Quintiles went public with a more than $1B IPO in May, rejoining the market that it left in 2003 when it merged with Pharma Services Holdings.
The contract research organisation's (CRO) move attracted the attention of investors and analysts, most of whom predicted that the firm would grow as a result.
"The late-stage CRO market is poised to grow 7-9% over the next several years, according to March survey data. Quintiles should trend up to that rate, while late-stage peers are above that,” David Windley of Jefferies said in a note. “Q's margins are closer to ‘peak’ than its peers leading to slower earnings growth. With the growth differential, Q's valuation handsomely rewards its leadership position among CROs.”
Analyst Tim Evans at Wells Fargo also sounded relatively upbeat on the company’s future, noting, their success at capturing more market share. “Quintiles will continue capturing share from small contract research organizations (CRO),” he wrote. “We also see Quintiles as one of the industry’s most disciplined operators, maintaining relatively high margin and returns on capital. Finally, we believe Quintiles is one of the most forward-looking companies in the industry, taking a leadership position in technology and also willing to think outside the box strategically.”
The breakdown of analysts and their price targets for Quintiles stock, according to various investment sites, include:
- Neutral at Goldman Sachs with a 12-month $44 price target;
- Neutral at ISI Group with a $46 target;
- Neutral at Baird with a $46 target;
- Hold at Jefferies with a $41 target;
- Underperform at Sterne Agee with a $36 target;
- Outperform at Wells Fargo with a $49 target;
- Buy at Deutsche Bank with a $51 target;
- Overweight at J.P. Morgan with a $50 target;
- Overweight at Morgan Stanley with a $51 target;
- Overweight at Piper Jaffray with a $52 target; and
- Outperform at Raymond James with a $50 target.
Quintiles shares closed at $43.79 on Wednesday.
Recent trends in the CRO industry related to virtual pharma companies looking to outsource more of their work may also play into the hands of Quintiles. Tycho Peterson at JP Morgan noted that Quintiles “sits at the nexus of several important trends, including a continued push toward outsourcing, and the drive by biopharma customers to send more work through fewer, higher-quality CROs.
With “stable biopharma R&D budgets and an increased reliance on outsourcing,” Peterson said they expect “Quintiles to outgrow industry peers aided by a diversified global footprint and unique service offerings, and strong cash flow.”