By Josh Nathan-Kazis
The crisis that has swept the biotech sector crashed into Medpace Holdings on Tuesday, sending shares of the drug-testing company down more than 13% in morning trading.
Medpace, which runs clinical trials of experimental medicines on behalf of drugmakers, revealed third-quarter results late Monday that implied weaker-than-expected demand from drugmakers.
On an investor call Tuesday morning, Medpace CEO August Troendle said the company had seen higher-than-normal levels of cancellations in the third quarter, an issue that has dogged the company throughout the year.
Troendle blamed the cancellations on biotechs running out of cash.
"We've never seen a period in which we had across-the-board elevated cancellations that weren't just kind of one-off," Troendle said. "I don't see any trend across therapeutic areas or anything like that. The only common factor is that these were companies that were funded during the Covid high, and have run out of money."
As a result of the cancellations, the company's net book-to-bill ratio, a key indicator of demand, was just 1.00 for the quarter, below analyst estimates and the lowest in Medpace's history as a public company, according to Truist analyst Jailendra Singh.
Net new business awards were $533.7 million, short of the $567.5 million consensus estimate.
Investors rained cash on biotech companies in 2020 and 2021, sending scores of early-stage companies onto the public markets. That surge of enthusiasm left many companies stranded with experimental medicines they couldn't afford to continue testing, as rising interest rates and plummeting valuations made it impossible for these firms to keep raising money.
Even now, three years after the biotech sector peaked, there's little sign of life. The SPDR S&P Biotech exchange-traded fund is still down 40% from its early 2021 peak, and is up only about 12% this year compared with the S&P 500's 22% gain.
Medpace's disappointing quarter is a warning sign for the sector, and indicates that biotech's pain is continuing. Medpace says that 79% of its customers are small biopharma names, the same group hardest hit by the biotech industry crisis.
Underlining the uncertainty at Medpace is the company's decision not to provide 2025 guidance until February.
Truist's Singh wrote that the company generally provides guidance for the following year along with its third-quarter earnings.
"MEDP didn't issue its forward year guidance along with its Q3 press release, which we believe is likely attributable to the lack of enough visibility at this point," Singh wrote.
Revenue for the quarter was $533.3 million, short of the $541 million consensus estimate. Earnings were $3.01 per diluted share, beating the $2.77 per share consensus estimate.
Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
October 22, 2024 10:09 ET (14:09 GMT)
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