S1802

The CARGO Act of 2025 amends the Public Health Service Act to explicitly forbid the Director of NIH from awarding any support for activities or programs that use live animals in research unless that research occurs within the United States or its territories. This directly impacts the approximately $2.2 billion in NIH funding that went to foreign organizations for animal research between fiscal years 2011 and 2021. This funding will now be exclusively available to U.S.-based research institutions and contract research organizations (CROs). The money trail shifts entirely to domestic entities. U.S.-based universities, research hospitals, and CROs with animal research facilities stand to gain from this redirection of funds. Companies like Charles River Laboratories ($CRL) and Labcorp, which have significant U.S. animal research operations, will see increased demand for their services. Conversely, CROs with substantial international animal research facilities that previously received NIH funding will lose access to this revenue stream. The mechanism is a direct prohibition on grant and contract awards to non-U.S. entities for animal research. Historically, shifts in research funding priorities have directly impacted the CRO market. For instance, increased NIH funding for specific disease areas or research methodologies has historically led to increased contract awards for specialized CROs. While a direct historical precedent for a complete geographic restriction on animal research funding is not available, similar legislative actions that re-prioritize domestic spending, such as the 'Buy American' provisions in infrastructure bills, have consistently shown a redirection of funds to U.S.-based companies. The immediate market reaction to such shifts is typically seen in the stock performance of companies with high exposure to the affected funding streams. Specific winners include U.S.-based animal research facilities and CROs like Charles River Laboratories ($CRL) and Labcorp, which will see increased demand for their domestic services. Companies like Inotiv ($NOTV), which specializes in preclinical research services within the U.S., also stand to benefit. Losers are foreign-based research organizations and potentially large pharmaceutical companies ($PFE, $JNJ, $MRNA) that rely on international CROs for animal research funded by NIH grants, as they will need to re-evaluate their research partnerships and potentially incur higher costs for domestic research. Companies like Recro Pharma ($RCUS), which has a significant international footprint, may face challenges in securing NIH-funded animal research contracts. This bill has been referred to the Committee on Health, Education, Labor, and Pensions. The next steps involve committee hearings and potential markups. If it passes committee, it will move to a full Senate vote. The earliest market impact will be seen as the bill progresses through the legislative process, with significant shifts occurring upon passage and enactment, likely within the next 12-24 months if it gains traction.