Positive Long-Term Outlook for IQVIA as Clinical Trial Outsourcing Demand Drives Growth

Equity Analyst

Rachel Elfman

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Technology & Analytics Solutions

Research & Development Solutions

Contract Sales & Medical Solutions

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IQVIA (formerly QuintilesIMS) is the result of the merger of Quintiles, a leading late-stage contract research organization, or CRO, and IMS Health, a dominant player in life sciences data and analytics. The combined company has become a leader among CROs and in the life sciences data and analytics industry. Further, as a result of the merger, the company leads in real-world evidence, in which data from sources such as patient records or medical claims can be used to create clinical evidence for regulatory approval. 

Roughly half of revenue comes from the research and development segment (outsourced clinical trials), and most of the remainder comes from the technology and analytics segment (legacy IMS Health, cloud solutions for life sciences, and real-world data trial offerings). A small portion of revenue (about 5%) comes from the contract sales business. The research and development segment focuses on late-stage research, which requires the enrollment of thousands of patients across the globe. IQVIA easily belongs in the top tier of large, global CROs with the infrastructure to win these contracts, and its size means it works on more clinical trials than any competitor, further sharpening its clinical and regulatory expertise and network of clients.

The company’s comprehensive data set of de-identified patient records and script data enhances its ability to attract and retain healthcare customers throughout the life cycle of a drug. IQVIA compiles data from over 150,000 data suppliers, including pharmacies, medical claims, and electronic health records, and has access to over 1 billion patient records. This unmatched database, layered with proprietary methodology, enables clients to set informed strategies to most effectively commercialize their drugs. As a result, the business commands a pricing premium and high retention rate of existing clients. Access to this data helps inform patient recruitment for clinical trials and trial design. The company can also leverage the cohorts of de-identified patient data sets in real-world evidence trials, where the data is used in lieu of traditional clinical trial cohorts for regulatory approval.

Business Strategy & Outlook

We award IQVIA a narrow moat based on its proprietary data analytics solutions and significant late-stage clinical trial exposure, which is supported by intangible assets and high switching costs. IQVIA was formed through the 2016 merger of IMS Health, which was a leading data and analytics company in life sciences, and Quintiles, which was a global CRO with the largest market share in the industry. We think IQVIA's proprietary data and clinical development expertise have positioned the firm well among top health information technology companies and global CROs. Exposure to late-stage clinical trials is crucial for moats in the CRO space as late-stage trials are larger in scope, more complex, often multinational, and have higher risks of failure, which enforces switching costs. As more complex trials provide room for differentiation, global CROs leverage their expertise to shorten the clinical trial time frame and ensure accuracy and precision. 

Drugs typically have a 20-year patent life span, which begins at discovery. This means that clinical trials consume a significant portion of what could otherwise be patent-protected profits before generic drugs come to market. As a result, biopharma companies seek to shorten the drug development period as much as possible while maintaining the precision and accuracy necessary for a drug's approval. This is the driving force in the CRO business model, in which CROs leverage their assets and expertise to design a trial tailored to regulatory technicalities, quickly identify target patients at sites around the world for rapid enrollment, and then advise on data collection and analysis for regulatory approvals. The speed and quality of these trials are essential since late-stage clinical trials are expensive and the stakes for a successful outcome are high. There is a high risk of failure at each step of a drug’s development process, and clinical trials are very expensive. According to a 2020 study released on JAMA, the median cost of developing a new drug was $985 million with the average cost totaling $1.3 billion. The study was based on data for 63 drugs developed by 47 companies between 2009-18.

The firm's CRO business is narrow moat-worthy with its global infrastructure, diversified client base, and late-stage trial exposure. Late-stage trials are complex and provide room for differentiation, and global CROs leverage their expertise to shorten the clinical trial time frame and ensure accuracy and precision. IQVIA maintains the top spot in the CRO industry, representing nearly 15% market share in 2021, and most of its CRO revenue comes from late-stage trial work. 

The firm has a diversified client base, split between small/midsize customers and larger biotech and pharmaceutical companies. Additionally, its broad portfolio of capabilities spans from central lab work through commercialization. A diversified client base strengthens IQVIA's competitive advantage as small/midsize clients are likely to need full outsourcing solutions, while large pharmaceutical companies offer profitable preferred partnerships with high switching costs, choosing one or a few trusted CROs to which they funnel most of their new business. Clinical trial outsourcing has increased from 36% in 2007 to about 60% in 2020, and we expect outsourcing penetration will continue to grow steadily as trials become more complex.

IQVIA's technology and analytics business also deserves a narrow moat due to its intangible assets. Its proprietary data set is sourced from over 150,000 data suppliers such as pharmacies, claims registries, and patient records, and it includes more than 1 billion patient records. A high barrier to entry is created by the scale of IQVIA’s data and best-in-class analytical technology. IQVIA is known for its expertise in collecting, cleaning, analyzing, and presenting its proprietary data in its user-friendly technology solutions. 

IQVIA’s data and analytics capabilities allow it to be well positioned to carry out next-generation decentralized trials. Decentralized, or remote trials, have seen increased adoption as a result of the COVID-19 pandemic. Biotech and pharmaceutical companies are also encouraging regulatory agencies to continue building out a framework for evaluating real-world evidence for the use in regulatory decisions. IQVIA is utilizing its vast patient data to inform and accelerate clinical trial planning and execution for its clients. In addition to real-world evidence solutions and analytics, IQVIA’s technology & analytics segment also offers software as a service solutions to support a wide range of clinical and commercial processes, including clinical trial planning, patient consent, site payments, and performance management. 

We believe IQVIA's reputation and assets in the data space are unparalleled, as evidenced by its over 99% retention rate of its top 1,000 clients. Its biotech and pharmaceutical clients use IQVIA's services for critical functions such as planning new product launches, forecasting revenue, marketing, and commercialization. Clients are likely to continue choosing IQVIA based on its trusted reputation. IQVIA’s leadership within the CRO market and continuous technological advances gives us confidence that it will be able to maintain its trusted brand name and keep up with the ongoing innovation in the industry.

IQVIA’s significant CRO market share and noteworthy data capabilities allow it to be well positioned to lead the way with real-world evidence work, and it has several real-world trials ongoing with its Big Pharma clients. As a leader in the CRO industry, IQVIA has helped spur the expansion into data solutions across the industry. Following the IMS Health and Quintiles merger, several other CROs began to build out their data capabilities with acquisitions and partnerships, although to a much smaller degree compared with IQVIA.

Narrow

Economic Moat

IQVIA Hlds

IQVIA Holdings, Inc. engages in the provision of analytics, technology solutions, and clinical research services to the life sciences industry. It operates through the following segments: Technology and Analytics Solutions, Research and Development Solutions, and Contract Sales and Medical Solutions. The Technology and Analytics Solutions segment supplies mission critical information, technology solutions and real-world solutions and services to the firm's life science clients. The Research and Development Solutions segment, which primarily serves biopharmaceutical customers, provides outsourced clinical research and clinical trial related services. The Contract Sales and Medical Solutions segment offers health care provider and patient engagement services to both biopharmaceutical customers and the broader healthcare market. The company was founded by Dennis B. Gillings and Gary Koch in 1982 and is headquartered in Durham, NC.

Earnings data Q2 2021

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Earnings data Q3 2022

Earnings data Q4 2022

Earnings data Q1 2023

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Earnings data Q4 2023

Earnings data Q1 2024

IQVIA reports strong Q1 earnings, anticipates TAS revenue acceleration

IQVIA's Q1 2023 earnings call highlighted strong financial performance, a robust backlog, and ongoing market share gains. While facing challenges in TAS core growth rate and operational variability, the company remains confident in its full-year guidance and sees opportunities for revenue acceleration and strategic expansion through M&A activity.

IQVIA reports strong Q2 earnings, highlights biopharma sector opportunities

IQVIA reported strong operational and financial performance, with a focus on organic revenue growth, net new bookings, and backlog growth. However, challenges in decision-making delays and cautious client spending were highlighted, while opportunities in biopharma sector activities and AI were emphasized.

IQVIA reports solid Q3 performance, eyes rebound in TAS demand

IQVIA's strong demand in R&DS and cost reduction initiatives in large pharma are key positives. However, challenges in the TAS segment and foreign exchange headwinds require attention. The company's updated 2023 guidance reflects slower growth in TAS, but it expects mid-single-digit overall revenue growth in 2024.

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IQVIA Holdings, Inc. engages in the provision of analytics, technology solutions, and clinical research services to the life sciences industry. It operates through the following segments: Technology and Analytics Solutions, Research and Development Solutions, and Contract Sales and Medical Solutions. The Technology and Analytics Solutions segment supplies mission critical information, technology solutions, and real-world solutions and services to the firm's life science clients. The Research and Development Solutions segment provides outsourced clinical research and clinical trial related services. The Contract Sales and Medical Solutions segment offers health care provider and patient engagement services to both biopharmaceutical customers and the healthcare market. The company was founded by Dennis B. Gillings and Gary Koch in 1982 and is headquartered in Durham, NC.

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