maintain client/customer service, technical assistance and consulting service departments, which address both our customers’customers' routine and more specialized needs. We frequently assist our customers in solving problems related to animal husbandry, health and genetics, biosecurity, preclinical and clinical

study design, regulatory consulting, protocol development and other areas in which our expertise is widely recognized as a valuable customer resource.resource by our customers.

Competition

Our strategy is to be a leader in each of the markets in which we participate. We compete in the marketplace on the basis of quality, reputation, responsiveness, pricing, innovation, breadth of therapeutic and scientific expertise, timeliness and availability, supported by our professional bench strength in animal science and toxicology, global capabilities and strategically located facilities worldwide. We are able to offer a unique portfolio through our broad array of both routine and specialized preclinical services, as well as a wide range of research models and research model services.

The competitive landscape for our two business segments varies.

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For RMS, our main competitors include three smaller competitors in North America (two(each of whom have a global scope), and several smaller competitors in Europe and in Japan. Of our main U.S. competitors, two are privately held businesses and the third is a government funded, not-for-profit institution. We believe that none of our competitors in RMS has our comparable global reach, financial strength, breadth of product and services offerings, technical expertise or pharmaceutical and biotechnology industry relationships.

We



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As for PCS, we believe we are one of the two largest providers of preclinical services in the world, based on net service revenue. Our commercial competitors for preclinical services consist of both publicly held and privately owned companies. Thecompanies, and it is estimated that the top five participants (including Charles River) account for approximately 50% of the global market (exclusive of clinical services), with the rest of the market remaining highly fragmented. Our PCS segment (including our Phase I business) also competes with in-house departments of pharmaceutical and biotechnology companies, universities and teaching hospitals. Independently, the Phase I clinical services market is highly fragmented, with approximately tenover 15 participants, both public and private, representing the majority ofsharing the market and a number of smaller, limited-service providers also providing capacity. In addition,

        We believe that the barriers to entry in certain of our PCS segment (including our Phase I business) competes with in-house departments of pharmaceutical companiesbusiness units, particularly those which require substantial capital expenditures and universitiesmandate GLP compliant practices, are generally high and teaching hospitals.present a significant impediment for new market participants.

Industry Support and Animal Welfare

One of our core values is a concern for and commitment to animal welfare. We have been in the forefront of animal welfare improvements in our industry, and continue to show our commitment with special recognition programs for employees who demonstrate an extraordinary commitment in this critical area of our business. We created our own Humane Care Initiative, which is directed by our Animal Welfare and Training Group. The goal of the initiative is to assure that we continue as a worldwide leader in the humane care of laboratory animals. Laboratory animals are an important resource that further our knowledge of living systems and contribute to the discovery of life-saving drugs and procedures. We work hand-in-hand with the scientific community to understand how living conditions, handling procedures and stress play an important role in the quality and efficiency of research. As animal caregivers and researchers, we are responsible to our clients and the public for the health and well being of the animals in our care.

We support a wide variety of organizations and individuals working to further animal welfare as well as the interests of the biomedical research community. We fund scholarships to laboratory animal training programs, provide financial support to non-profit institutions that educate the public about the benefits of animal research and provide awards and prizes to outstanding leaders in the laboratory animal medicine field.

Employees

As of December 30, 2006,29, 2007, we had approximately 8,0008,500 employees including approximately 330600 science professionals with advanced degrees, including approximately 140 D.V.M.s, 240 Ph.D.s and 20 M.D.s. Our employees are not unionized in the United States, although employees are unionized at some of our European facilities, consistent with local customs for our industry. Our annual satisfaction surveys indicate that we have an excellent relationship with our employees.

Backlog

Our backlog for our PCS business segment was approximately $341$393 million at December 30, 2006.29, 2007. We do not report backlog for the RMS segment because turnaround time from order placement to fulfillment, both for products and services, is rapid. Our preclinical services (including Phase I clinical services) are performed over varying durations, from short to extended periods of time, which may be as long as several years. We maintain an order backlog to track anticipated revenue from studies and projects that either have not started, but are anticipated to begin in the near future, or are in process and have not been completed. We only recognize a study or project in backlog after we have received written evidence of a customer’scustomer's intention to proceed. We do not recognize verbal orders. Cancelled studies or projects are removed from backlog.

We believe our aggregate backlog as of any date is not necessarily a meaningful indicator of our future results for a variety of reasons. First, studies vary in duration (i.e., some studies that are included in 20062007 backlog may be completed in 2007,2008, while others may be completed in later years). Second, the scope of studies may change, which may either increase or decrease their value. Third, studies included in backlog may be subject to bonus or penalty payments. Fourth, studies may be terminated or delayed at any time by the client or regulatory authorities for a number of reasons.reasons, including the failure of a drug to satisfy safety and efficacy requirements or a sponsor making a strategic decision that a study or service is no longer necessary. Delayed contracts remain in our backlog until a determination of whether to continue, modify or cancel the study has been made. We cannot provide any assurance that we will be able to realize all or most of the net revenues included in backlog or estimate the portion to be filled in the current year.

Regulatory Matters

As our business operates in a number of distinct operating segmentsenvironments and in a variety of locations worldwide, we are subject to numerous, and sometimes overlapping, regulatory environments, as described below.

The Animal Welfare Act (AWA) governs the care and use of certain species of animals used for research. The United States Congress has passed legislation which excludes laboratory rats, mice and chickens used for research from regulation under the AWA. As a result, most of our United States small animal research model activities and our vaccine support services operations are not subject to regulation under the AWA. For regulated species, the AWA and attendant Animal Care regulations require producers and users of regulated species to provide veterinary care and to utilize specific husbandry practices such as cage size, shipping conditions, sanitation and environmental enrichment to assure the welfare of these animals. We comply with licensing and registration requirement standards set by the United States Department of Agriculture (USDA) for the care and use of regulated species. Our animal production facilities and preclinical facilities in the U.S. are accredited by the Association for Assessment and Accreditation of Laboratory Animal Care International (AAALAC), a private, nonprofit, international organization that promotes the humane treatment of animals in science through voluntary accreditation and assessment programs. PortionsAAALAC covers all species of ourlaboratory animals, including rats, mice and birds. Our preclinical business areis also generally regulated by the USDA.

Our import and export of animals in support of several of our business units as well as our operations in foreign countries are subject to a variety of national, regional, and local laws and regulations, which establish the standards for the humane treatment, care and handling of animals by dealers and research facilities. We maintain the necessary certificates, licenses, detailed standard operating procedures and other documentation required to comply with applicable regulations for the humane treatment of the animals in our custody at our locations.

Our PCS business conducts nonclinical laboratory safety studies intended to support the registration or licensing of our clients’clients' products throughout the world. The conduct of these studies must comply with national statutory or regulatory requirements for Good Laboratory Practice (GLP). GLP regulations describe a quality system concerned with the organizational process and the conditions under which

nonclinical laboratory studies are planned, performed, monitored, recorded, archived and reported. GLP compliance is required by such regulatory agencies as the FDA, United States Environmental Protection Agency, European Agency for the Evaluation of Medicinal Products, Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom, Health Canada, and the Japanese Ministry of Health and Welfare. GLP requirements are significantly harmonized throughout the world and our laboratories are capable of conducting studies in compliance with all appropriate requirements. To assure our compliance obligations, we have established quality assurance units (QAU) in each of our nonclinical laboratories. The QAUs operate independently from those individuals that direct and conduct studies and monitor each study to assure management that the facilities, equipment, personnel, methods, practices, records, and controls are in compliance with GLP. Our laboratory managers use the results of QAU monitoring as part of a continuous process improvement program to assure our nonclinical studies meet client and regulatory expectations for quality and integrity.

Our PCS business also conducts human Phase I clinical trials and provides services in support of our clients’clients' registration or licensing applications. Human clinical trials are conducted in a progressive fashion beginning with Phase I, and in the case of approved drugs, continued through Phase IV trials. Phase I studies are the initial human clinical trials and are conducted with a small number of subjects under highly controlled conditions. These clinical trials and services are performed in accordance with the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use Good Clinical Practice Consolidated Guidance and in compliance with regulations governing the conduct of clinical investigations and the protection of human clinical trial subjects. In the United States, these trials and services must comply with FDA regulations and in

Europe our clinical trials and services must comply with the clinical trials directive of the European Union. Neither FDA regulations nor the clinical trials directive requires a quality assurance program; however, each of our Phase I facilities has an established quality assurance unit that monitors the conduct and reporting of Phase I trials to assure that these trials are conducted in compliance with appropriate regulatory requirements.

        Our manufacturing business produces endotoxin test kits and reagents and vaccine support products. Additionally, the analytical divisions of several of our nonclinical laboratories conduct stability and potency testing in support of our clients’clients' manufacturing programs. These activities are subject to regulation by the FDA and MHRA under their respective Good Manufacturing Practice regulations or the FDA’sFDA's Quality Systems Regulation (manufacturing of medical devices). We are required to register with the FDA as a device manufacturer and are subject to inspection on a routine basis for compliance with these regulations. These regulations require that we manufacture our products in a prescribed manner with respect to, and maintain records of, our manufacturing, testing and control activities.

All of our sites are also subject to licensing and regulation under national, regional and local laws relating to the surface and air transportation of laboratory specimens, the handling, storage and disposal of laboratory specimens, hazardous waste and radioactive materials, and the safety and health of laboratory employees. Although we believe we are currently in compliance in all material respects with such national, regional and local laws (which include the USDA, the standards set by the International Air Transport Association, and European oversight agencies), failure to comply could subject us to denial of the right to conduct business, fines, criminal penalties and other enforcement actions.

To ensure that all business sectors comply with applicable statutory and regulatory requirements and satisfy our client expectations for quality, we have established a corporate regulatory affairs and compliance organization that oversees our corporate quality system and all quality assurance functions within the Company. This organization reports to our Corporate Vice President for Regulatory Affairs and Compliance.

Corporate Governance

We are committed to operating our business with integrity and accountability. We strive to meet or exceed all of the corporate governance standards established by the New York Stock Exchange, the Securities and Exchange Commission, and the Federal government as implemented by the Sarbanes-Oxley Act of 2002. SevenEight of the eightnine members of our Board of Directors are independent and have no significant financial, business or personal ties to the Company or management and all of our Board committees are composed of independent directors. The Board adheres to Corporate Governance Guidelines and a Code of Business Conduct and Ethics which has been communicated to employees and posted on our website. We have always beenare diligent in complying with established accounting principles and are committed to providing financial information that is transparent, timely and accurate. We have implemented a Related Person Transactions Policy in order to promote the timely identification of such transactions and to ensure we give appropriate consideration to any real or perceived conflicts in our commercial arrangement.arrangements. We have established global processes through which employees, either directly or anonymously, can notify management (and the Audit Committee of the Board of Directors) of alleged accounting and auditing concerns or violations including fraud. Our internal Disclosure Committee meets regularly and operates pursuant to formal disclosure procedures and guidelines which help to ensure that our public disclosures are accurate and timely. Copies of our Corporate Governance Guidelines, Code of Business Conduct and Ethics and Related Person Transactions Policy are available on our website at www.criver.com under the “Investors"Investor Relations—Corporate Governance”Governance" caption.

Item 1A.    Risk Factors

Risks Related to Our Business and Industry

Set forth below and elsewhere in this Form 10-K and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this Form 10-K. We note that factors set forth below, individually or in the aggregate, may cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

The outsourcing trend in the preclinical and clinical stages of drug discovery and development may decrease, which could slow our growth.

Over the past several years, some areas of our businesses have grown significantly as a result of the increase in pharmaceutical and biotechnology companies outsourcing their preclinical and clinical research support activities. We believe that due to the significant investment in facilities and personnel required to support drug development, pharmaceutical and biotechnology companies look to outsource some or all of those services. By doing so, they can focus their resources on their core competency of drug discovery, while obtaining the outsourced services from a full-service provider like us. While industry analysts expect the outsourcing trend to continue for the next several years, a decrease in preclinical and/or clinical outsourcing activity could result in a diminished growth rate in the sales of one or more of our expected higher-growth areas and adversely affect our financial condition and results of operations. Furthermore, our customer contracts are generally terminable on little or no notice. Termination of a large contract or multiple contracts could adversely affect our sales and profitability. Our operations and financial results could be significantly affected by these risks.

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Our debt level could adversely affect our business and growth prospects.

At December 30, 2006,29, 2007, we had approximately $572.1$510.0 million of debt. This debt could have significant adverse effects on our business, including making it more difficult for us to obtain additional

financing on favorable terms; requiring us to dedicate a substantial portion of our cash flows from operations to the repayment of debt and the interest on this debt; limiting our ability to capitalize on significant business opportunities; and making us more vulnerable to rising interest rates.

If we are not successful in selecting and integrating the businesses and technologies we acquire, our business may suffer.

During the past sixseven years, we have expanded our business through several acquisitions. We plan to continue to acquire businesses and technologies and form alliances. However, businesses and technologies may not be available on terms and conditions we find acceptable. We risk spending time and money investigating and negotiating with potential acquisition or alliance partners, but not completing the transaction.transactions. Even if completed, acquisitions and alliances involve numerous risks which may include:

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difficulties and expenses incurred in assimilating and integrating operations, services, products or technologies;




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difficulties in developing and operating new businesses, including diversion of management’smanagement's attention from other business concerns;

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potential losses resulting from undiscovered liabilities of acquired companies that are not covered by the indemnification we may obtain from the seller;

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risks of not being able to overcome differences in foreign business practices, language and other cultural barriers in connection with the acquisition of foreign companies;

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the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies; and

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difficulties in achieving business and financial success.

In the event that an acquired business or technology or an alliance does not meet our expectations, our results of operations may be adversely affected.

We could experience a breach of the confidentiality of the information we hold or of the security of our computer systems.

We operate large and complex computer systems that contain significant amounts of customer data. As a routine element of our business, we collect, analyze and retain substantial amounts of data pertaining to the preclinical and the clinical studies we conduct for our customers. Unauthorized third parties could attempt to gain entry to such computer systems for the purpose of stealing data or disrupting the systems. We believe that we have taken adequate measures to protect them from intrusion, but in the event that our efforts are unsuccessful we could suffer significant harm. Our contracts with our customers typically contain provisions that require us to keep confidential the information generated from these studies. In the event the confidentiality of such information was compromised, we could suffer significant harm.

We depend on key personnel and may not be able to retain these employees or recruit additional qualified personnel, which would harm our business.

Our success depends to a significant extent on the continued services of our senior management and other members of management. James C. Foster, our Chief Executive Officer since 1992 and Chairman since 2000, has held various positions with us for over 30 years. We have no employment agreement with Mr. Foster or other members of our management. If Mr. Foster or other members of management do not continue in their present positions, our business may suffer.

Because of the specialized scientific nature of our business, we are highly dependent upon attracting and retaining qualified scientific, technical and managerial personnel. While we have an

excellent record of employee retention, there is still strong competition for qualified personnel in the veterinary, pharmaceutical and biotechnology fields. Therefore, we may not be able to attract and retain the qualified personnel necessary for the development of our business. The loss of the services of existing personnel, as well as the failure to recruit additional key scientific, technical and managerial personnel in a timely manner, could harm our business.

Our quarterly operating results may vary, which could negatively affect the market price of our common stock.

Our results of operations in any quarter may vary from quarter to quarter and are influenced by such factors as as:

•

the number and scope of ongoing customer engagements,



•

the commencement, postponement, progress, completion or cancellation of customer contracts in the quarter,



•

changes in the mix of our products and services,



•

the extent of cost overruns,



•

holiday patterns of our customers,



•

budget cycles of our customers,



•

the timing and charges associated with completed acquisitions and other events, and



•

exchange rate fluctuations.

        We believe that operating results for any particular quarter are not necessarily

a meaningful indication of future results. Nonetheless, fluctuations in our quarterly operating results could negatively affect the market price of our common stock

Item 1B.    Unresolved Staff Comments

There are no unresolved comments to be reported in response to Item 1B.

Item 2.    Properties
                        Properties

We own or lease the land and lease ourbuildings where we have facilities. We own large facilities (over(facilities over 50,000 square feet) for our PCS businesses in the United States, Canada, Scotland and Ireland, and lease large facilities in the United States, Canada and, Canada.once completed, China. We have recently brought aonline new U.S. Preclinical Service facility onlinePCS facilities in Massachusetts and will bring another one in Nevada online in 2007.Nevada. We own large RMS facilities in the United Kingdom, France, Germany, Japan, Mexico, Canada and the United States. None of our leases are individually material to our business operations and many have an option to renew. We believe that we will be able to successfully renew expiring leases on terms satisfactory to us. We believe that our facilities are adequate for our operations and that suitable additional space will be available when needed. For additional information see Note 7[7] to the Consolidated Financial Statements included elsewhere in this Form 10-K.

Item 3.    Legal Proceedings

We are not a party to any material legal proceedings, other than ordinary routine litigation incidental to our business that is not material to our business or financial condition.

Item 4.    Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5.    Market for Registrant’sRegistrant's Common Equity, Related Stockholder Matters and Issuer Purchases Ofof Equity Securities

Our common stock began trading on the New York Stock Exchange on June 23, 2000 under the symbol “CRL.”"CRL." The following table sets forth for the periods indicated below the high and low sales prices for our common stock.

Except as disclosed in a current report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2006 with respect the Company’s sale of 2.25% convertible senior notes due 2013, thereThere were no equity securities that were not registered under the Securities Act of 1933, as amended, sold by the Company during the fiscal year ended December 30, 2006.29, 2007.

Shareholders

As of February 15, 2007,12, 2008, there were approximately 555508 registered shareholders of the outstanding shares of common stock.

Dividends

We have not declared or paid any cash dividends on shares of our common stock in the past two years and we do not intend to pay cash dividends in the foreseeable future. We currently intend to retain any earnings to finance future operations and expansion. Some of the restrictive covenants contained in our revolving credit agreement and term loan agreements limit our ability to pay dividends.

Issuer Purchases of Equity Securities

The following table provides information relating to the Company’sCompany's purchases of shares of its common stock during the quarter ended December 30, 2006.29, 2007.

On July 27, 2005, the        The Board of Directors of the Company has authorized a share repurchase program, to acquire up to $50.0 million of common stock. Onoriginally authorized on July 27, 2005 and subsequently amended on October 26, 2005, the Board of Directors authorized increasing the share repurchase program by $50.0 million to a total of $100.0 million. On May 9, 2006 the Board of Directors authorized an additional increase of the Company’s share repurchase program by $200.0 millionand August 1, 2007, to acquire up to a total of $300.0$400.0 million of common stock. The program does not have a fixed expiration date.

During the quarter ended December 30, 2006,29, 2007, the Company repurchased 76,900199,200 shares of common stock for approximately $3.3$12.0 million. The timing and amount of any future repurchases will depend on market conditions and corporate considerations. Additionally, the Company’s 2000Company's Incentive Plan permitsPlans permit the netting of common stock upon vesting of restricted stock awards in order to satisfy individual tax withholding requirements. Accordingly, during the quarter ended December 30, 2006,29, 2007, the Company acquired 8811,144 shares as a result of such withholdings.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes, as of December 30, 2006,29, 2007, the number of options issued under the Company’sCompany's stock option plans and the number of options available for future issuance under these plans.

(1)

None of the options outstanding under any equity compensation plan of the Company include rights to any dividend equivalents (i.e., a right to receive from the Company a payment commensurate to dividend payments received by holders of common stock or other equity instruments of the Company).

(2)

On March 22, 2007, the Board of Directors determined that, assuming shareholder approval is received for the 2007 incentive Plan, no future awards would be granted under the preexisting equity compensation plans, including the Charles River 1999 Management Incentive Plan and the Charles River 2000 Incentive Plan. Shareholder approval was obtained on May 8, 2007. Previously, on February 28, 2005, the Board of Directors terminated the Inveresk 2002 Stock Option Plan to the extent that no further awards would be granted thereunder.

        The following table provides additional information regarding the aggregate issuances under the Company's existing equity compensation plans as of December 29, 2007:

(1)

For purposes of this table, only unvested restricted stock as of December 29, 2007 is included. Also for purposes of this table only, the total included 30,300 restricted stock units granted to certain employees of the Company outside of the United States.

Item 6.    Selected Consolidated Financial Data

The following table presents our selected consolidated financial data and other data as of and for the fiscal years ended December 30, 2006, December 31, 2005, December 25, 2004, December 27, 2003 and December 28, 2002. The Statement of Income Data and Other Data for the fiscal years ended December 30, 2006, December 31, 2005 and December 25, 2004, and the Balance Sheet Data at December 30, 2006 and December 31, 2005 have been derived from the audited consolidated financial statements for such years, included elsewhere in this Form 10-K. The Statement of Income Data and Other Data for the fiscal years ended December 27, 2003 and December 28, 2002 and the Balance Sheet Data at December 25, 2004, December 27, 2003, and December 28, 2002 have been derived from the audited consolidated financial statements for such years not included in this Form 10-K. During 2006, we sold Phase II-IV of the Clinical business and made a decision to close our Interventional and Surgical Services (ISS) business. Accordingly, the results of these businesses are disclosed as discontinued operations, less applicable income taxes (benefit), and are reported as a separate component in the accompanying statement of income for the current and prior periods. In addition, assets and liabilities of discontinued businesses have been reclassified in the balance sheets of periods ended prior to 2006. You should be read the selected consolidated financial data contained in this table in conjunction with “Management’sItem 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations" and our consolidated financial statements and the related notes.notes thereto contained in Item 8., "Financial Statements and Supplementary Data" of this report.