U.S. drug research firm Charles River Laboratories International's plan to buy Chinese rival WuXi PharmaTech looks increasingly shaky as more investors come out against the deal.

While Charles River claims to have the backing of a majority of its shareholders and is confident of the deal winning stakeholders' approval, three large holders of the company's stock made their opposition to the takeover clear over the past two weeks. The market also seems to be signaling that it supports the shareholder groups' view that the $1.6 billion deal is expensive and comes with financial risks.

Charles River has fallen 9% since the deal was announced, while WuXi shares are trading around $16, well short of the offer price of $21.25. Here are some possible scenarios for Charles River:

Cutting The Offer Price

Many investors and analysts view the deal as making sense strategically, but think there is no margin for error at the current price. Charles River could quell some of the opposition by renegotiating the offer price downwards with WuXi. However, settling on a price that both appeases investors and also wins over WuXi management could prove to be a tall order.

"A deal that is about 25% lower than the current offer would probably be acceptable to investors, but that would eliminate the premium," Jefferies and co-analyst David Windley said. "WuXi's total value has been lower than the offer price since just two hours after the deal. Most WuXi investors probably know they are not going to get $21.25, the market is telling them that," Windley said.

Restructuring The Deal

Charles River could avoid a shareholder vote by reducing the stock portion of the transaction to below 20% of outstanding shares from the over 30% currently. At that level, the company would not require shareholder approval to go ahead with the deal. However, the investor groups opposing the deal have already warned the company against such an action.

Reducing the share component, would increase the debt burden on the company by about $275 million, potentially creating greater risk for the company. Right now, the company plans to finance the cash portion of the deal through cash on hand and one or more sources of new debt financing. It has a financing commitment for a $1.25 billion credit facility from JP Morgan Chase & Co and Bank of America Merrill Lynch.

Drumming Up Client Support

As unlikely as it may seem right now, Charles River can try to win over shareholders by getting its clients to come out in support of the deal and the strategy behind it. Charles River CEO James Foster has said the plan to combine itself with WuXi and deepen its expertise in upstream drug-research services like discovery services has seen huge enthusiasm from its client base.

"Our clients are talking to us about giving us programs to work on, meaning the development of an entire drug as opposed to a project at a time," Foster said in an interview to Reuters earlier this week. Jefferies' Windley agreed and added that the Wilmington, Mass.-based company should make public the expected synergies from the deal.

Walking Away

While walking away from the deal seems like the last thing Charles River management is thinking of right now, they may be left with little choice if shareholder opposition grows. Charles River's preclinical drug research business, which has been going through a tough phase since late 2008, is lately showing signs of stabilization, and the company may not need a big transaction distracting it from a recovery.

"With Charles River having about 20% of the total outsourced preclinical market, they are primed to benefit from the recovery that is coming," Wells Fargo analyst Greg Bolan said. "However, the WuXi deal creates a big overhang. Because we don't know whether or not there is a successful integration for at least a year or more."