Quintiles Transnational Holdings Inc. (Q)
Morgan Stanley Global Healthcare Conference Call
September 9, 2013; 09:25 a.m. ET
Tom Pike - Chief Executive Officer
Kevin Gordon - Chief Financial Officer
Ricky Goldwasser - Morgan Stanley
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Tom its been about four months since your IPO and for the benefit of the audience in the room that might not be as familiar with the story, can you just take a few minutes to provide us a stream work of Quintiles’ story and kind of the recent developments since the IPO.
Okay, sounds good. Why don’t I take one minute and I’ll talk about us and then we’ll talk about recent developments. We are a 31-year-old company who’s really the innovator in terms of pharmaceutical development services. So we’re very much one of the creators of this industry, and its an interesting time for us, because if you think about 30-year-old industries, they go through transformation and growth often at that point. We feel that we’re at that point.
Our focus in primarily in pharmaceutical services, starting from the first in human. So if you think about the drug development lifecycle, you start with the pure research piece and then at a point it becomes part of a clinical trail, it becomes first in human. So from first in human Phase I clinical trails and some of the technical services before that, all the way through late phase, so approval, late phase and then we also have a segment that participates in the commercialization of pharmaceuticals.
As part of what we do, because we are so deep in drug therapy, we are so deep in medical knowledge. We have about 1,600 docs and PhD’s. That’s the size of a top five teaching hospital in the United States. We also are starting to do some work in the provider community in particular and a little bit in the payer community, because of that defects per piece in value.
If you look at us we have two segments. Product Development, which is Pharmaceutical Development Services and Integrated Healthcare Services, which primarily supports the commercial pharmaceutical customer and then some of these other segments like providers.
We went public in early May and with the assistance of Ricky and others and since then I think the good news is that nothing has really changed in terms of our thesis, with the way we run the company. We continue to have a very strong backdrop for our industry. We believe its growing 5% to 8% per year at a minimum, and we are very pleased, because there are very few industries in terms of how we sort of grow that way.
Two components to that; a tiny bit of growth in research and development, but mostly a trend towards greater outsourcing of services by the pharmaceutical firm and those driver that growth.
We are focused on the late stage clinical trials, Phase II, Phase III to 90% of our product development business and frankly that is the section that’s growing the fastest. It’s also the one that’s transforming in terms of more outsourcing, more services and then we continue all the way through the commercialization piece.
So I think the story is solid. To be honest with you, we haven’t changed much. We have the terrific five year track record of growth and we produced a significant amount more EBITDA than our public competitors combined and things are carrying on with strong net new business at about a 1.36 book-to-bill ratio in our product development segment, which competes with the other CROs in the first half of the year.
And just as a reminder, if any of you have any questions for the team, just raise your hand. We don’t have an official Q&A session. Raise your hands and we’ll get the mic to you.
So there’s been a lot of discussion this year and a lot of enthusiasm around our pharma renewed focus on innovation. Can you share with us how this filters into the conversations that you have with yours customers? Is the excitement that we are seeing, is it achieved kind of like trickling through these conversations and what are you hearing from the company?
Very much so. I think in many ways I have the pleasure of meeting with a lot of the top executives in the pharmaceutical industry and I think there is a palpable excitement about the number of drugs that are in the pipeline right now and some of the indications, some of the areas of focus.
It’s quite broad. We see it both in small biopharma, where of course there’s a return to some funding models over the past years. It’s been pretty attractive. We see it in large biopharma with a little bit of rewriting based on the future pipeline and some confidence associated with their pipelines moving forward.
The way it trickles into our business Ricky is that we’ve in fact seen an increase in our e-volume. There is really two elements to a product development segment associated with us selling. One is, we have a significant buying of RFTs and that as I referred to is actually increasing over the past number of months by significant double-digit amounts and then the other thing that we see is, because of our defects per piece in over – we have the docs globally; we are in 100 countries; we have the leading technology. Because of those things, we are proactively going out to our customers to try to help them make development more effective.