Tuesday, December 11, 2018

A Current AIM Program International Equity Holding: ICON Plc (ICLR) by: Luke Smrek. "An Iconic Strategy"

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.


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