Tuesday, November 26, 2019

A Current AIM International Equity Holding: ICON Plc (ICLR, $145.28): “A Global ICON”


ICON Plc (ICLR, $145.28): “A Global ICON”
By: Mia Albian, 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 Global Clinical Research Organization (CRO) that provides services to the pharmaceutical, biotechnology, and medical device companies. ICLR specializes in the strategic development, management and analysis of programs that support the clinical development process, from compound selection to Phase I-IV clinical studies.

• ICLR has a globally diverse network by generating 41.1% of revenue from Ireland, 34.5% of revenue from the United States, and the rest from China, Germany, and the United Kingdom. ICLR is headquartered in Dublin, Ireland and was founded in 1990.

• ICLR recently acquired Symphony Clinical Research, a provider of site and patient clinical trial support services. This acquisition further enhances the company’s ability to help solve their client’s main challenge of getting patients faster and more efficiently.  

•Management reported in their Q3 earnings that ICLR continues to expand their relationships and revenues from customers outside their top 10, which grew by over 20%.   

• ICLR was added to the AIM portfolio on April 12, 2013 at a price of $30.66. It is currently trading at $145.28, showing a 373.84% increase from the initial purchase.   

Key points:

ICON Plc released Quarter 3 earnings on October 23, 2019, which were consistent with 2Q19 trends. Q3 earnings reported year-to-date revenue of $2.080 billion, representing a strong revenue growth of 8.5% YoY. Earnings per share on a diluted basis was $5.06, representing an increase of 13%, compared to $4.47 per share for the prior year. ICLR increased their backlog by 12%, growing to $8.4 billion. Management completed its existing share repurchase authorization of 1M shares in Q3. This total compares to ~$245M in operating cash flow YTD, resulting in ICLR having the strongest balance sheet among its peers.

The continued demand for biotechnology and the trend for outsourced development services allows ICLR to broaden their customer base. At the end of September, ICLR acquired Symphony Clinical Research. ICON can now offer patients at-home trial services, which will make it faster and more efficient for ICLR’s customers to get their patients into clinical trials. This positions the company well to continue gaining market share by differentiating themselves through a diverse patient network.

What has the stock done lately?

Over the past 3 months, ICLR has seen a change of 14.7%, with a high of $158.86 on August 19th and a low of $138.50 on October 16th. After releasing Q3 earnings at the end of October, the stock price increased ~5%, from $139.95 on October 23rd to $151.62 on November 4th.

Past Year Performance:

ICLR has a 52 Week H/L of $165.13 to $118.10. The company was trading at a high of $165.13 in July of 2019 and at low of $118.10 in January of 2019, which represents a change of 39.8%. The company has been increasing in price throughout the last year, but now is consistently staying in the mid-range from where the price has historically been this past year. Overall, ICON Plc is up 23% YoY, as the company is currently priced at $145.28, but was trading at $118.10 on January 3, 2019.

Source: FactSet
My Takeaway

ICLR has performed extremely well over the last year and since the initial purchase. ICLR is largely differentiated from their peers through its global stance, with 2/3 of revenue generated outside of the United States. Looking forward, this company will continue to grow as they serve diverse patient networks through services that integrate all phases of drug development. This is a great advantage to their company, as the CRO market is intensely competitive. ICLR may face potential risks such as a slowdown in pharmaceutical R&D outsourcing or lower pricing amid higher competition. However, ICON Plc continues to conduct clinical trials globally in many of the major therapeutic areas, which is very attractive for drug developers seeking one CRO relationship that coverall all of their drug development.


Source: FactSet