ICON at William Blair Conference: Strategic Focus Amid Challenges

On Wednesday, 04 June 2025, ICON PLC (NASDAQ:ICLR) presented at the 45th Annual William Blair Growth Stock Conference. CEO Steve Cutler outlined both the hurdles and opportunities facing the Contract Research Organization (CRO) industry. While acknowledging challenges like fluctuating biotech funding and cautious customer behavior, Cutler emphasized ICON’s strong market position and strategic initiatives aimed at cost management and innovation.

Key Takeaways

• ICON operates in a $60 billion CRO market with significant growth potential.
• The company is among the top three CROs, with 41,000 employees in 55 countries.
• Strategic partnerships with 17 of the top 20 pharmaceutical companies bolster its competitive edge.
• ICON focuses on innovation with technologies like OneSearch and SmartDraft.
• The company is actively exploring M&A opportunities to strengthen its services.

Industry Overview & ICON Positioning

• CRO Market: Valued at $60 billion, with a penetration rate of 50% that could rise to 70%.
• ICON’s Strengths: Global reach and strategic partnerships enhance its competitive position.
• Challenges: Volatile biotech funding and elevated cancellation rates are current industry concerns.

Innovation & Technology

• OneSearch: Aims to optimize clinical trial sites and reduce non-recruiting sites.
• SmartDraft: Utilizes AI to expedite contract negotiations, potentially cutting timelines drastically.
• Cassandra & Tokenization: Enhance regulatory compliance and long-term patient monitoring.

Financial Strategy & Outlook

• Balance Sheet: Debt reduced to 1.7 times adjusted EBITDA, with strong free cash flow for share buybacks.
• M&A Opportunities: Focus on patient recruitment, site networks, and lab services.

Market Challenges and Strategic Response

• Challenges: Loss of exclusivity impacting pharma spending and cautious customer behavior.
• Strategic Response: Emphasis on cost management and market share growth through effective delivery.

ICON’s presentation at the conference highlighted both its resilience in navigating industry challenges and its commitment to leveraging innovation and strategic partnerships for future growth. For a detailed understanding, readers are encouraged to refer to the full transcript.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Max Mach, Research Analyst, William Blair: Alright. Good morning, everyone, and thanks for joining us today for the management presentation.

My name is Max Mach, and I’m the research analyst here at William Blair who covers Icon. We’re pleased to be joined this morning by CEO, doctor Steve Cutler, and Kate Haven, vice president, investor relations. Before we get into the presentation, I have to mention two things. First, the breakout session will be held in Adler on the second floor immediately following this presentation. And second, I’m required to inform you that for a complete list of research disclosures or potential conflicts of interest, please visit our website at WilliamBlair.com.

So, again, very pleased to have Icahn with us here today. And with that, I’ll turn it over to Steve.

Steve Cutler, CEO, Icon: Thank you, Max, and good morning to everybody. Nice to see you all here, and looking forward to giving you a little bit of an insight onto ICON and what’s happening with us at the moment. I’ll I’ll flash the forward looking statement up there. I’m sure you haven’t seen that before, and we’ll continue to move on. So the CRO industry, I think, is going through something of a challenging time at the moment.

That’s not news to anybody. But, ultimately, we do believe it’s a very positive and and strong industry, and we do believe in the medium to long term, there’s there’s plenty of reason to be constructive and optimistic. Our market is in the vicinity of $60,000,000,000. That’s about about a half of what gets spent or outsourced or at least spent on on r and d in the in the pharma space. And so, you know, we have a penetration of around 5050%, which we believe can continue to increase.

It has increased really over the last, probably, twenty, twenty five years at about 100 to 200 bps per year. We believe that can continue probably up to around about 70%. So that’s a source of of market growth for us as we do more of our pharma customers r and d, do more of their development. And, of course, we also see opportunities for taking market share as we are one of the largest players in the industry. There is certainly some near term challenge and some volatility as we work through the next twelve to eighteen months or so.

But overall, we do feel, as I say, a a very strong market and a very a great a great opportunity for for long term value in our business and in our industry. There’s there’s certainly prioritization of of late stage development. The biotech funding did improve in in 2024 to the tune of about 30 to 40%. That’s a little bit volatile, certainly the first part of this year, so we’re not quite through some of the challenges around biotech funding. But overall, do believe it’s it’s moving in the right direction.

The the the rise of of novel and complex therapies continues. And even beyond that, the the GLP ones, the cardio metabolic area offers us a significant opportunity to to go back to doing very large scale trials. When I came into the industry twenty or so, thirty years ago, we were doing very large scale cardiovascular trials. More more recently, those have gone away, and we do tend to we tend to do more oncology work, rare disease. But the GLP ones and the GLP one agonist offers the opportunity to go back to some of those large scale trials, which, of course, are very good for for our business.

The the opportunities around innovation and technology also offers us an opportunity to be more efficient, to spend our customers’ money more effectively. We believe we’re on a good track to do that, and I’ll present a little bit of that as we go through today. So overall, a constructive longer medium to long term opportunity, I think, within our business and and certainly within our industry. ICON is a is a is one of the largest players in the industry. We’re in the in the top three.

We’re number one in a number of segments, number two in a number of others. We’re about 41,000 people around the globe in 55 countries and almost a hundred locations. In clinical development, you need to be a scaled organization. You need to be able to deliver patients and data from around the world. And so that’s one of our key advantages, the scale of our operations.

We also have strategic partnerships with seven end of the top 20 and a number outside the top 20 as well, and that’s certainly been a benefit to us as as we see the industry develop and those partnerships develop. We’re a world leader in the full service space. That’s in the phase two, phase three where we do all of the work, particularly for biotech companies. We do all of the work in in large pharma. We’re also a leader in functional service provision.

That’s FSP. That’s where we do departmental or functional areas. We provide people in various forms to do data management, to do statistics, to do medical writing, to do monitoring on a functional or departmental basis. And that’s an area of our business. It went round about 22% of our business, but it’s it’s it is an area of our business that is is growing at a reasonable clip.

We’re also one of the leading area leading CROs in the biotech space as well. We have a group of about 6,000 people who are focused in on the biotechs and doing the work that the biotechs require. All full service work. They don’t have the the ability or they don’t have the infrastructure to to manage functional service delivery. And so they are full service of customers, and that’s certainly an important part of our business.

Early phase is an area that’s been growing nicely for us in the in the recent past. Not a huge part of our business, but one that brings through opportunities in the phase two, phase three space, and that’s been going and moving along nicely. And we’re also number two in our in the in the more late phase area as well. That’s phase four and and commercialization where we do trials that more lead towards developing key opinion leaders and developing the market for the drugs in terms of new indications. We are structured as an organization to deliver to our key segments.

Our key segments being large pharma, of course, ICON being known as a large pharma CRO. We’ve also, more readily, as we acquired PRA about four years ago, moved into the biotech space. Not that we weren’t in that with with as ICON, but we really have a a significant focus in the biotech space where there’s around six to 7,000 people focused in that area at the moment. I mean, biotech is a different class of a segment of customers. They are customers who are much much more lighter, much more agile, much more willing to to to move fast and and and get things done.

But, of course, they they do have some challenges at the moment. In terms of our development solutions group, that’s a group that looks after our early phase group, our labs, our imaging group, and and some regulatory consulting. So it’s a girl the group that has sort of peri clinical services that support both our large pharma and our biotech segment. And underlying that, our global business support services, which I actually do believe is one of our key strategic selling points. We have a very strong global business services group around HR, IT, finance that works across our organization.

It’s one of the reasons we’ve been able to control our costs and mitigate any cost increases very significantly over the last twenty twenty or twenty five years or so. So what are our competitive strengths in in what is a very competitive industry? And I think there are a number of I just mentioned the the global business services area. That’s something I think we take very seriously. We manage our costs very effectively, and that that’s partly through our global business services group.

I also mentioned our global reach and global scale up there in the top right. 40,000 employees across 55 countries. You do need to be a scaled provider of services in this space. We often have to go, and we have we have to be agile. We have to move in terms of where we do these trials.

We do them in Asia. We do them in South America. We do them in Central East Europe, and sometimes even more esoteric and and exotic locations as well when you’re looking for patients with a rare disease or or a particular indication. And it’s important that you’re able to do to move around the world and do that with your own resources very effectively. Many of our smaller subcontract with others, but that introduces a level of complexity and a level of challenge that certainly our customers are not always keen to endure.

We do have a singular focus in the clinical space. We’re focused phase one to phase four. We believe that’s a source of comparative advantage to us. Some of our competitors go well beyond that into data, into other other parts of the the pharma services business, other diagnostics, equipment, machines, etcetera, etcetera. We focus in the clinical space.

So we’re the we’re the largest scale provider in that space, and as I said, around phase one to four. We are able as a big as a large provider of functional FSP models and full service models, we’re also able to provide the blended models. And increasingly, customers, particularly large pharma, are looking for a blended model. There’s no one who actually does purely FSP or purely FSO unless you’re a biotech, of course. Particularly in the large pharma or the mid sized space, it tends to be a blend of of services and a blend of of functions, and that’s an area that we’re able to accommodate our customers and and go where they wanna go very effectively.

We have a site and a patient network. That’s something we’ve invested in significantly over the last few years. We continue to look for opportunities in that space. Again, integrating our services, making it more controllable, bringing recruitment, or giving us more influence over recruitment of clinical trials. Recruitment being the area that is most influenceable, if you like, in terms of shortening the the the time to to do a clinical trial.

Often, you’re looking at a year, two years, even three years for to recruit some of these trials, particularly when you’re looking for large numbers of more rare disease patients. So we can do that more effectively in a in faster time frame through our network of sites. It gives us a competitive advantage. We also have a a broad and vast expertise around the complex clinical trials. In clinical trials have become much more complex over the last, probably, ten years as we go into the cell and gene therapy, as we’ve gone into into some of these rare diseases.

Oncology is almost every oncology study is almost a rare disease study these days. You rarely do just a straight, you know, third line non small cell anymore. You’re looking for subtypes. You’re looking for genomic types, and that’s it’s always important to be able to to find those patients and have expertise in those particular areas. And, of course, finally, we also have integrated technology and a decentralized solution.

The the talk of decentralized clinical trials, not so much in the in the last year or so, but certainly in the last we are seeing more and more components of our clinical trials being more decentralized, an opportunity for us again to be more efficient for our customers. So we have a platform that integrates a number of our services, be it our home care, be it our site network, be it our monitoring, the way we do risk based monitoring, our imaging, all of those sorts of areas. Our fire crest facility, which is a site portal that we that we have sites to get trained on and get information through. So there’s a number of things that our decentralized platform bring to a clinical trial that allow us to be more effective and and certainly more efficient. I think the other thing we with that’s perhaps not there as a as a competitive strength, but is a a an output of those competitive strengths is that is those partnerships in the large pharma space.

We have, as I say, 17 of the top 20 in preferred partnerships, and we’re increasingly moving that now to some of the midsize companies. Companies who commit us to spend or commit us spend to two or three. Sometimes it’s one. That that tends to be more rare. It’s certainly two, three, occasionally four providers.

And and as one of the top tier providers, we’re always in the conversation when those sorts of partnerships come up. In terms of our innovation and some of the applications and systems that we’ve been bringing to the market or bringing to our customers really over the last few years, and and some of these, you’ll you’ll already be aware of. Those of you who follow ICON, our OneSearch facility, helps us to identify the right sites. We we would generally recruit patients through sites. It’s rare that we go directly to patients.

And so getting the right site and the right investigator into the trial is is critically important. You do not wanna have sites that don’t recruit patients. It’s a it’s a resource intensive thing, bringing a site to a point where they can recruit patients into a trial. There’s a lot of documents to collect. There’s a lot of approvals to get, And so you don’t wanna waste that money.

You don’t waste that time. Typically, in the industry, 30 to 40% of sites don’t recruit a patient. Or sometimes it’s even worse if they recruit one patient because you’ve gotta go out there and monitor that one patient, spend money doing that, and it tends to be very inefficient. Where we can find the right sites and we can get sites that recruit multiple patients into those clinical trials, we become a much more effective, a much more efficient deliverer of the of that clinical trial for our for our customers. Our one search tool through data, through vast amounts of data, through our CTMS, our clinical trial management system, through our lab, through sight lines, through a number of external sources, allows us to identify the right sites and the sites that will most will will contribute well to the clinical trial that we’re contemplating doing.

Our Cassandra system, which helps us to predict post marketing commitments based on FDA, EMA, Japanese authorities, what what trials that that that our customers will need to do as they move to marketing, again, helping our real world business. Tokenization is an area where we’re able to follow a patient tokenize a patient and follow-up follow a patient through accessing real world data. And that’s particularly important as we go back to some of these larger larger scale trials, these obesity trials where we’re recruiting thousands of patients, the vaccine trials, where we’re recruiting thousands of patients, and you need a flawless safety profile. The only way to do that is to follow those patients, you know, on a long term basis over a number of years even even after the trial’s finished. And we can do that again in a very cost effective manner, albeit fairly high level basic data.

But that’s all you need once you get regulatory approval, and the regulatory authorities are looking for this sort of data going forward, particularly with these large scale obesity type compounds and vaccines where there’s where large large amounts of patients and large proportions of the populations are are taking them. ICONICS helps us to identify key opinion leaders. Again, an important part of of of commercialization of the drugs as as they get to market. And our digital platform, I’ve mentioned, that’s how we do decentralized clinical trials. More recently, SmartDraft has helped us to to contract more effectively with sites and bring sites up to to a point where they can recruit patients more speedily, more efficiently.

Typically, it can take six to twelve months to to go to to go from identifying a site to a point where they can actually recruit patients with all the documentation and approvals that need to be collected. SmartDrive, one of the rate limiting steps is contracting with those sites. The contracts that you put in place, include the budgets, are rate limiting. And so we can we use AI now to help us look at what we’ve done before with that particular site. Of course, we work with these sites for multiple customers in multiple trials, and we know what they will accept.

We know what will work with them, and we’re able to bring that to our customers much more speedily as as we as we take that those discussions forward. So we can say to our customer, listen. You can, you know, you can discuss and negotiate for six months, or you can go straight to what to what we know this site has already accepted, and it can be done in a month. So so there’s a potential, of course, up to the customers to what they wanna accept, but we have the potential to to significantly reduce the amount of time to get that site to a point where they can recruit patients. And then I submit around our trial master file.

As you as you run clinical trials, you collect vast amounts of documentation that all needs to be put into files. Typically, digitally these days in electronic files, we have a trial master file. And the the submission of those or those putting those those documents, whether they be CVs, whether they be approvals, whether they be data into a trial, it allows us to be able to do that on a on a easy basis. And, again, we’ve been able to save a significant amount of time and resource using our iSubmit tool. So we do we’re typically doing up to we’re we’re planning for up to five million hours in robotic type work.

It’s not all AI, but it is robotic type work. And we’re very practical in the way we apply those those applications in those systems, and we’ve been able to save I I believe it’s getting towards 80 to a hundred million in our SG and A costs through our robotics and through our API. We believe there’s always further opportunity in that as we go forward. Just another way we’re able to to continue to look at our costs. The challenges that we’re looking at, you know, really are around key industry challenges, and that, as I said, relates to recruitment of patients, recruitment in in a way that’s effective and efficient, and looking at at sites that failed to recruit patients.

So I I talked about our our OneSearch tool and and the way that’s that’s been implemented now over a number of years and in terms of of an ability to meet planned enrollment challenges. Typically, in the industry, about 40% of trials don’t meet their enrollment timelines. And and we’re able we’ve been able to bring that down significantly, as you can see there, through the use of OneSearch, through the use of our AccelaCare site network. So we do believe our execution and delivery is is is on track and is a competitive advantage for us. It’s something that we emphasize significantly with around our company.

We’ve been able to find get sites up at about 10% faster. We we have 33% fewer non recruiting sites. So we’re we’re in the teens on non recruiting sites, whereas the industry is is is well north of that in the high twenties or even 30% depending upon therapeutic area, etcetera, etcetera. In terms of trials completed on time, we believe we’re also ahead of the industry average. So, again, the the the the technology and the innovation that we put in place has been able to practically and tangibly improve our our our execution and delivery, and that’s particularly important for us, I think, for customers who are always looking for value, particularly in these somewhat challenging and tough times.

So what are we focused on through what we’ve called a transition year 2025? Of course, as you’re all as you’re all aware, the market has has a number of challenges. The LOEs with respect to large pharma, particularly two hundred to three hundred billion dollars in in in loss of exclusivity over the next five years or so, and looking very hard at what they’re doing in in that space now. Biotech funding, as I’ve mentioned, although it was up last year, has a has a has a fairly lukewarm start to this year even the the the results I’ve seen even for for May. You know, again, not not as as as strong as we would like.

And so so there’s still some challenges. Some challenges remain in terms of funding. There are 700 ish public biotech companies, and so there are some challenges, I think, there with the funding and the with the with the the public markets almost nonexistent at the moment for them. They do have some challenges. That’s showing up with our business in terms of the speed of of decision making and the amount of money that they have, and they’re able to allocate to their trials.

So the the market dynamics are are challenging. We’ve seen elevated cancellations that will probably that will likely continue for for certainly for the second quarter and and into the year. I think as we get into next year, we’ll start to see that settle down, but I think there’s still a period of time where we’re working through some of those elevated cancellations and cautious customer behavior, which we’ve seen certainly over the last six to twelve months or so. We have a good track record of executing on cost management. We’ve been able to maintain our margins pretty well, certainly over the last couple of quarters given the the the shortfall in the in the revenue.

We actively look at our costs on a very regular basis, and we we have a good track record of that over, not just the last year or so, but over the last fifteen or twenty years. It’s something that we do. It’s part of our DNA, and we we we manage that very effectively. And I think we’re able to maintain our margins, and and we’ve shown an ability to do that. We do think there’s we’re capturing opportunity, and there’s and there’s progress across our our customer groups.

Our large pharma win rate has been very strong. The opportunities in our biotech space have have been increasing, albeit they’re not always opportunities that that move then forward to to awards and then revenue. There’s an element of budget requests, I think, in some of those biotech ones. So the quality of those RFPs is not quite where we’d like it to be. We do believe that’ll come back over the more medium term.

And we do believe we’re we’re capturing market share. It’s a little bit hard to tell in the in a in a sort of this challenging, somewhat volatile time. But as an organization that’s that’s that’s delivering and executing as I showed you with those slides, we’re getting good feedback from customers in terms of our feed engagement scores and and our ability to to deliver for them in an effective manner. And, of course, we have a very strong balance sheet. We paid down our debt from our acquisition of PRA Health Sciences four years ago.

We’re at about 1.7 adjusted EBITDA to to debt, and and that gives us a strong balance sheet and ability to deploy that. We’re focusing that in the relatively short term or medium term, I suppose, on on on the share buybacks. We we did $250,000,000 in the first quarter. We’re aiming to do a similar similar number in this quarter. We are an Irish company, and that means we have some restrictions as to as to what we can how much we can spend in the in the share buyback area.

It really comes down to free cash flow. But our free cash flow is strong, and so we’re looking to to continue to spend it about at a similar level to what we did in the first quarter as we as we continue to go ahead. And now we believe we believe that share price and our value is is unprecedented at the moment. Certainly, we’re continuing on that front. We also are looking in the m and a market because we do believe our with with our balance sheet so strongly, we believe there are opportunities out there, particularly in this somewhat challenged environment.

So there are a number of areas that we’re looking at in terms of patient recruitment, in terms of site networks. Our lab, I would like to be to be larger and to be a a larger part of the landscape. Even in the real world evidence, I think we’re seeing some evidence that the regulatory authorities, particularly FDA, are shifting towards post post approval commitments. And I think the real world evidence market is also set to to, on a long term basis, grow as well. So there’s opportunities there, and we look at that.

But right at the moment, share buybacks do do take precedence. So with that, I’ll I’ll finish, and I think we’ll have the question and answer in the Adler Room, Max. Thank you very much.

Max Mach, Research Analyst, William Blair: Alright. Thanks everyone for joining. Again, we’re doing the breakout in Adler on the Second Floor, so we’ll see everybody up there in about ten, fifteen minutes. Thank you.

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