RBC Capital Markets has initiated coverage on IQVIA Holdings Inc. (IQV), a global leader in healthcare data and analytics, with an Outperform rating and a price target of $275. The analyst highlights IQVIA’s impressive data assets as its biggest differentiator, noting that the company is the largest global contract research organization.
Despite recent challenges stemming from the COVID-19 pandemic, rising interest expenses, and a declining biopharma funding environment, RBC believes that IQVIA’s robust data collection and expertise in drug development will drive significant earnings growth in the coming years. The analyst notes that investor sentiment and earnings per share (EPS) growth have been impacted over the past 2.5 years due to these headwinds, resulting in the stock underperforming the S&P 500 by about 26% since Q1 2022.
RBC emphasizes that IQVIA offers the best exposure to the vast AI and data opportunities in drug development. The company boasts one of the largest healthcare data collections in the industry, managing over 61 petabytes of data and 1.2 billion patient records from more than 150,000 data suppliers. IQVIA estimates that in 2023, biopharma companies spent approximately $50 billion on outsourced clinical drug development, a market that IQVIA could address with its solutions. This represents a 17% market penetration compared to IQVIA’s $8.4 billion R&D revenue for the year. The company also estimates that there is another $150 billion in spending across other business areas, indicating a 4-5% market penetration in these segments.
Looking ahead, RBC Capital’s analysis suggests that fading headwinds will lead to a significant rebound in EPS growth, pushing IQVIA’s valuation back toward its historical average. The analyst’s model takes into account several macro indicators, including:
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Biotech Funding:
A significant acceleration in biotech funding during Q1 2024, which is a long-term indicator and influences EBP (earnings before interest and taxes), now comprising approximately 25% of R&D bookings.*
Industry R&D:
The analyst model shows upward momentum in industry R&D spending into 2025, a shorter-term indicator.*
Clinical Trials:
An increase in Phase 3/4 clinical trials in 2024, reflecting current trends.*
FDA Approvals:
A notable rise in FDA approvals of new molecular entities (NMEs) and biologics license applications (BLAs) in 2023.RBC’s positive outlook on IQVIA is bolstered by the company’s strong competitive positioning and its ability to capitalize on the growing demand for healthcare data and analytics. The analyst believes that IQVIA’s data assets, expertise, and market penetration will drive significant value creation in the years to come.
