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Is IQVIA Holdings Stock a Buy?

By David Haen - Updated Mar 13, 2020 at 12:53PM

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Headwinds from COVID-19 may negatively impact 2020 projections.

IQVIA Holdings (IQV 0.29%), a contract research organization (CRO) formed through the $9 billion 2016 merger of Quintiles and IMS Health, provides outsourced services and technology to healthcare companies. This lesser-known healthcare services giant employs approximately 67,000 people across 100 countries.

Female healthcare professional holding tablet with images of organs

Image Source: Getty Images.

IQVIA's three-pronged business

IQVIA's R&D solutions unit helps companies -- including everything from the largest multinational pharmaceutical company to virtual biotechs -- set up and manage clinical trials. With a global footprint, IQVIA helps identify clinical trial sites, finds appropriate patients, coordinates with local labs, and handles day-to-day clinical trial operations to cut down time frames and improve the quality of data. It claims more than 250 clinical development customers, including 13 of the top 20 pharma companies.

The Technology and Analytics Solutions unit uses more than 1 million data feeds in its robust analysis. The company aims to incorporate real-world evidence into decision-making for drug developers. This aids in identifying gaps in the marketplace and designing optimal clinical trials. These insights help inform selection of comparator drugs, patient characteristics, and which parameters to evaluate in the studies.

Finally, IQVIA's contract sales and medical solutions unit helps in the planning, launch, and tracking of commercial medical products. Data-driven insights help resource allocation, aid in pricing decisions, support reimbursement, and provide patient engagement. This operation will do everything from analytics to determining the size of the sales force to providing a contract sales team for a specific product. 

Huge sales and more on deck

IQVIA's R&D solutions unit led the company with $5.79 billion in 2019 revenue. About $1.5 billion came in the fourth quarter alone. Behind R&D solutions, the technology and analytics business brought in $4.5 billion in 2019 sales, while contract sales and medical solutions posted $814 million.

Healthcare investors can evaluate the prospects of CROs by reviewing contract backlogs. This includes contracts for new clinical trials that have not commenced and yet-to-be-recognized portions of ongoing trials. Keep in mind, clinical trials often take years to start up, run, and then wind down.

IQVIA touts a substantial clinical development contract backlog of $19 billion. According to the company's guidance, $5.2 billion should be earned in the next 12 months. Of course, this does not include new business generated in 2020.

Will COVID-19 impede clinical trials?

The current COVID-19 coronavirus outbreak presents an unforeseen headwind facing IQVIA and other CROs. It remains too early to know what type of impact this will have on clinical trials. Patient enrollment may slow down. An industry contact informed me that some hospitals and clinics have stopped allowing clinical trial monitors on-site. These are the folks sent by CROs like IQVIA to make sure the data from patients is being captured correctly.

With emerging news of a scarcity of hospital beds around the globe, it may be more difficult to conduct trials. Further, medical professionals who would normally be managing trials for new drug and medical-device interventions may be pulled to focus on the most urgent, pressing healthcare needs. Lastly, no one wants to send high-risk patients such as the elderly, or those with history of cardiovascular disease or pulmonary disease, to a hospital that is a hotbed for treating infected patients.

Clinical trial enrollment and data releases may be pushed out a quarter or two -- or potentially even longer. Even if enrollment continues, delays in accessing and verifying clinical trial data may occur. Who will pay for the delays? Will it be the CRO or the sponsor pharma company? This uncertainty concerns me across the board for CROs including IQVIA.

IQVIA's stock has fallen 26% in 2020, more than many of its peer CROs. The unknown impact of the COVID-19 outbreak on IQVIA's R&D solutions business, its biggest revenue producer, puts me on the sideline as an investor for now. Significant delays could lead to contract renegotiations between CROs and trial sponsors, each taking responsibility for a portion of the extra expense. 

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