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IQVIA Q2 2023 Earnings Call Transcript


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Participants

Corporate Executives

  • Nick Childs
    Senior Vice President, Investor Relations and Treasury
  • Ari Bousbib
    Chairman and Chief Executive Officer
  • Ron Bruehlman
    Executive Vice President and Chief Financial Officer
  • Mike Fedock
    Senior Vice President, Financial Planning and Analysis

Presentation

Operator

Ladies and gentlemen, thank you for standing by. At this time. I would like to welcome everyone to the IQVIA Second Quarter 2023 Earnings Conference Call. [Operator Instructions].

I would now like to turn the call over to Mr. Nick Childs, Senior Vice-President, Investor Relations and Treasury. Mr. Childs, please begin.

Nick Childs
Senior Vice President, Investor Relations and Treasury at IQVIA

Good morning, everyone. Thank you for joining our second quarter 2023 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Ron Bruehlman, Executive Vice President and Chief Financial Officer; Eric Sherbet, Executive Vice President and General Counsel; Mike Fedock, Senior Vice President, Financial Planning and Analysis; and Gustavo Perrone, Senior Director, Investor Relations.

Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call in the Events and Presentations section of our IQVIA Investor Relations website at ir.iqvia.com.

Before we begin I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings.

In addition, we will discuss certain non-GAAP financial measures on this call which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation.

I would now like to turn the call over to our Chairman and CEO.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Thank you, Nick, and good morning. everyone. Thank you for joining us today to discuss our second quarter results. IQVIA delivered another quarter of strong operational results with 9% organic revenue growth, excluding the impact of foreign exchange and COVID related work. The demand environment for the industry continues to be healthy, which supports our confidence in the long term outlook for our businesses. Emerging biotech funding continued its healthy trend. According to bio world second quarter EBP funding was $17.1 billion up 33% versus prior year and up 10% sequentially versus Q1. Clinical trial starts were up over 10% sequentially compared to Q1 2023.

FDA approvals continued their strong momentum, which is a positive indicator for our commercial businesses going forward. There were 26 approvals in the first half of the year and that's up 30% versus the average of the prior five years. M&A activity in the biopharma sector remains strong with over $90 billion spent in the first half. 2023 is on pace to be one of the largest years in the last decade in both value of transactions and number of deals and that is with a high interest rate environment. Our Q2 demand metrics showed continued healthy growth. Net new bookings were just under $2.7 billion which was our second largest quarter ever and represented a quarterly book-to-bill of 1.28.

By the way before I move on, I know that some of you enquired last quarter about our services book-to-bill, and I think some of you were concerned about what that may have implied about our performance. So just to remove any concern our services book-to-bill this quarter was, Nick 134?

Nick Childs
Senior Vice President, Investor Relations and Treasury at IQVIA

Correct.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

134 and our trailing 12 month book-to-bill is 134 overall, and again, for those who asked, it's the same on a services basis. Once again going forward, if there is any meaningful deviation between our total book-to-bill ratio and the services book-to-bill, then we'll let you know, otherwise you can assume they are roughly the same.

Now as a result of these bookings, our backlog reached $28.4 billion growing 11% versus prior year on both reported and constant currency basis. Now the metric we track is our quarterly RFP flow and this past quarter it was the largest ever, it was up 8% year-over-year and 6% sequentially. For the longer term fundamentals of the industry are certainly very positive. Now in the short term, our clients have continued to be cautious with their spending due to the uncertain macroeconomic conditions and that's reflected primarily, I would say only, in some subsegments of our commercial business segments that is TAS and CSMS.

In the second quarter, these businesses were stable with the TAS segment growing in the second quarter at a rate consistent with the first quarter as we had anticipated in our guidance. Of course, the last time we spoke, we expected client spending in these commercial businesses to show signs of acceleration by now, but unfortunately they have continued to delay decisions. Our pipeline is still there, however, the seasons keep being moved to the right. And as a result we now expect this commercial businesses to perform for the balance of the year similarly to what we saw in the first half. For the TAS segments that represents approximately 6% growth organically excluding the impact of FX and the COVID step down and that's 6% growth organically for the year is actually very strong in the current environment.

With that let's review the second quarter results. Revenue for the second quarter grew 5.3% on a reported basis and 5.5% at constant currency compared to last year and again excluding COVID related work from both periods we grew the top line 9% at constant currency on an organic basis. Second quarter adjusted EBITDA increased 8% driven by the revenue growth and ongoing cost management discipline. Second quarter adjusted diluted EPS of $2.43, as expected faced the headwind of the step up in interest expense and the UK corporate tax rate change. Excluding the impact of these nonoperational items, our adjusted diluted EPS growth would have been 14%.

A few highlights of business activity, IQVIA has been awarded a significant contract with a top 10 pharma to implement a full commercial data and analytic solution suite. This suite of offerings will benefit our clients by utilizing insights powered by AI, such as personalized engagements with ACPs, leveraging our multi-channel capabilities, including digital, precise geographical sales targeting and better cost efficiency by reducing the number of resources that are manually generating insights. These initiatives positions IQVIA as a strategic partner with [Indecipherable] top 10 pharma client for AI powered Data and Analytics Solutions. Another top 10 pharma extended and broadened an analytics project to track the sales performance of the top selling immunotherapy oncology drug in Europe. The project allows commercial teams to continuously track brand performance factoring AI generated insights and improve as a result execution across seven cancer indications in over 25 countries.

In another win, IQVIA was awarded a significant contract from another top 10 pharma client to deploy our OCE optimizer application globally. This is an AI powered multichannel sales management application that optimizes HCP engagement in real time. IQVIA was selected over two other competitor solutions because of the seamless integration that OCE offers with the client's current ecosystem, the superior AI capability and our successful history with these clients in previous global system implementations. Also in the quarter, IQVIA was selected by multiple clients to deliver regulate -- regulatory mandated post approval safety studies in Europe. In each case IQVIA was selected our preferred providers due to our deep expertise in sourcing data from the local health systems in Europe and our ability to bring multiple databases together in a harmonized manner for research.

We were awarded a five-year pregnancy exposure study from an EBP customer to collect and analyze health information from women who take prescription medicines or vaccines during pregnancy and compare results with women who have not taken them. We won this award because of our reach experience in post-approval safety studies in pregnancy and deep experience in epidemiology.

In the quarter, IQVIA has been recognized by the Artificial Intelligence Breakthrough Awards with the prestigious best AI-based solution for healthcare award. IQVIA was recognized for its AI software including natural language processing and proprietary large language models technology, which annualizes complex and unstructured patient data to provide unique insights into patient care and disease states. This technology is helping clinicians identify and screen at-risk patients, enabling targeted intervention to patients in needs. IQVIA continues to differentiate in the application of AI analytics with two of the top 10 pharma companies designating their use of IQVIA AI as their innovation of the year.

In addition, both Databricks and Snowflake separately named IQVIA their 2023 health and life sciences partner of the year. These awards recognize AI and tech partners for their exceptional accomplishments and joined collaboration. There is a lot going on at IQVIA regenerative AI and we will likely be discussing this at the appropriate time at the future Investor meeting.

Let me now move to R&Ds segments, which had another strong quarter including several key wins. Our expertise in oncology continues to be a differentiator for us. In the quarter, a midsize pharma company awarded IQVIA two large phase-3 trials for gastric and prostate cancer which are expected to last about six years. The client selected IQVIA due to out therapeutic expertise and infrastructure to one global complex oncology studies as well as our global data assets. Also this quarter, the large FSP client renewed their partnership with IQVIA as a preferred provider this time without soliciting competing bids. This client was a historical lockout account for the historical Quintiles legacy company. We won here due to our FSP expertise scale and delivery capabilities.

In our lab business, the top 10 pharma awarded us a large study in the quarter for a novel drug that improves the quality of life of patients suffering from serious autoimmune disease that impacts one out of 50 people worldwide. These studies are client's top R&D program and it has positioned IQVIA as the largest laboratory service provider for these clients.

Lastly. I am proud to share that Sheetal Telang, Vice President of Therapeutic Strategy, at IQVIA has been honored with the 2023 rising star award by the Healthcare Business Women's Association. Sheetal earned the award for a strong and innovative leadership of critical industry initiatives including by increasing diversity and inclusion levels among patients enrolled in clinical trials.

I will now turn it over to Ron for more details on our financial performance.

Ron Bruehlman
Executive Vice President and Chief Financial Officer at IQVIA

Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. Second quarter revenue of $3,728 million grew 5.3% on a reported basis and 5.5% constant currency. In the quarter, COVID related revenues were approximately $120 million which is down about $140 million versus the second quarter of 2022. Excluding all COVID related work from both this year and last, organic growth at constant currency was 9%. Technology & Analytics Solutions revenue was $1,456 million that was up 3.4% on both a reported and constant currency basis, excluding all COVID related work, organic growth at constant currency in TAS with 6%. R&D Solutions revenue of $2,096 million was up 7.5% reported and 7.6% at constant currency, excluding all COVID related work, organic growth at constant currency in R&DS was 12%.

Lastly, Contract Sales & Medical Solutions or CSMS revenue of $176 million declining 3.8% reported and was flat at constant currency. However, company first half revenue was $7,380 million which was up 3.8% on a reported basis and 5.1% at constant currency, excluding all COVID related work organic growth at constant currency for the first half was 10%.

Technology & Analytics Solutions revenue for the first half was $2,900 million, that's up 1.9% reported in 3.2% at constant currency, excluding all COVID related work organic growth at constant currency in TAS with 6% for the first half.

R&D Solutions first half revenue of $4,122 million was up 6.1% at actual FX rates and 7.1% at constant currency, excluding all COVID related work organic growth at constant currency in R&DS was 14% in the first half.

Contract Sales & Medical Solutions or CSMS first half revenue of $358 million declined 5.3% reported and 0.5% constant currency. If you note down the P&L now, adjusted EBITDA was $864 million for the second quarter, which represented growth of 8% while first half adjusted EBITDA was $1,715 million which was up 6.4% year-over-year. Second-quarter GAAP net income was $297 million and GAAP-diluted earnings per share was $1.59. For the first half, we had GAAP net income of $586 million or $3.12 of earnings per diluted share. Adjusted net income was $454 million for the second quarter and adjusted diluted earnings per share was $2.43. For the first half, adjusted net income was $916 million or $4.88 per share. Now excluding the year-over-year impact of the step-up in interest rates and the increase in the U.K. corporate tax rate, adjusted diluted earnings per share grew 14% in the second quarter and 11% for the first half. As already reviewed R&D Solutions delivered another quarter of excellent bookings backlog at June 30th stood at a record $28.4 billion, which is up 11% year-over-year and up approximately 40% in the last three years.

Reviewing the balance sheet as of June 30, cash and cash equivalents totaled $1,382 million and gross debt was $13,777 million which resulted in net debt of $12,395 million. Our net leverage -- leverage ratio ended the quarter 3.59 times trailing 12-month adjusted EBITDA. Second quarter cash flow from operations was $402 million and capital expenditures were $160 million resulting in free cash flow of $242 million. As we previously announced in May, we issued $1,250 million of senior secured and unsecured notes. The proceeds from these notes were used to pay down our revolving credit facility. We also took advantage during the quarter of our stock price multiples falling to 2017 levels and deployed $490 million to repurchase 2.5 million shares at an average price of $194 per share. In the first half share repurchases totaled $619 million. We ended the quarter with $736 million at share repurchase authorization remaining under the program -- our Board of Directors just authorized a $2 billion increase to our share repurchase plan, which brings the authorization to $2,736 million as of today.

Let's turn to the guidance. We are updating our guidance to address the impact of the continued client cautiousness we've been experiencing in the commercial business. We now anticipate this cautiousness persisting for the balance of the year and reflecting the reduced expectations for both TAS and CSMS. We currently expect revenue to be between $15,050 million and $15,175 million, which represents a year-over-year growth of 4.4% to 5.3%.

Total company organic growth at constant currency excluding COVID related work is now expected to be between 8% and 9% for the year. This revenue guidance continues to assume about 100 basis points of contribution from acquisitions and a step down in COVID related revenue of approximately $600 million versus 2022. TAS segment, we now expect TAS to grow approximately 6% consistent with what we saw in the first half. Our expectation for the R&DS segment are unchanged and consistent with our previous guidance and finally we now expect CSMS revenue to decline approximately 3% and all of these growth rates are organic at constant currency, excluding COVID related work. Now reflect these changes in revenue, we're also updating our guidance for full year adjusted EBITDA to $3,600 million to $3,635 million, which represents a year-over-year growth of 7.6% to 8.6%.

Lastly, we are updating our guidance for adjusted diluted EPS to $10.20 to $10.45 representing year-over-year growth of 0.4% to 2.9%. This adjusted diluted earnings per share guidance includes the year-over-year impact of the step-up in interest rates and the increase in the U.K. corporate tax rate and together these non-operational items reduced the year-over-year growth rate by approximately 12 percentage points. So excluding these items, adjusted diluted earnings per share is expected to grow well to 15%.

Let's move to our third quarter guidance. In Q3, we expect revenue to be between $3,760 million and $3,810 million or growth of 3.9% to 5.3% on a constant currency basis and 5.6% to 7% on a reported basis. Adjusted EBITDA is expected to be between $880 million and $895 million, up 8.1% to 10% and adjusted diluted EPS is expected to be between $2.39 and $2.49 declining 3.6% to growing 0.4% year-over-year. Excluding the step up in interest expense and the increase in the U.K. tax-rate this translates into third quarter adjusted diluted EPS growth of between 11% and 15%. Now, I should note that all of this guidance assumes that foreign currency rates as of July 31 continue for the balance of the year.

So let me summarize, we delivered another strong quarter of financial performance, including organic revenue growth of 9% excluding the impact of foreign exchange and COVID related work. Accordingly, net new bookings were the second highest ever at just under $2.7 billion and our industry leading backlog reached a new record of $28.4 billion up 11% year-over-year. Underlying demand in the industry and our business remains healthy with a RFP flow reaching a new record high in the quarter up 6% sequentially versus Q1 2023.

We took advantage of the stock price multiple spilling to 2017 levels during the quarter and bought back almost a $0.5 billion worth of shares at an average of $194 per share. On top of this, our Board of Directors authorized a $2 billion increase to our share repurchase authorization and finally while client cautiousness in their discretionary spending is slightly reduced our short term outlook on the commercial side of the business that is TAS and CSMS.

The fundamentals of both the clinical and commercial markets continued to be healthy and support our confidence in the longer term outlook for our company. And with that, let me hand it back over to the operator to open the phones for Q&A.

Questions and Answers

Operator

Thank you. [Operator Instructions].

We will go first this morning to David Windley at Jefferies.

David Windley
Managing Director at IQVIA

Hi, good morning. Thanks for taking my question. Ari, you talked about a pretty substantial increase in trial start activity which is encouraging certainly and the bookings, as you highlighted, are also pretty strong. I'm wondering if kind of on two points, if -- if that is reflective of maybe, pharma companies, pharma and biotech companies, kind of getting about business after some period of -- of evaluation of pipelines. And then two, if there is any improvement in the operational environment, thinking about site staffing, labor turnover, things like that that would help throughput, on the operational side. Thanks.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Yeah. Thank you, Dave. Look, the environment from what we have been able to see over the past year and a half to two years has not changed. I know there have been rumblings about EBP funding on one hand and concerns about the impacts of the IRA on the other hand and it's through large pharma is evaluating a longer term impact of the IRA and in that context taking another look at their portfolio of studies both in-flight and to come and some of them re-prioritize some of the studies but -- but fundamentally, our business has been sound, strong, growing sequentially every quarter. Our bookings have been beating record after record. So we really did not experience any trend at all in the market on the R&DS side. And this quarter was just the continuation of what we had experienced. With respect to your second question about staffing and -- and site startup attrition rates are back to pre-pandemic levels, which is about 10% to 12%. From our -- on our end things are good, we continue to actively recruit and hire because we are growing organically at a very high rate and therefore we need the people to execute the work, so that -- that recruiting is targeted at meeting the incremental demand. Obviously, there is always competition for talent, and right now we have about 87,000 employees and we continue to recruit thousands of people a year so that's -- that's on our hand. With respect to the sites, staffing issues -- frankly we continue to see some staffing issues at some sites but it's really to a lesser degree than in prior, let's say probably half year or three quarters and it's already dramatically reduced, so really we are essentially getting back, one of them stick to a 100% staffing levels [Indecipherable] again all sporadic issues here and there, but it's not -- you're correct, it's not the severe issues we experienced perhaps six months or nine months ago. So it's -- it's much improved. Thank you, David.

David Windley
Managing Director at IQVIA

Yes, thank you.

Operator

We'll go next now to Ann Hynes at Mizuho.

Ann Hynes
Managing Director at IQVIA

Hi, good morning. I just wanted to dig into TAS a little bit more, within TAS I know there are several sub-segments, can you just give us growth rates or declines within the sub-segments like consulting technology and real-world evidence and also I think most of the pressure is coming from the consultants segment, can you tell us just what the margin drop through is that so if consulting is maybe like 25% of revenue, I think it is, what's the margin -- negative margin dropped through. That'd be great. Thank you.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Okay. I don't think we disclose by sub-segment, the margins, but it's -- it's very good margin. We did this way, the consulting is good margin and the analytics is also very strong margin. A lot of our analytics work is delivered out of offshore centers in Bangalore, in Manila and we generate good margins, it's a lot of standardized work. We have workflows that we use and processes that over the years we've refined and that work when we think consulting, don't think McKenzie type consulting. Consulting is really again the pricing and market access study, launch study, a Salesforce optimization studies. So these are operationally geared consulting services that our clients utilized to support often the launch of new drugs or the re-prioritization of geographic markets or specific restructuring of our sales organization in certain geographies or in certain therapies, those types of projects and it's not like they are not going to do them. Those must are must do projects, but -- yeah environment, the climate, the higher interest rates has with people on sort of on a whole pattern if you will. The pipeline is there and no one is telling I am just not doing the project and therefore we would say, well, the prospects are lower. No, we have -- the project are still there, but the decision making seems to be pushed to the right. We were hoping, frankly, up to -- two to three months ago that things would recover by now in terms of the decision making and accelerate. And that's why we frankly we were hoping that you would get back to 8% or so growth either single digit growth for the TAS segments for the year, we were expecting a strong acceleration but we haven't seen it materialize in the second quarter and so as of now based on what we've seen I think it's prudent to say that this -- the type of growth rates we've seen for the segment as a whole, which is 6% organically at constant currency and not including the COVID impacts. It should be -- it should continue the rest of the year. Thank you.

Ann Hynes
Managing Director at IQVIA

All right, thanks,

Operator

Thank you the next now is you Eric Coldwell at Baird.

Eric Coldwell
Managing Director at IQVIA

Thank you very much. I had the same question as Ann and I just wanted to follow up on that the way we think about TAS is force broadly defined sub-segments, data analytics, consulting, real-world evidence and in technology, I'm curious, did any of this cautiousness or sluggishness did it expand beyond the analytics and consulting side, what are the -- the growth trends in data, real-world evidence, tech, any nuances or changes there and then I have one quick follow up, if I might. Thank you,

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Alright, sure, of course, Eric. Thank you. So let's start with data, right. The core of the business that has not changed. I would say 90 plus percent of our business for the year on the data side, is it just locked in by the month of December for the following year. So there is no -- no change there. That's recurring revenue and not much has happened there. The level of discretion in terms of data [Indecipherable] from the clients is much less than the analytics and consulting segment that we were just discussing.

For the faster growing businesses is real world and commercial take. Let's take the technology suites, it's not like the revenue is a reflection -- reflection of the sales in the year. The revenue generated in technology is longer cycle corresponds to technology awards from prior periods, from prior years. So nothing has changed there on the revenue side. There is cautiousness similar to consulting and analytics on the technology side in terms of new buys and new transition as a number of dislocation in technology going on right now. By the way, both on the clinical side and on the commercial side the main CRM competitor decided to change their platforms. So as a result, clients are kind of reviewing their technology decisions on the technology side, we get new innovations, we get the main competitors there Medidata and others and Oracle are launching a new suites. So there is dislocation, so because of that clients are kind of taking their time to review decisions, but that's not impacting our revenue in year.

On the real-world side again some of these are longer term studies. There is a little bit -- a little bit but again I don't think that we've seen it affect our revenue year that much. Little bit of cautiousness and perhaps a little bit of delaying on the late phase real-world studies that we've seen again, I'm just giving you really high level commentary here on just to -- to really scratch the business but fundamentally it is a 25% piece of the TAS segment that's commercial -- that's consulting and analytics that is essentially down year-over-year by I think about 5% if I recall. And so, everything else is pretty much stable as expected.

Mike Fedock
Senior Vice President, Financial Planning and Analysis at IQVIA

There is a follow up.

Eric Coldwell
Managing Director at IQVIA

Yeah Mike. Thank you for the follow up. I know you don't tend to get into details on M&A in the quarter with typically these are smaller companies. Sometimes higher revenue multiples, but I did notice $426 million I believe spend on acquisitions, this quarter was hoping to get some sense of directionally what that -- that might have been.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Yes, and I think.

Eric Coldwell
Managing Director at IQVIA

Yeah.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

It was done towards the end of the quarter I mean, I can tell you so it's a company called Cognitive for which we paid almost $300 million, it is a clinical site network as we know, as part of our strategy. Overall, we are -- we've been acquiring certain assets that have strong patient enrollment capability in specific therapies. So Cognitive in particular is strong in internal medicine, in CNS, in -- in vaccines as well and has some large pharma customers. So the company is headquartered in Arizona, Obviously it is a significant multiple of revenue but -- and we acquired that towards the end of the quarter and we have a bunch of all small stuff over here but that's the -- what else do we have here, we have a $36 million investment in a small.

Mike Fedock
Senior Vice President, Financial Planning and Analysis at IQVIA

We -- we had one other site network right.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Right.

Mike Fedock
Senior Vice President, Financial Planning and Analysis at IQVIA

[Speech Overlap] acquired site management organization, yeah.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

That was -- that was in psychiatry and smoking cessation. So again, highly specialized site management organizations what we've done a couple this past quarter.

Eric Coldwell
Managing Director at IQVIA

So you are -- you are starting to follow the path of what PPD and Icon have done in prior years with moving into the opening up the marketplace for actually being -- being a hybrid SMO but probably still at a very small scale I would assume.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Yeah, yeah, so we had already. We do have network that we have started ourselves but we -- you're correct I don't think we are -- I mean we bought, maybe one, other one last year if I remember, they can, you're correct. Again, these are, it's not like we are buying dozens of these, but they are happens to be that coincidentally we bought two in the quarter. And that's basically the bulk of the spend that you see there.

Eric Coldwell
Managing Director at IQVIA

Perfect, thank you so much.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Thank you.

Operator

We will go next now to Tejas Savant at Morgan Stanley.

Tejas Savant
Executive Director at IQVIA

Hey guys, good morning and thanks for the time this morning. Ron, maybe one for you on a quick follow-up on the M&A side for Ari as well, if I may. Mr. Ron, first, I mean margins in the mid point look to be expanding nicely here into the fourth quarter as implied by your third quarter guide, can you just walk us through sort of what drives your confidence in that sort of margin expansion into year end and then on the M&A side Ari, we noticed that the -- the Propel Media acquisition from earlier in the year is being blocked by the FTC at the moment, we have some new merger review guidelines, draft guidelines admittedly put out a couple of weeks ago as well. Does it concern you that you need to sort of rejig your M&A strategy here in light of like some of these recent developments.

Ron Bruehlman
Executive Vice President and Chief Financial Officer at IQVIA

I will take the -- the margin question first Tejas. Look, there were a couple of things here. Number one, we've had margin expansion all year. So pretty good indicator that it's credible to say we're going to have in the back half of the year, we have a number of productivity initiatives underway to reduce costs, and those tend to be of course more back end loaded, you get more benefit as you go through the year. So that's certainly going to support margins in the back half of the year. I think another thing that's happening is the some of the labor cost pressure that we've been feeling over time on a year-over-year basis you're starting to develop -- kind of lap that and get more -- more pricing benefit in as well. So it's a combination of factors. Now, all those factors overcome a little bit of drag from mix for instance, the input business which is tends to be a profitable business never grows as fast as the rest of the business. So we're very confident in the margin outlook for the back half of the year and those are the reasons.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Yeah, and the question on the acquisition that we're trying to do that really I think about the year. That we have a strategy to continue to grow in the digital space. Our strategy remains intact. We've seen those merger guidelines, look I'm not going to comment on the pending litigation with the FTC grew pending litigation. We continue to believe strongly that there is absolutely zero logic to blocking these transaction but we are aware that there are few novel COEs that are being promoted by this administration of the FTC and listen administrations come and go and we're not going to change our M&A strategy.

We believe that we are still a very small player in the hugely massive digital promotional market. I mean, you've got the Googles of this world, giants that also participate in this market and we have a right to participate in this market that we are serving the life sciences in the industry and their needs and our customers welcome that development and our ability to offer those services. We believe that this acquisition actually increases the degree of intensity of competition in this market and actually allows all other participants to counter the -- the essential strong | 00-56-08| that dominate the digital space today. So we just simply do not understand the FTC's arguments and I'll leave it at that.

Tejas Savant
Executive Director at IQVIA

Thanks guys. I appreciate the color.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

You are welcome.

Operator

We'll go next now to Luke Sergott at Barclays.

Luke Sergott
Director at IQVIA

Good morning, guys. Thanks again for the questions. So you were talking about little bit about decision making getting elongated I know that -- that was on parts of the task business, but can you talk -- can you give us a sense of how much longer that has gotten. Typically take for you guys like -- like let's say two months or three months to close a certain deal and now that -- that six months. Just give us some type of framework on how long that has gotten and then as you guys think about things recovering I assume that there's also some delayed decision making on the big RDS side, so when things start to turn around is it safe to assume that the RDS side comes back before the TAS side when on this decision making process.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Thanks for the question, Luke. I just not sure what you mean by R&DS coming back very strong. The R&DS segment is not experiencing any delays in decision making that we can see frankly. Again, we have another record quarter of bookings, nothing has changed there and our RFP flow again is at a record level. I could spend time giving you a stats on the -- on our leader indicator metrics on the R&DS side, a qualified pipeline and the pipeline overall and so on are at a record-high and we continue our sales activities as before. Again, nothing, no sign of delaying decision making on the R&DS side I want to be very clear on that. On the TAS segment and CSMS and again it's -- it's largely affecting the consulting and analytics segment and I would say almost exclusively the issue is I can't quantify enough that we -- that's in our pipe that we had seen at the end of last year and here we are, August 1, and the clients have got specific opportunity, still has not decided to -- everything is negotiated, and they know they have to study, but they could do the study next year. So, whatever clients are on that side of the business, clients are basically saying to themselves well, do I need to do this to now or can I kick the can another few months. [Indecipherable] pipeline six months and we haven't taken it out because the client still stand as they want to do it, they just haven't signed. Yet so -- yeah I mean it's a bit in the timeframe that you're talking about, it would have taken a month or two and it's taking six months or more.

Luke Sergott
Director at IQVIA

Okay and I guess I sorry from implying that you guys are seeing the RDS weakness or delays there pm decision making just going more of overall pharma comment and on that decision making on the task is that more due to them, like your customers, focusing more on where they're going to place our bets and deploy that capital for the -- for the clinical trials and then kind of entire stuff is like a secondary knock on or secondary benefit that you guys offer.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

It's really all over every client has -- it's how to -- it weighs on everyone. It's there going to be a recession, there is not going to be a recession. Maybe we should delay the launch in Portugal, maybe we should not look at our sales force now, we do this next year, maybe that project that we were planning to do, to evaluate whether we should adjust pricing in consideration of the IRA implications and so on, on this drug, in that market, in that therapy, we push it back. So it's not like I can give you a blanket answer, it's just the environment, the atmospherics are such that. Luke, I'm sure someone is going to ask me a question. I'm assuming it's going to be Shlomo, but our cash flow, wasn't too special this past quarter and is the same thing. Why are large pharma companies that are sitting on massive piles of cash not paying their bills on time. Collections are not where they should be and it's just it's a high interest environment. So, people tend to just find all kinds of reasons why there was a comma missing in an invoice and therefore we can't pay you and suddenly buy the invoice in two weeks, it's just the environment, no I don't have another answer.

Luke Sergott
Director at IQVIA

Gotcha, that's helpful. Thank you.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Thank you, Luke.

Operator

We'll go next now to Shlomo Rosenbaum at Stifel.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Here we go.

Shlomo Rosenbaum
Managing Director at IQVIA

Yeah, Ari I still get a question even though you asked that one right,

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Yeah.

Shlomo Rosenbaum
Managing Director at IQVIA

Alright thank you, actually just -- I wanted to touch on one just -- just a metric and then may follow-up with another one just more -- a little more broad just if you could talk to just -- just what's with the growth rate on a real-world evidence was in the quarter and then ARI maybe just if you could talk a little bit about in terms of AI, you give us a little bit of a teaser, but can you talk a little bit about just where you might have unique advantages, either because of the investments you've made in AI over the last bunch of years or just because of the uniqueness of the information that you've aggregated, is there anything that's out there in market that's really unique right now or is this really stuff that's going to be on the come. Thank you.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Thank you. So quickly on the real-world evidence it's been double digits for a lot and students strong double-digit, so nothing changed there. With respect to AI, we're obviously very excited by the opportunity. This is not new for us, right. I mean, we've been working on this for a long time. We've invested since 2015, 2016, and we own a number of market leading and proprietary AI software engines, we've dedicated AIML resources for a long time. And we are extremely well-positioned. We apply AI in drug development, discovery, clinical development, safety market access, medical affairs, and of course in commercialization to inform promotional and sales and targeting activities. We are using AI in NLP, processes in translations of medical documentations and protocols. That's for the offering part of the business if you will. On the -- on the internal side we've applied AI to many of our own internal processes for example lead to cash. We've read across a set of processes to create efficiencies operationally. So it is a great opportunity for us and has been for the past few years now.

How do you use AI to gain competitive advantages, it has optimized site identification based on the patient populations that we derived from our -- that remain in our databases, helps optimize patient recruitment techniques based on data and analytical footprint. It has optimize development, drug development protocols, we can -- we have support. We have build predictive enrollment models based on all the protocol criteria thresholds. You are familiar with the next best application in our OCE suite, which leverages the know-how and the historical data to create predictive models of engagements with customers. We have also been developing a novel biomarker database we have own natural language processing tools.

We've used this in Alzheimer's studies to have an early identification of recruitment of patients with most likely to develop Alzheimer's. A lot of activities, frankly to expand patient pathways. So if you look into I'm sure somewhere in our websites or literature, we have over 150 patent pending methodologies and algorithms, more than 30 predictive data disease models, more than 300 life science specific and ethical libraries. I mean I could go on and on, we have got a lot of stuff here, proprietary material in AI. Now, this whole buzz around generative AI as people are finding -- finding out, it's not so easy to apply and actually derive precise and relevant insights and I'm looking forward to presenting why even using and by the way we are working with everyone who has announced significant generative AI, applications and models because it's really as always, it's -- if you don't have access to the business rules and to the relevant content, you are going to come up with what they call hallucinations and we've tried it and we are working with partners-- with technology partners and it's very clear that we have the sauce internally here that would enable those large language model tools to be a lot more effective and accurate and precise than what they are to date in the world of life sciences where they basically only have access to what's available on the internet or on public sources. Okay, that's what I can say now, but again it's a very exciting development. Obviously, we are very busy leveraging internally and there was a question early on margins and margin expansion and it's one of the several initiatives that is helping us generate margin expansion.

Shlomo Rosenbaum
Managing Director at IQVIA

Thank you.

Operator

Thank you. Next now to Jailendra Singh at Truist.

Jailendra Singh
Managing Director at IQVIA

Yeah, thank you and thanks for taking my questions. I actually want to ask about data and information offerings business for you guys. One of your competitors recently talked about coming a bit competitive solutions in that space for pharma companies. I understand it's a more stable and high margin very sticky business for you guys, but just remind us about your positioning there and what makes the the barriers to entry high in that business.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

You are asking about the data business.

Jailendra Singh
Managing Director at IQVIA

Yeah, yeah.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Okay and the comments that Dave has made and turn our head [Speech Overall]. Okay. Okay, yeah. I mean, Luke, I don't know what to say here. it's just not the same planet, the only way I can put it. The scale, the global presence in over 100 countries, the level of granularity, the infrastructure, the IT infrastructure to process, plans, cure, the knack or the data on a global basis the business rules, I mean look in healthcare, data skills. You could have as much data as you want, if you don't understand it and connect it and cleanse it and know what you're dealing with, it's not really relevant. We have data on about 2 billion patients and that I don't think there's anyone that has anything resembling what we have. I mean I just don't know like.

Mike Fedock
Senior Vice President, Financial Planning and Analysis at IQVIA

We've been at it since the early 1950 Jailendra that should tell you something. I mean you don't -- there's nothing that would stop somebody technically from recreating what we have in data, if they have 70 years and all the expertise we have.

Jailendra Singh
Managing Director at IQVIA

Got it, thanks a lot.

Ari Bousbib
Chairman and Chief Executive Officer at IQVIA

Thank you.

Nick Childs
Senior Vice President, Investor Relations and Treasury at IQVIA

Okay, well thanks everyone for joining us today. We look forward to speaking all of you again on our third quarter earnings call, the team and I will be available the rest of the day to take any other follow-up questions you may have. Thanks for joining.

Operator

[Operator Closing Remarks]

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