Medpace surprises with Q2 2018 revenue growth: ‘Things have been running very smoothly’

09-Aug-2018 - Last updated on 09-Aug-2018 at 13:43 GMT

(Image: Getty/wutwhanfoto)

Revenue growth has taken off, driven by steady start-up on several programs, as the CRO remains focused on its core market of small and midsized biopharma – which makes up the majority of its revenue.

“One thing that surprised us was the revenue growth, which we did not think was going to take off quite as rapidly in the second quarter,” said August Troendle, Medpace CEO on the company’s Q2 2018 earnings call last week.

Troendle explained there were “surprisingly easy, steady start-ups on a number of programs” with few delays. “Things have been running very smoothly,” he said.

In last year, the contract research organization (CRO) saw a slowdown from clients, due to part to funding challenges, though things have “moved along quite rapidly” this year, Troendle explained – commenting that the business environment continues to strengthen.

Second quarter revenue was $170.1m and net new business awards were $239.9m. Constant-dollar organic revenue growth in Q2 increased $24% compared to the same period last year.

For the full year 2018, the revised guidance reflects a net service revenue in the range of $461m to $473m, which is an organic growth of 19.3% to 22.4% over last year’s net service revenue of $386.5m.

Jesse Geiger, CFO, said demand has been balanced between “the amount of lab works that comes as part of a full-service operation engagement with the CRO activities compared to some stand-alone lab activity.”

“We’re seeing good progress in both areas,” he added.

Therapeutic areas and customer mix

Medpace maintains a diversified portfolio as it pertains to therapeutic areas. Though it continues to have a strong presence in oncology, said Troendle, as there is an “overwhelming bias toward oncology” in the company’s small biotech client base.

The global oncology market is expected to reach $200bn by 2022, according to a recent report.

Geiger echoed that revenue growth was primarily driven by oncology, cardiometabolic and antiviral, anti-infectious diseases, or AVAI.

“With regard to our mix by customer size, we remain focused on serving our core market of small and midsized biopharma customers that represent a large portion of our total business and a segment of the market where we see further opportunities for continued growth,” Geiger said.

Per customer concentration, top 5 and top 10 customers represent approximately 22% and 33%, respectively of the total revenue.

Troendle said revenue from small biotech clients was approximately 60% of its revenue – and was more than 70% of awards.

Investment and employment

As per capital expenditures, Geiger said “some of the near-term capital outlays this year are more abroad as we’re expanding a number of additional offices that require some build-out space, IT, equipment, furniture ... So that relates to largely offices outside the US during this year and into next year.”

Geiger noted that the “real expansion,” from an office space perspective, will begin in 2020 with the addition of another building and larger lease.

As per laboratory space, Medpace continues to expand in the US and at its Belgium facility.

The company also increased its headcount to 2,661 employees at the end of the second quarter, up 9% so far this year. “We’re hiring pretty aggressively,” said Troendle, who expects this to continue through the second half of the year.

“So I think we’ll be catching up with our revenue growth in terms of employee count,” he added. “We haven’t seen anything particularly challenging about the labor market, but it is always difficult to find good people and we are actively working on it.”