IQVIA at TD Cowen Conference: Strategic Insights and Growth Outlook

On Tuesday, March 4, 2025, IQVIA Holdings Inc (NYSE: IQV) participated in the TD Cowen 45th Annual Healthcare Conference, offering a strategic overview of its diverse revenue streams and market positioning. The company highlighted both opportunities and challenges, emphasizing its focus on long-term growth while addressing short-term market dynamics.

Key Takeaways

• IQVIA’s revenue is diversified, with 55% from CRO activities and 45% from TAS and CSMS businesses.
• The company anticipates elevated cancellation rates in the first half of the year but expects improvement later.
• IQVIA is targeting a 6-9% top-line growth, driven by various factors including pharma spend and outsourcing.
• Emerging Biopharma (EBP) clients contribute significantly to revenue, with strong funding prospects.
• Strategic focus on M&A is balanced with share repurchases, depending on market conditions.

Financial Results

• Revenue is split between CRO (55%) and TAS/CSMS (45%).
• Approximately 10% of revenue stems from emerging biopharma companies.
• FSP-related revenue represents about 15% of total R&DS revenue.

Operational Updates

• IQVIA maintains preferred partnerships with 22 of the top 25 large pharma companies.
• The company experienced elevated cancellation rates, about 50% above normal last year, with expectations of improvement in the second half of the year.
• TAS business is expected to grow 5-7% in constant currency, with a stronger second half anticipated.

Future Outlook

• IQVIA projects a 6-9% top-line growth, with contributions from pharma spend, outsourcing, share gains, and inorganic growth.
• Portfolio rationalization is progressing, with expectations of recovery in the latter half of the year.
• The company plans to allocate about $2 billion for share repurchases and acquisitions, favoring acquisitions when opportunities arise.

Q&A Highlights

• There is a noted shift towards Functional Service Provider (FSP) models, with IQVIA participating in hybrid trials.
• The company is exploring opportunities in digital marketing, anticipating a favorable M&A environment under the new administration.

In conclusion, IQVIA’s presentation at the conference underscored its strategic initiatives and growth prospects. For further details, readers are encouraged to refer to the full transcript below.

Full transcript - TD Cowen 45th Annual Healthcare Conference:

Unidentified speaker: Is my mic on? Yes. Okay, great. Yeah.

Look, I I I think one of the things are people are overlooking for IQVIA in particular is that we are not exclusively a CRO. Fifty five percent of our revenue, give or take, is CRO related. 45% comes out of the TAS business and CSMS business. So I think that that’s a a a big item that that people overlook. I think they also tend to overlook the long cycle nature of the industry sometimes and get overly focused on on the short term in particular and, you know, kind of the quarter quarter fluctuations in demand.

And this this business is one where you you book something this quarter and it takes four or five it takes six months before you get any revenue out of it at the minimum, and it takes four plus years before you end up fully realizing the trial. So it’s a business that has a lot of long term momentum in it. The fundamentals remain very good even with some of the recent choppiness we’ve seen with portfolio, reprioritization. So I I I guess what I would, urge people to to look at is kind of some of the longer term trends. You know, for instance, we went back and we did a study back to the year February of all the publicly traded CROs to say, what happened during that period?

This is a period where you had a couple of pretty significant recessions. And during that period, there was not a single year when the publicly c r traded CROs had negative revenue growth. Yet there were, I think, three years when the S and P as a whole did have negative revenue growth. So it’s it’s a business that has a lot of stability long term. Well, I’ll make a can a comment about cancellations.

We did see a very elevated level last year, about 50% above normal, as you say, over the course of the year. Now there were two very large trials that we had that were canceled for futility. So that that’s very idiosyncratic. You’re not gonna say that that that’s necessarily indicative of any sort of trend. But having said that, we also did see some, particularly late in the year, portfolio re prioritization effect.

We think a lot of it due due to IRA, and how pharma companies were reacting to that. And we see that continuing on, probably an elevated level of cancellations in the first or second quarter. And, you know, why other people see different than we do, it’s it’s company to company. It’s it’s customer to customer. And there’s a there’s a fairly big variation in in policies around, I think, about cancellations.

I look at one of our our our competitors and saw they have very, very, constant cancellations quarter to quarter. And that that I just scratch my head about. So I I don’t know how that could be. So there is flexibility, I think, in when you you recognize cancellations. And I think different, companies take different approaches to that.

You know, I would make the overall point while we’re talking about, you know, quarter to quarter and cancellations and things of that nature. I I’m gonna go back to something that Ari talked about on our earnings call, which was that, we think that there’s there’s too much focus on the quarter to quarter and the book to bill in particular. And let me give you some thoughts around that. You know, first of all, like I said, it’s a long cycle business. So any one quarter isn’t gonna tell you that much, particularly when a a booking you get this quarter burns over four or five years.

The other thing is that there’s there’s a significant variability in how different customers treat, not just cancellations, but bookings. What we’ve seen is some people do it like us on a contracted basis. Some do it based on verbal awards. What gets goes into the backlog versus what doesn’t go into the backlog varies. There are differences in how many years of FSP companies take.

So there are all sorts of differences in in in that. So it’s very hard to compare across companies. And then when you realize that there are only four companies out there out of all the CROs that that report book to bill, you you don’t even have a very broad base of companies to which to compare that to. You know, the, the other thing I would say is I think the industry as a whole has done itself a bit of a disservice by by emphasizing that too much because our that that is a quarterly book to bills because our our our customers have picked up on that. And they push you at the end of the quarter because they know everybody’s trying to make the quarter quarterly bookings numbers.

And, you know, in our case, it’s particularly frustrating too because we have a whole huge TAS business, which is practically half of the business, and everything seems to come down to, you know, what’s going on with the book to bill in a given quarter. So I I can tell you that, you know, we’re actively having debates internally about, is this something we even wanna continue reporting on a quarterly basis? Because it just it gets just gets too much emphasis, and we put out a lot of other good metrics like next twelve month revenue from from backlog, backlog growth, all those sorts of things. So anyway, I think it’s worth making those points. About about 10% of our revenue comes out of what we would consider to be pre revenue or pre commercial, emerging biopharma company.

So it’s a comparatively small percentage. Overall, we do about, call it, roughly a little bit over 20%. How we define EBP, and that’s the other thing I’d be cautious about because everybody has a different definition. One of our big competitors talks about the top 50 and everybody else goes into EBP. We have a a little bit narrower definition.

But in in any event, it’s it’s relatively small in pre commercial. And, we tend to focus on EBP customers that have funding, that are in in in better situation, more likely to go forward. We do more late stage work that is phase three. Phase two, phase three, we don’t do much, at all. And we do nothing in in in preclinical, and we do very little in phase one.

So we tend to get, EBP companies that are a little bit further along in their cycle and are better funded. So, in that sense, we don’t feel like we have much exposure there. But, you know, there, we we do do a substantial amount of our business with with EVPs for sure. Probably, it’s, you know, if you wanna put round numbers on it, it’s probably 20% of our revenue the way we define it and 25% of our bookings because they’re growing a little bit faster than than the, than large pharma is, mid and large pharma. So that’s 20% of CRO.

Yes. CRO. Exactly. Yes.

Unidentified speaker: Organic growth strategies and kind of, you know, I know they’re just trying to follow the molecule. Do you want to expand into low earlier stage or potentially manufacturing?

Unidentified speaker: Our organic growth strategy, I think our first emphasis is on filling in holes in our TAS portfolio where we have opportunities to grow. You know, we haven’t historically been as big in medical communications or affairs, for instance. We’d like to do more in the digital marketing area. There are a whole bunch of places that, you know, that the the TAS business and the commercialization of pharma is very broad. So there are all all sorts of places we can fill in there.

Now on the r and d s area, you know, we we have, done some acquisitions in the lab business. We’ve done selective acquisitions in the CRO business where we think, you know, we can add, some particular capability. But it’s probably weighted two thirds towards TAS and one third towards towards r and d s roughly in our inorganic activity. Now you asked I think you were kind of poking at would you wanna get involved in the CDMO space or something was a little earlier. I don’t know.

I mean, it’s something we could look at. We we would have to convince ourselves that there was a a nice fit with our business. For instance, that it would feed our our R and Ds business or in somehow enhance that business to be involved in. I wouldn’t rule it out, but, you know, probably probably not likely.

Unidentified speaker: The pharmas seem to want to consolidate their vendors and I guess other CROs are saying, they’re winning this business. So in the CRO business, are you looking at a margin compression or even just a flat margin in the CRO business for, like, the next four or five years given the cancellation of the contracts, the fact that you have to try to get in as to be one of the exclusive ones, you know, that type of thing. And then also if you can say if the biopharma is the smaller guys are getting similar terms than the bigger guys.

Unidentified speaker: The we we went through, I think, pretty much our entire large pharma, you know, portfolio last year, and we reaffirmed all the preferred partnerships we have. We have preferred partnerships with 22 of the 25 large pharma. And we actually even expanded our business some of the new therapeutic areas. We got a little bit more, FSO I mean, FSP business. And so we we I think in seven of those, we actually expanded the scope of of of the work we’re doing.

Hey, Charles. Account. No problem. Let me let me finish the question. I think what you’re you’re asking here is is is there is there a long term pressure, margin pressure on on r and d assets as a result of all that activity.

And the short answer is we don’t think so. It’s been a little bit competitive in the FSP space, so there there there’s there’s been some pressure there on margins. We have some short term margin pressures because we’ve had some trials that were delayed and have some stranded costs there. But, long term, I don’t think we we’ve seen things fundamentally change within that business. Now that being said, at the time of the merger, we really plucked a lot of the low hanging fruit on costs.

So it gets it gets harder and harder to take cost out. We do it through a combination of ways, but one of them is, you know, we’re we’re always looking for low cost sourcing. When we do acquisitions, that allows us to, to reload. And I think the next big frontier for us in terms of cost reduction is, AgenTek AI. And you heard that we re upped our, or not re upped, but started a a relationship with NVIDIA.

And, we’re working with them very carefully, closely to identify areas where we can use AgenTek AI to take cost out of our our organization. And I think that that will bear fruit over time. Probably not a big 2025 impact, but going forward, I I think there’s a lot of opportunity there. Look, we have almost 90,000 employees in the business, so it’s a very labor intensive business. And I think the combination of labor and data lends itself very well to AgenTek AI.

So I think you should see some progress there overall. Charles, you wanna pick up?

Unidentified speaker: And and

Unidentified speaker: And I’ll tell you where that where where where where we’re going over old ground here.

Unidentified speaker: And apologies because, they had somehow doubled me for something. So, again, thanks for the patience. Ron, so maybe just picking up on that a little bit. You mentioned sort of margin pressures. And if we think about FSP adoption, I think depending on who you ask, right, we’ve seen maybe a little bit more pickup, maybe it’s slowing.

Where where do you and but certainly when you listen to some of the big restructurings that are occurring, among large pharma, it does seem like there is a little bit more of a focus on bringing some capabilities in house. The thought process behind that for pharma seems to be a little bit more having a little bit more control or a little bit more visibility on some, obviously with big portfolio pipelines. Can you talk about how you guys can help support that? And does that change the dynamics of what the role of, you know, sort of these large CROs or someone like an IQVIA would be providing in the future? I know in the past you’ve talked about it tends to be cyclical and kinda comes back and forth.

Do you still think that’s the case, and sort of just where do we where do you think we are in this kind of pendulum momentum, I guess?

Unidentified speaker: Yeah. We look, we we still think that’s the case because we’ve we’ve seen the cycles of pharma getting more involved in FSF, FSO and outsourcing more on an FSP basis before, and we’ve seen it swing back. There’s no question right now we’re in a cycle that’s towards a little bit more FSP. What I would say is and we will participate in that for sure. The the old Quintiles pre merger did not wanna do that.

And when we we had the merger, we changed our view on that. Said, look, we wanna do all work, be it FSB or FSL. It it’s a gradual movement in that direction. It’s roughly 15% of our total revenue, and r and d s is FSP related. That’s up a couple of percentage points versus two or three years ago.

So you’re talking about a move of a percentage point or so per year. If you looked at our bookings, it’s probably more along the order of 20% or so. So it’s there there’s a gradual shift. When when will it shift back? I don’t know.

I I I can’t call that. But what we’re seeing in a lot of cases is we’re actually being participating in hybrid trials. It starts out as being FSP, and then the sponsor comes to us and says, well, we really wanna do something in the safety monitoring area and want you guys to take that over. We wanna do something here or there. And so it ends up being a hybrid of FSP and full service work.

So it’s a continuum between the two. But net net overall, it has been somewhat of a shift towards FSP. For sure.

Unidentified speaker: Do you think hybrid then is probably more likely gonna be a bigger piece of the market going forward or at least over the next several years?

Unidentified speaker: Yeah. I think I think I think it will be for sure.

Unidentified speaker: Yeah. Mhmm. And obviously with this period of reprioritizations and pharma going through these restructurings, it’s also come with sort of elevated levels cancellations, we’ve seen across sort of the space. You know, here we are, you know, our way through the first quarter. Any sort of commentary on what you’re seeing in terms of that levels of cancellations as that

Unidentified speaker: Well, I’ll I’ll be real brief here because we we already covered this with the group. But, yeah, we do expect continued, you know, elevated level of cancellations in the first quarter and potential in the second quarter, we think we’ll see a reversal in the second half. And, you know, TAS is very helpful, instructive to us here. You might ask TAS or NDS why. Well, TAS being a shorter cycle business saw the impact of pharma kinda pulling in the reins on spending first.

And we predicted that this would, you know, last for a year or so, and then we would see a bounce back. And coming into last year, we said we expect much stronger second half than first. And there was an understandable level of skepticism among the investors about that. And, in fact, that’s exactly what we saw. It was even a little bit, more of a bounce back than what we expected.

And we think that that informs what’s gonna happen in the the r and d business. We see the first half of the year being a little slow, in part because we had trials at the end of last year that were delayed, some fast burning mega trials that were delayed into the back part of, 2025. But, also because we see pharma now being about two thirds to three quarters of the way through their portfolio rationalization. By the middle of the year, we think that will largely be behind us, and we expect to see things come back in the back half of the year. So the the cycle for r and d s will, we think, take a shape pretty similar to TAS, just a year or so delayed.

Unidentified speaker: Maybe sticking with TAS then. Obviously, you talked about sort of delayed decision making. It’s kind of bounced back here. Is that because of pent up demand or is it just we’re kind of getting back to a the normal kind of cycle, particularly as we think about maybe real world evidence? You know, I think the 2025 guidance, you know, looking sort of constant currency growth, five to 7%.

Do you think that could end up being conservative then?

Unidentified speaker: It it could be. I mean, I think with the to to answer your first question, I see, both pent up demand and just return to normal. I I wish it were the world where everything that was deferred back when things were slow came roaring back immediately. Honestly, I don’t think that’s that’s realistic. I think a lot of the work you got done internally by pharma or or, you know, they they just cut back on their spend.

Some of it has to get done and got pushed, and we’re picking that up now. But we’re also seeing a recovery of normal work as a per strings loosen up. We had, fifth the FDA approved 55 drugs in 2023 and fifty in 2024. And to put that into context, the average is about in the forties, 45 or so. So there’s there’s a lot of work that, that needs to get done and will get done going forward.

And our our indicators in the TAS business right now are very solid. So to your question, we said five to 7% constant currency growth. Could it be better than that? Sure. Could be better than that.

It’s a short cycle business. It’s tough to, it’s tough to predict, and we wanna be prudent going into the year and give you what we were seeing at the time.

Unidentified speaker: And and when we think

Unidentified speaker: about the different components within TAS, it sounds like we could look at RWE and sort of, commercial tech as being kind of the faster growing parts of it as we’re kind of coming out of this cycle. Those tend to be a little bit lower margin than, you know, some of the other parts, if you think about sort of the the software and analytics or information systems. Does that should we think about that

Unidentified speaker: Real world is real world is lower margin, has been, although the margins are improving there. The info tends to be the highest margin, but the slowest growth. I think we’ve been fairly clear about that. Actually, analytics and consulting, should can be quite high margin when you when you get into a period an upswing period. And I think we’re just getting into that right now.

It’s lagged a little bit behind real world, but should come back. And the the, the margins are actually improving in the tech part of the business. I wouldn’t consider them low at all. In fact, as we get into more license revenue and away from implement so much in implementations in terms of waiting, the margins is improving there. So I I I think, going forward for this year, margin should be should be fine in, in the, the TAS business.

You know, they’re gonna be pieces moving in in in different directions, and mix always plays into it. But when you net it all out, I think we should be fine, particularly with, analytics and consulting improving because that can be really nice margin.

Unidentified speaker: That that shift away from implementation and being more focused on licensing. If we think about OCE, for example, and and the partnership now, with Salesforce and with them embedding OCE into their life science cloud, can you just remind us what that relationship looks like going forward as they go to market? Sort of what role do you play, and and how does that show up sort of in results?

Unidentified speaker: Well, the the first thing is we’re continuing to sell the the old OCE platform. Salesforce is out, you know, selling the the new platform, which is on their sales their new cloud based platform, and we’ll get a a a license fee or a a royalty on that. We haven’t disclosed the terms, and we won’t disclose the terms on that. So we’re gonna continue to service existing customers probably through at least through 2029, maybe through the end of the decade. That business isn’t going away anytime soon.

There’ll be a gradual shift over, we think, onto the new platform, and we’ll pick up some royalty revenues on that. Yet net net, it’ll probably be a drag on our revenue in that part of the business, but it’s really not that big. I I, you know, I’ve seen numbers that are thrown around. It it’s it’s probably, we call it, roughly a hundred and $50,000,000 business for us this year. And we have a $1,400,000,000, commercial TAS business.

So you’re you’re never gonna see it. It it it it’ll be a a gradual taper down and, we’re gonna have growth in other areas. You’ll you’ll never see it.

Unidentified speaker: Yeah. Maybe lastly within test, digital marketing. Obviously, you tried to make an acquisition earlier and kind of got blocked. With the change in administration, you know, maybe change in FTC leadership, Do you think this is an opportunity then to kinda go back to, you know, some of these areas?

Unidentified speaker: It could be. The specific deal that we were looking at that got blocked by the FTC, the which injustice would which was deep intent. I don’t know whether that’ll come back or not, you know. Sometimes those things, they, when they’re gone, they’re gone. But we’re we certainly would be looking to do other things in in the digital marketing area.

And the overall comment I would make is we think that the new administration will be, more friendly to mergers and acquisitions than the old administration will be. Whether it be in digital marketing or another area, I think it’s it’s helpful to us overall. Now most of what we are looking at, we didn’t think we had had any issues with any way. But, you know, there are always a few on the margin that you’ll you’re you’re concerned about whether if you have a particularly aggressive, FTC, whether it’s it’s gonna make it difficult to get the deals done. And we think that, it’s the pendulum has shifted back in the favor of of business on that.

Unidentified speaker: Okay. That that’s helpful. Maybe just in the last few minutes here, talk about sort of long term growth outlook. You know, you that algo, right, if we think about it, six to 9% top line growth, you know, has typically contemplated sort of a, you know, outsourcing kind of continue to increase about a percent a year in pharma. Is that sort of still the right way to kind of conceptualize the market?

Because obviously we’re talking about different mixes, hybrid kind of programs. But for investors, as you kind of build out kind of a, you know, how to think of the market growth, how should we think about sort of the pace of outsourcing itself now that it’s the complexity has changed a

Unidentified speaker: little bit? Let me build that up, that, that that number. We talked at our Analyst Day about six to 9% growth. That’s obviously a constant currency number. We don’t know which way currency is gonna go.

And that, consisted of four components. We see overall a pharma spend. This is across r and d and, the commercial space, and it’s everything from EBP mid to large pharma. So the whole thing, everything that we would play in, growing at about three to 5%. On top of that, we think, we’ll pick up another percentage point or so due to outsourcing.

And that’s not just outsourcing and r and d s growth. It’s also outsourcing growth in the commercial space because we’ve certainly seen that as well. Then another percentage point or so of share gain, that’s historically what we’ve been able to do. And on top of that, looking at probably one to two points is what we typically per year is what we typically target in inorganic contribution. So if you add that all up, that comes to to the six to 9% growth that we’re talking about.

And, look, we’re we’re very bullish on the industry long term. We, you know, you you go through rough periods in individual businesses, and I think the tendency is to kinda get my myopically fixed fixated on those things. But the the underlying industry is very, very healthy and we see, you know, very, very, very solid growth going forward.

Unidentified speaker: And and and I think you

Unidentified speaker: you talked earlier. Right? Do you think what you saw experienced in TAS last year and change, you do see that, for RDS as well. So is it really just the first half, like, what are the KPIs that you’re looking at internally that kind of give you, you know, more of this kind of confidence that in the back half of this year, we will see that sort of bounce back in demand?

Unidentified speaker: Well, there there is if you if I start at the most aggregate level, we have relationships with everybody who’s of any size in pharma. So we we know where they are, give or take, within their portfolio rationalization. So that’s number one. We come in very well informed because we have thousands of touch touch points in pharma. In the EBP space, we’ve seen, financing, the funds fundraising continue to be strong.

It was strong, last year, it’s the highest year other than 2021. It was up substantially year over year. So now some of the EBPs have been a little bit slower to spend that money than you might think, but the funding is definitely there, and and we think it’ll come back. We also look at, of course, the pipeline of what we see coming in. That was up year over year in fourth quarter.

The, the the RRFP flow was up mid single digits. We have a lot of indicators like that, some of them just based on conversations with our customers and the relationships we have, some of them more quantitative, that give us a confidence that we’re gonna see things, improve in the second half of the year. And some of the second half is just, you know, the nature of our business and what got deferred late last year and when we expect it to restart.

Unidentified speaker: That’s really helpful. And then maybe just, in the last couple of minutes here, the the guidance for this year contemplates about 2,000,000,000 deployed, for between share repo and m and a. How should we think about that mix, this year?

Unidentified speaker: Well, it’s one of those things that it’s a a really important question, but it’s also one that’s always difficult to answer because it depends so much on opportunity. On balance, I think we would like to spend more on acquisitions than on share repurchase because acquisitions help us, build our capabilities and give us a platform for growth. But you have to have willing sellers and you have to have pricing that’s reasonable. And it’s always tough when you go into a year, even when you have a pipeline of potential opportunities built up to know what’s gonna get done and what won’t get done. It’s just very difficult to predict.

The other part of the equation too on share repurchase is when the stock is depressed as it is right now, you know, you you you say, gee, our stock may actually be the best buy of anything that we’re looking at. So the combination of those two things, opportunities on both sides will dictate where we’re spending our money. All else being equal, I’d rather be spending on acquisitions and share repurchase. But you see, we’ve been aggressive about doing share repurchase when we didn’t spend the money on acquisitions and when we thought it was, justified by the the value we were getting repurchasing our own shares.

Unidentified speaker: So fair to think. In the current environment, probably we’re tilting more to share repurchase. I guess, the pipeline, though, would you say the

Unidentified speaker: pipeline We came in with a pretty good pipeline into the year. Yeah. It’s still there. There’s no question. The share price is awfully tempting right now.

Unidentified speaker: Great. We’ll stop it there. We’re at the time. Ron,

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