ICON
Plc (ICLR, $143.56): “An Iconic Strategy”
By:
Luke Smrek, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary:
• ICON Plc (NASDAQ: ICLR) is a clinical research organization that
engages in the provision of outsourced development services in the
pharmaceutical, biotechnology, and medical device industries.
• In the past year, on
July 27th, 2017. A subsidiary of the company ICON Clinical Research
Limited acquired Mapi Development SAS and its subsidiaries. The acquisition of
Mapi Group strengthens commercialization and its strategic research business
and adds more market presence, analytics, real world evidence generation and
strategic regulatory services.
• ICON ended 2017 with
net revenue increasing $91.9 million or 5.5%, Operating profit for year-end
2017 increased by 6.1%
• At the beginning of
2018 the new revenue recognition standard ASC 606 Revenue from Contracts with
Customers came into effect and ICON is in this transition period and it will
affect their financials significantly moving forward.
• ICON is well positioned
to adapt to the increasing market share of clinical research organizations, and
enabling this growth is ICON’s core strategy of focusing on partnerships as
they are becoming the industry’s top trusted partner of choice.
Key
points:
Since the end of quarter two, ICON has repurchased
nearly $38 million worth of shares and year-to-date has repurchased $92 million
overall at an average price of $125.58 per share. The company’s goal is to
continue to repurchase shares as the end of the year approaches.
Key growth drivers remain
in place for ICON as Biopharma R&D spending continues to increase at about
3% per year. Increases in the number of trials and outsourcing penetration
rates will help customers improve their efficiency and productivity. This past
year there has been a 60% increase in the number of new patients into the ICON
trials and this progress is expected to continue which will provide ICON with a
differentiated position on the challenge of reducing development time.
On October 1st,
ICON announced the release of ADDPLAN neo, which provides an advanced
integrated technology platform for design, simulation, and analysis of adaptive
clinical trials. This tool will help convert theory into practice and will help
make ICON’s software for trials more adaptive and efficient for its customers.
In the third quarter of
2018, revenue backlog grew to $5.3 billion which is a year-over-year increase
of 10.5% with their top customer accounting for 9.8% compared to the end of the
quarter last year. This shows that ICON is expanding their clientele and
increasing their revenue simultaneously.
What
has the stock done lately?
Since November 2nd,
2018, the price has gone up from $137.33 to $143.56 representing a 4.54%
increase in stock price. Over the last six months the stock price has increased
by 10.61% and over the last year has increased and generated a return of
28.21%. This is a high figure and is largely due to the company continuingly
launching new programs and new methods to increase their trial efficiency and
customer satisfaction.
Past
Year Performance:
ICON has increased in stock price by 28.21
% in the last year and its performance is on the upward trend. With the release
of ADDPLAN neo, and other new programs, the forward-looking trend for the
company continues to look profitable and investors may look to gain confidence
from ICON’s performance this last year.
Source:
FactSet
My
Takeaway:
ICON has performed well
the last year and throughout its quarterly reports continues to improve on a
yearly basis. As the clinical research organization industry looks to expand by
6% annually over the next four to five years, ICON is well positioned to gain
market share and help lead this growth due to their extensive strategic plan
with partnerships and being the industry’s top trusted partner of choice. ICON
is continually releasing new programs to advance their software and improve the
efficiency and productivity of its customers. If management utilizes the
opportunities within the industry and the company continues to advance at the
same rate it has been, then look for the value of ICON to continue to increase.
Source:
FactSet
