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Medpace in Three Words: Seamless Clinical Trials

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Medpace is a Contract Research Organization who helps biotechnology companies navigate their clinical trials.

Background

We often complain about the high costs of health care, particularly prescription drugs. The costs that we see as consumers and patients are the result of the many years and billions of dollars to bring a drug from discovery to market.

The majority of that time and expense is spent in clinical trials. These are the clinical studies required by regulatory bodies to determine that a drug candidate is safe and effective. There are four phases of clinical trials, with each needing specific environments. The process is complex and not every biotech company is set up to successfully bring a drug candidate through the process. Those who are not, especially small- to mid-sized biotech companies, outsource the process contract research organizations (CROs).

Medpace is a CRO and one of the largest by revenue in its market. It conducts clinical trials for drug developers and medical device “sponsors” with the mission to make the complex seamless.

The complex, in this case, is the ability to plan, manage all of the regulatory requirements at the different stages, recruit patients, and actually conduct the trial. There are typically three phases of clinical trials before regulatory approval for the market and then a fourth post-market phase. Each phase measures something different and has a unique set of requirements. Clinical trials are complex and not surprising that they can cost a drug company upwards of 100’s of millions of dollars to conduct. Medpace differentiates itself by providing a full-service solution across all phases of the clinical trials process. It has built expertise over the last three decades, both in the therapeutic areas it supports and the understanding of the regulatory environment.

Medpace conducts clinical trials for clients in 40 different countries, supporting the sponsor’s need but also supporting diversity in the patient populations it is testing. It primarily targets small- to mid-sized biotech and pharmaceutical companies, but it does have some larger companies as customers, making up 4% of its customer base. Its primary therapeutic areas include oncology, metabolic, cardiovascular, anti-viral and anti-infective, and CNS. Its experts work with sponsor drug and medical device companies from the initial planning stages through trial completion and preparing documents for regulatory approval. Having one team manage all steps of the process does in fact make it seamless for the sponsor.

The company has seen significant demand for its services. This makes sense given that the macroeconomic environment makes it challenging for small- to mid-sized biotech companies to build out their own clinical trial processes and facilities. Hiring a CRO, one of the best in the business, simply makes sense. The company has seen a significant increase in revenue as a result.

While the environment may be challenging for smaller companies, which could ultimately impact Medpace, the company is firmly established in its industry and has the knowledge and experience to maintain its market leadership.

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"Its stock is now selling at just 30x trailing earnings and 20x trailing free cash flow. These are the best valuation multiples we've seen since 2018."

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