Conference Transcript - IQV 2026-03-12

Luke Sergat, Analyst — Barclays

Good morning, everybody. Luke Sergat. I cover life science tools and diagnostics for Barclays. With me, I have Mike Fedek, CFO of IQVIA. Thanks again for making it down. It's been a long week for you guys, so I really appreciate it.

Mike Fedock, CFO

It's been a long week for everybody. It's the worst place to be in Miami, so thank you for having me.

Luke Sergat, Analyst — Barclays

That is incredibly true. I think we were just kind of talking offline. Like, one of the biggest issues facing you guys and overall CROs is just obviously this bogey of AI is coming, right?

Mike Fedock, CFO

The AI bogeyman.

Luke Sergat, Analyst — Barclays

And it's really hard to just prove the negative. So kind of, and you guys talked about having, you know, 70 agentic modules running out. Can you open up the sheet a little bit and just show us, here's what you guys have been working on, here's where it's going, and then interest in where you think the initial demand is going to translate into business growth?

Mike Fedock, CFO

Yeah, absolutely. No, great question, and obviously incredibly timely. um firstly this this ai phenomenon um has it's a great for us right because a ai is a net positive to iqvia on both in terms of revenue and margin expansion over time and and what it's done is it's it's actually put a spotlight on our crown jewels at iqvia which is really our proprietary data and our domain expertise. And, you know, that's the first thing I think that was being misunderstood was the data, right? And you get this like kind of this high level narrative with the AI boogeyman to say, well, you have data and you sell data to pharma and therefore you're going to be displaced. And that is just fundamentally false. If you think about our data, and obviously Everybody has kind of gotten around the notion of if you're building models, your models are only as good as the data that it's built upon. And we, by far and away, have the most robust data set in the industry, hands down. It's not even close. We have 150,000 live data feeds of prescription data and claims data and genomics data. I mean, you name it, it's coming in. And that raw data that comes in every day is, in a sense, useless. And what our secret sauce is, is that we take that data, and it's de-identified, and you clean it, and you code it, you bridge it, you link it together to actually make it useful. And that's our data moat. So that data is not available out there in the marketplace. And so clients have realized that. And it's actually changed, it's fundamentally changed the way clients are engaging with us. The whole theory of the merger, and in October we'll have our 10th anniversary as IQVIA, was to take that, at the time, 60-plus years of IMS data and use it to completely transform clinical development, right? So that's the whole theory of why IQVIA came to be in the first place. and over the years we would build all of these like amazing leveraging that data and we would build all these agents let's say like on the clinical side one of the first things we built was an AI enabled study optimizer sort of tool and we would sit down with a pharma company and they said you asked us to bid on this in this protocol and we bid it to spec because it's competitive but here's our AI team has sort of ran it through our models and we've taken your protocol and we've optimized it if you go to this site if you change this assessment this is what it's going to do to speed up enrollment and reduce sort of dropouts and you know years ago pharma would go oh my god that's amazing but thank you we've always done it this way but now that's changed because now pharma wants to use the data to inform decisions so it's like elevated so now they're actually pulling us in. And in 25, I think we've deployed over 150 agents. Our roadmap is by 27 have over 500 agents. So we're going sort of at pace. And we even learned this week in some of our internal management meetings that already 19 out of the top 20 pharma already are using agents that we've built within their operations. So, yeah, it's a net positive for us, and we're excited about the outlook.

Luke Sergat, Analyst — Barclays

Is that across both the research side and the commercial side, right?

Mike Fedock, CFO

Yeah, both clinical and commercial.

Luke Sergat, Analyst — Barclays

Yeah, absolutely. On the clinical side, I mean, I was just thinking when I just mentioned 10 years ago, you did a deal. PTSD feels like yesterday. Elizabeth Anderson and I putting together the tech when you guys did a deal. I remember you guys came out with the heat map, and we were just like, oh, my God, this is amazing, right? Like, you can figure out which doctors are ordering based on this data, and like and just accelerating and this just feels like uh you know giving that backbone of your your business like steroids right this is like just this is natural evolution of how things are going and so when you're engaging with customers now that their mentality's flipped to be like oh we know what we're doing to like how can you help like how much are you leading with the ai piece like how much of that is your your biggest differentiator right yeah i mean we're

Mike Fedock, CFO

We are leaning hard into it and our teams are super excited because that engagement is being received on the other side. One of the big fears that came out is particularly on the commercial side, people would have this hypothesis, your consulting business is going to go away. No, it's not going to go away. Our teams are locked into virtual rooms and we try to beat the hell out of all of our offerings and try to say, okay, where are we vulnerable and where do we have sort of net gains to have there? And when we looked at, like, our analytics consulting, you know, there's some offerings like primary market research or key opinion leader searches where, you know, you could probably scrape together good enough data that's out there, but we even kind of ran the simulation, say, let's use, you know, Claude to come up with sort of the top 10 key opinion leaders in a particular therapy and compare it to what our data shows us and and out of the top 10 Claude got like three out of the top 10 right so even in like the most basic sort of use cases yeah it's still not as good and what our clients what we're finding with our clients is you know there's so many use cases out there particularly in the commercialization sort of area that it's just not economical for them to go and try to build all of these like agents themselves you might as well come to us that's trained on on our data and we even learned that you know one pharma company in particular I think started out with doing 700 internal AI initiatives and they've already killed half of them right so everybody's playing and that's from drug discovery to clinical and to commercial so you know the level of engagement we're really leaning into this uh to the AI efforts and what we bring to the table yeah and I mean I feel like

Luke Sergat, Analyst — Barclays

it's one of those it's all promise right now and we'll the rapid adoption and potential disruption really needs to come from showing that it is shrinking trial like the overall trial spend it is it is accelerating the time to market and that's what you guys have always done can you talk about kind of what you're from internally what you guys have run some of the use cases that you've actually shown to be like, oh, if we did it this way, you know, our trial execution would have been like 10% or, you know, 20%. Have you guys done anything like that on

Mike Fedock, CFO

internal studies or looked at that? Yeah, I would say just to help people think how to think about kind of AI and how that'll start manifesting in our numbers sort of over time here. And I think time is the key thing to put out there. On the commercial side, right, it's a shorter cycle part of our business. So I think that you will see organic revenue growth acceleration and margin accretion as those agents kind of get at scale and are adopted at scale. And we're already selling them and it's already in our numbers, but that's a $7.3 billion part of our business, right, so it takes time for you to see it, but it is already happening on the clinical side a lot of our efforts on over there are around sort of identifying our internal processes so it's more of a margin expansion kind of play there and the thing that people need to realize is is that in quite literally the thousand individual processes that kind of underpin the execution of a clinical trial when you make an agent and you deploy it Let's say on something like that's very laborious, like site activation, right, where you have to get the sites contracted and the informed consents and things like that. Huge potential. But when you have that agent, because of the regulatory nature of those studies, you can't drop that into live studies, right? So it's going to come out as new studies start to get launched. You'll apply those agents on the go-forward basis. So there's a ton of promise in the clinical side around accelerating particular site startup, how you handle the regulatory documents for, like, trial master files. It makes your CRA sort of more efficient, and you can get sort of more throughput through them. And then, obviously, there's some benefits in, like, data management. You can speed up the setup of the database and things like that.

Luke Sergat, Analyst — Barclays

Yeah, and that's like one of the key questions has been and pushing back on just broad Claude adoption and disruptors is like you have to plug into the pharma. There's a lot of hesitance, but like your tax returns up on Claude right now. Like pharma, that's it. That's their whole terminal value is like on that side. Exactly. So it's like they're already working with you, right? You're already doing the services, and if you're building out these applications for them, I'm like, why would they build that internally? Correct, right.

Mike Fedock, CFO

And, you know, obviously it's built on our data, which is more robust than them building it on their internal data set. And I think one thing that's been resonating over the past sort of three weeks or so with investors on the clinical side that, you know, to kind of dispel the boogeyman in that part of our house is just reminding people to give an analog, right? And I remember like when the headlines were coming out to basically say AI is going to, you know, fundamentally disrupt the CRO sort of business model, right? You kind of, you talk about PTSD. I go back in the early 2000s, right, when I remember the headlines where CRO business models are going to collapse because people are going from paper CRFs to electronic data capture and pharma was going to have all the data and CROs make a lot of money. And, you know, and what happened? If you look back, CROs and budgets grew and even sort of accelerated. And absolutely, there were certain line items or services in the budget that went away. I mean, Sears used to charge, you know, $2 a page or whatever it was for double data entry of paper. And that goes away. But because you had electronic data capture where you can get access to the data in real time and it's being clean and coded, well, like, new offerings came up, like centralized monitoring and remote monitoring. Those are like net new services. and trial complexity accelerated because it's like, oh, if I can collect data easier, I want more data to inform my trials. So, you know, we think that AI is going to do something similar on the CRO side. It's going to open up, you know, new potential offerings.

Luke Sergat, Analyst — Barclays

And so I promise I wouldn't go over half our time talking about AI.

Mike Fedock, CFO

No, it's okay.

Luke Sergat, Analyst — Barclays

I'd love to talk about other than, it's fascinating because it's so unknown and it's just one of those things where I feel like the entrenched players have an edge and they're just not being given that credit. And I think from when you think, so let's talk more about just the demand environment itself on the clinical side. It's been recovering. Book to Bill's been improving. You guys have been showing nice growth in the booking side. Can you talk about just that existing demand environment right now? I mean, and we all, the problem is we all go back to, like, the heyday of free biotech spending, right? And, like, Vonna was just, like, everything was up and to the right. And so now it's been this kind of, is this one of those another false starts that we're getting? And I know that you guys get a good early look on the late-stage clinical side, and you're building out more on your biotech piece. So just give us the lay of the land of what you see right now. and you know the how not how that comped before but like how what's been changing sure well with

Mike Fedock, CFO

book to bill I think it's pretty well known about our feelings on that particular metric I mean it is used sort of metric in the industry and people over rotate both to the good and the bad on any quarterly book to bill and we don't forecast book to bill it's an it's an impossible sort of task But when you take a step back and you look at book-to-bills over time, it's an indicator, and it's interesting. What I can say is that from the metrics that we track and the conversations that we're having with our conversations, it certainly is encouraging in the outlook. Our demand metrics like our RFP and our qualified pipeline are healthy. we watched as we went through 25 the decision timelines kind of moderate and the conversations with our clients there is clearly more certainty this year than compared to last year so it just feels better and then you throw on top pretty robust actually biotech funding you know it all of that together certainly feels like 26 is going to be a better year. Now, the rate and pace of that and how that translates into the quarterly book-to-bills, I don't know. Nobody knows. But certainly the interactions with our customers is a lot more optimistic.

Luke Sergat, Analyst — Barclays

I mean, that's all we need is just better than last year, right?

Mike Fedock, CFO

Better than last year. It's kind of a low bar, but we're excited about the

Luke Sergat, Analyst — Barclays

future that's true and then on the on the the see more win more strategy with biotech um talk about early traction there um any new logo wins that obviously you're not going to give those but how that has really translated and kind of revitalized that part of your business yeah

Mike Fedock, CFO

it's been it's been great and you know i think part of um maybe the misnomer and maybe we didn't do a good enough job at sort of explaining kind of the see more win more strategy everybody just went to like it's like a price thing yeah um and that's really not the case i mean when you're competing for ebp work you know price is always a factor but really you know giving ebp customers the confidence that you're going to give them the attention right um and we have a biotech delivery model i think uh i think quintiles bought novella in 2013 and that's like archivia biotech so none of this is new for us. So, you know, doing a better job at telling our story and highlighting like we have a bespoke delivery model for what you need is key. And the other thing that we did was really twofold. One is looking at our engagement model with these customers. And we realized that we probably needed to engage with these customers early on, even well before they have an RFP to go out the door and we also capitalized quite honestly on the churn and with the FDA where you had a lot of reviewers and regulatory therapeutic and regulatory experts leaving the organization and we were snapping them up because you know you take people with that experience and then you get that early engagement with chief medical officers and chief scientific offices of these biotechs. And that engagement is there. And the other thing that is very encouraging about sort of biotech is that obviously the funding is in a good spot and continues to be. It's the fastest growing segment of the market. It's generally full service work that comes with higher margins, and you are seeing biotechs take their development further into clinical. It kind of used to be, as you probably know, that, you know, they used to get to, like, a phase two-way proof of concept, and then they would out-license, but now they're going deeper, and now we're even seeing, you know, biotech companies actually want to go into some of the commercialization, which is great for us. Perfect for you guys. Yeah, on the, I mean,

Luke Sergat, Analyst — Barclays

I mean, that was one of the feedbacks, but also your definition of emerging biopharmers, some of those are pretty big biotechs, right? I mean, it's under $500 million revenues, $250 million.

Mike Fedock, CFO

I am constantly amazed at the depth of that market. I mean, you know, there's so many companies out there across the globe and doing great science. And part of our, I'm going to say vetting, but our process around sort of EBP is that, you know, obviously we're very disciplined from a funding standpoint to make sure that, you know, when we make a sale, right, and we put it into our backlog, we have that funding sort of, you know, certainty. But also from a scientific standpoint, we really kind of are pretty particular about vetting the science and making sure that, you know, what the client has when we want to invest in that early engagement and help them that the science is robust. But, yeah, it's an amazing part of our industry.

Luke Sergat, Analyst — Barclays

And given the depth of that market right now, and you're talking about this being the fastest part, like, is there a certain size that's outstripping the other or is it just kind of broad based across that?

Mike Fedock, CFO

I think for us, I think we've been really pleasantly surprised at, you know, kind of going deeper into that market in the smaller size and really seeing the science that's out there and their openness to work with us and their engagement with us to help them through their problems. It's really encouraging.

Luke Sergat, Analyst — Barclays

Yeah, and I mean, you're talking about getting in earlier and earlier with the customer. It feels kind of like investment banking where you want to be involved at the very beginning. But it's kind of my terrible way of segueing into the Charles River deal.

Mike Fedock, CFO

You didn't know where I was going with that.

Luke Sergat, Analyst — Barclays

Yeah, whatever. So just walk us through the strategy here on those European assets from Charles River getting even further upstream from where you guys traditionally played.

Mike Fedock, CFO

To give you a little bit of context on that, we started looking at a little bit more focus on discovery. I would say 2021 and 22, we started looking in that area. We saw that it was an opportunity for us to expand our capabilities. And then we also saw the prospect of, you know, where this AI could potentially go and help drug discovery and kind of, you know, identify and pull more molecules through. But in 22, I believe it was, we bought a company called Specifica, and that was part of our, we put that in our lab business. And Specifica is a large molecule drug discovery business. that we're delighted with and you know since then we'd been looking in the market for a small molecule discovery sort of business and you know we looked at a bunch of companies and either the valuations weren't right or the capabilities so we were delighted when you know Charles River obviously has been very vocal about their efforts to look to divest what they termed non-core parts of their business. And when our head of our lab business, Dave Morris, and our corp dev guys came to us and said that, you know, Charles River reached out, you know, they laid out, here's the capabilities and the footprint that they have. And they meshed it up with what we already have with Specifica. And it was like a hand in a glove. So, you know, we were delighted to sign the deal on that asset at a very good very good price of that so. And is it more because of the

Luke Sergat, Analyst — Barclays

couple deals you do envision or the strategy just to continue to it's either we want to get even bigger in there or we're just going to be more opportunistic when we see really quality assets

Mike Fedock, CFO

that fit well with what we do. I think it's a little bit of both but we're pretty excited about the prospects for discovery in general. And, you know, if you look at the client segmentation when it comes to discovery, typically large pharma keeps a lot of that in-house. And we also see it as another mechanism that biotech really needs discovery. So, to your point, it helps us, you know, get in.

Luke Sergat, Analyst — Barclays

Earlier and earlier with them. Yeah, that makes total sense. In the last two minutes here with the CFO, I think we should probably talk about margins.

Mike Fedock, CFO

i'm a captive audience for two minutes go right um so we've talked about the pass through you

Luke Sergat, Analyst — Barclays

have fx headwinds kind of coming through but when the fsp has been a continued trend here pastors are relatively elevated versus what they've been in the past can you just kind of walk us through those changes and how you see you know what are you guys doing from an offset What levels are you pulling? We talked a little bit about AI, but what else can you do in the near term and long term?

Mike Fedock, CFO

Yeah, I mean, look, we have a great track record IQVIA in expanding margins year in, year out. And I think that it was the only two times in the past nine years where we haven't expanded margins. One was 2020, and obviously that was the pandemic. And last year, in 25, where I reported EBITDA margins contracted by 70 basis points. And, you know, what we've been telling people is to say, if you look at our margin, and this is maybe a construct, especially going forward, on how to think about our EBITDA margins, you know, you have non-operational dynamics like pass-throughs and FX. And then on the operational side, you have mix issues, mix and pricing that you were alluding to. and our productivity programs if you take just 2025 and that 70 basis points almost all of that margin reported margin degradation was because of non-operational so we just want to make the point to investors to say operationally and structurally right we are very sound and i had somebody you know tell me one time they're like yeah you can't uh you got to focus on the e but the dollars not the margins because you can't buy a sandwich with a percentage you know kind of thing. But we certainly understand people's focus in there. So if you look at the mixed headwinds from things like FSP and CSMS, let's say growing faster than some of our higher margin parts of our business, our productivity programs generally cover or are the things that kind of give sort of the margin sort of accretion there. And our productivity programs are things like the blocking and tackling like spans and layers and looking at the level of the numbers of managers to employees and real estate and all those other things. But, you know, automation has been sort of our cornerstone, whether it was robotic process automation and now agentic AI is just the next lever. So we remain confident that, you know, our productivity programs will continue to kind of, you know, outpace any sort of, you know, mixed headwinds we have. Great. Thank you. No problem.

Luke Sergat, Analyst — Barclays

All the time we have, unfortunately.