Medpace reports revs up 27% but sees signs of potential market downturn

Medpace has warned that increased project cancellations seen could indicate a potential market downturn despite ending 2022 with significant revenue gains.

The clinical research organization (CRO) made the comments last week, despite reporting that revenue for the final three months of the year had increased 27.7% to $394.1 million. Full-year revenue also increased, climbing some 27.8% to $1,460.0 million.

Medpace also predicted growth would continue in 2023, forecasting that full year revenue would be in the range of $1.690 billion to $1.750 billion, representing growth of 15.8% to 19.9% over 2022 revenue of $1.460 billion.

Cancellations

But irrespective of the revenue growth seen during 2022, CEO August Troendle was cautious about the CRO market during the Q&A session that followed the CRO’s fourth quarter call on February 14, citing a higher cancellation rate seen in the period.

“Among our clients, there’s a lot of financial distress, a number of our clients have had difficulties and have not been able to proceed with programs they thought they were going to proceed with.
“So that’s and we’ve had an elevated level of cancellations. So that’s always a risk to our performance and could represent the start of a real downturn.”

Environment

Troendle said the business environment for CROs continues to be challenging adding that the firm’s forward-looking business development metrics have weakened and were depressed in the fourth quarter.

He also said RFPs, pending RFPs and initial award notifications were all down moderately in the quarter, attributing the trend to clients’ undergoing “delayed financing” or choosing to reprioritize development pipelines.

In response Medpace has taken steps according to Troendle.

“We have diversified our pipeline, improved selectivity of clients based on quality of asset and likelihood of financing, tightened our on-going monitoring of sponsor financial condition and consistently negotiated safe payment terms to avoid write-offs.”

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