Specialist
Former executive at Syneos Health Inc
Agenda
- Recent trends and developments occurring within the CRO (contract research organisation) market coming out of the biotech funding slowdown and pandemic, focusing on Syneos Health (NASDAQ: SYNH)
- Syneos’s end-to-end clinical and commercial solutions for biopharmaceutical development, highlighting strengths and weaknesses
- Competitive landscape surrounding Syneos based on breadth of service offerings, leadership, pricing and innovation efforts, noting players such as Iqvia (NYSE: IQV), PPD and Icon (NASDAQ: ICLR)
- Syneos’s DCT (decentralised clinical trial) capabilities – patient recruitment, traditional vs trial hybridisation, oncology and CNS (central nervous system) opportunities and technical advancements
- 12-18-month CRO market outlook, noting partnership opportunities for Syneos and ability to sustain in an increasingly undifferentiated landscape
Questions
1.
Could you speak to the positioning of the broader CRO market as we come out of the biotech funding slowdown, particularly those revolving around Syneos? Are we witnessing lower RFPs [requests for proposal] amid the inflationary environment due to reduced pharma R&D spending or are pharma sponsors continuing to pour money into outsourcing?
2.
To address Syneos’s Q3 2022 results, the company witnessed quite a drastic downturn in the last quarter, with dismal clinical solutions book-to-bill results and a 0.9% YoY revenue decline. Do you think this is a one-off or a trend that might continue over the short-to-medium term, and what level of margin improvements do you expect going into 2023?
3.
Why was Syneos’s book-to-bill ratio so much worse than peers’? Where did all those missing bookings go? Why was it hit much harder than other CROs, given those have performed relatively much better in their Q3 2022 results?
4.
You mentioned Syneos’s weaknesses are going to continue for the next couple of quarters. Could you possibly provide a quantifiable number so that investors are more aware of what to expect over the next couple of months?
5.
Syneos attributed customer delays in its FSP [functional service provider] business within its clinical solutions segment as a reason for lowering guidance. To what extent might this trend continue over subsequent quarters, and, additionally, what is your assessment of the FSP business in comparison to that of a player such as Icon, which is uniquely positioned in the FSP space post its July 2021 acquisition of PRA Health Sciences?
6.
How do you expect Syneos to bounce back from Q3 2022? What are some levers the company could pull to rebound over the next couple of months, perhaps highlighting a couple of low-hanging fruits?
7.
Syneos has performed slightly better on the commercial solutions side, with an incremental increase in book-to-bill ratio. Can you comment on the company’s commercial solutions business unit? What is driving growth here, and do you think this segment has the potential to make up for the loss in the clinical side over the next couple of months?
8.
What is your take on Syneos’s efforts in the DCT [decentralised clinical trial] space across traditional vs fully DCTs, especially post the company’s recent acquisitions of Illingworth and the StudyKik platform? Do you think Syneos is well-positioned to pursue DCT opportunities in comparison to others?
9.
Would Syneos partnering with a smaller DCT player be an effective strategy for the company? Would it try to do more of these things in-house or would it be more of a viable strategy for it to partner with the smaller DCTs? I’ve heard some CROs are not willing to partner with these smaller DCT players, given they are potentially stealing revenue from the larger players.
10.
You mentioned some of the CROs could potentially acquire Medable. What is the likelihood that Syneos would potentially take up a smaller DCT player over the next year? Perhaps not Medable, given valuation is so high at the moment, but maybe another smaller DCT player for the technology part.
11.
What is your assessment of Syneos One and the ability to harness clinical and commercial capabilities into one? How do the two segments work together in harmony, in reality?
12.
Which types of drugs do you think Syneos will target to drive higher profitability in the near term? You indicated a strong interest in oncology as well as CNS [central nervous system], so is this where the potential growth opportunity is and the demand outlook? Which therapeutic areas would you consider the company are having a particularly slow uptake in, in terms of gaps and potential growth opportunities going forwards?
13.
You mentioned Syneos is overwhelmingly dependent on oncology and CNS, so do you think that could potentially pose a risk in terms of being too focused? Would it be better for the company to potentially diversify and not have all its money in a focused basket?
14.
Given CROs are becoming increasingly undifferentiated, what are some key factors taken into consideration by pharma sponsors when selecting their preferred outsourcing vendor? How does and how will Syneos differentiate itself from other CROs such as PPD, Icon, Iqvia and Covance, especially given its current financial situation? You mentioned thinking Syneos is the most differentiated CRO. Could you elaborate?
15.
In line with the competitive landscape, price competition seems to be a big talking and selling point when it comes down to consumer choice, so could you provide some macro colour on Syneos’s pricing strategy? Do you think the company will need to use price to win back market share or do you think it’s priced too thin for the quality offered? How does pricing work for it compared to others in the market?
16.
Do you think Syneos would seek to partner with another company to optimise growth rather than focus on in-house development? I know you mentioned you don’t see the company making big investments on the DCTs front, but which strategy do you think has been proven to be more successful? Could you discuss some areas or acquisition targets that would make sense for it to enter via collaboration, appreciating this is speculative?
17.
You said Syneos could potentially acquire some mid-size players. What names come to mind? Who might make sense for the company to acquire? Now may not be the right time, but what about over the next couple of years? What do you think the long-term path would be when it comes to acquiring any mid-size players?
18.
Along the lines of potential divestitures or sales, given Syneos’s current downturn, what is the likelihood of the company turning to a potential sale or even divesting some parts of its business? Would this be a potential outcome in the near term? Many have speculated it could be an interesting target to be acquired. Would you share the same view?
19.
What are your thoughts on Syneos’s leadership team, with Michelle Keefe and Jason Meggs as CEO and CFO respectively? There have been some concerns regarding leadership turnover and clientele mix. Are clients worried about the newly hired staff? Could you provide some sort of indication on Michelle’s positioning in the near term?
20.
You mentioned prior to this Interview that the Inflation Reduction Act may have an upsize impact on commercialisation. Can you elaborate on the trickle-down effect this act may have on Syneos and the rest of the CRO market in terms of immediate and long-term impacts?
21.
What are 2-3 key metrics investors should be monitoring to gauge an indication of a bounce-back? How do you expect that to unfold over the next quarters? What should we pay attention to over the next year?
22.
Would you like to highlight anything else around Syneos?
