Syneos Health's (SYNH) Product Launch Aids, FX Woe Hurts

Syneos Health SYNH has been gaining from partnerships and a strong Clinical Solutions segment. However, the company operates in a strict regulatory environment, which is a concern. The stock carries a Zacks Rank #3 (Hold).

In the fourth quarter of 2022, Syneos Health’s Commercial Solutions revenue growth was strong, primarily driven by deployment solutions, including the contribution from its Syneos One portfolio. During the reported quarter, the company had a robust net new business, including reimbursable out-of-pocket expenses, which resulted in solid book-to-bill ratios of 0.4 times for Clinical Solutions. Strong solvency with a moderately leveraged balance sheet is another upside.

Syneos One coordinates integrated solutions across the entire clinical development and commercialization continuum. Its offerings provide a cost-effective option for divesting, out-licensing, or co-promoting assets for small to mid-sized customers. It also gives large biopharmaceutical customers an opportunity to decrease their fixed-cost infrastructure as well as offers an alternative approach to develop and promote their non-core assets.

In the fourth quarter of 2022, Syneos Health’s Commercial Solutions business registered 2.5% revenue growth, driven by higher reimbursable expenses and growth in Deployment Solutions. Excluding reimbursable expenses and on a constant currency basis, Commercial Solutions revenue increased 0.5%, driven by Deployment Solutions, primarily due to the contribution from the Syneos One portfolio. 

Syneos Health, Inc. Price

Syneos Health, Inc. Price

Syneos Health, Inc. price | Syneos Health, Inc. Quote

The company also initiated planning activities for other product launches, subject to fulfillment of final regulatory approvals, with additional launches expected in 2023 and beyond.

Despite the near-term COVID-19 challenges, Syneos Health remains confident about the long-term strength of its business, given its robust backlog and unique market position. Per management, with integrated solutions and a compelling market position firmly established, the company is better positioned for long-term growth and value creation.

On the fourth-quarterearnings call the company noted that it is focused on driving transformation across the business with a particular concentration on Clinical operations, business development and cost structure realignment. In line with this, the company is investing in retaining and strengthening talent and prioritizing how to resource projects to ensure optimal delivery on customer commitments.

On the flip side, in the fourth quarter, Syneos Health’s Clinical Solutions revenues declined due to lower net awards and the impact of foreign exchange, partially offset by higher reimbursable expenses. Excluding reimbursable expenses and at CER, Clinical Solutions' revenue decline was primarily due to lower net awards and backlog conversion delays, largely offset by growth in large pharma business. The contraction of margins was concerning too.

The company also experienced delays in large pharma award decisions, with net awards being impacted by greater-than-normal delays.

We note that, Syneos Health has been exposed to fluctuations in foreign currency. In the past several years, the company’s earnings, results of operations and cash flows have been significantly affected by foreign exchange. The financial statements are reported in U.S. dollars.

Syneos Health has underperformed its industry over the past year. The stock has declined 55.7% compared with the industry’s 36.2% fall.

Key Picks

Some better-ranked stocks in the overall healthcare sector are Haemonetics Corporation HAE, TerrAscend Corp. TRSSF and Akerna Corp. KERN. Haemonetics and TerrAscend sport a Zacks Rank #1 (Strong Buy), while Akerna carries a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics’ stock has risen 40.2% in the past year. Earnings estimates for Haemonetics have increased from $2.91 per share to $2.94 for 2023 and from $3.28 per share to $3.29 for 2024 in the past 30 days.

HAE’s earnings beat estimates in all the last four quarters, delivering an average surprise of 10.98%. In the last reported quarter, it came up with an earnings surprise of 7.59%.

Estimates for TerrAscend in 2023 have decreased from a loss of 10 cents per share to a loss of 9 cents per share in the past 30 days. Shares of TerrAscend have declined 66.5% in the past year.

TerrAscend’s earnings beat estimates in one of the last three quarters and missed the mark in the other two, the average negative surprise being 136.11%. In the last reported quarter, TRSSF delivered an earnings surprise of 216.67%.

Akerna’s stock has declined 96.3% in the past year. Its estimates for 2023 have remained constant at a loss of $1.91 per share over the past 30 days.

Akerna missed earnings estimates in each of the last four quarters, delivering a negative earnings surprise of 15.49%, on average. In the last reported quarter, KERN came up with a negative earnings surprise of 13.33%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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