Q2 2020 PPD Inc Earnings Call
Good morning welcome to.
For the 2020 <unk> Conference call. Please note today's call.
Uh huh.
The conference over to me.
Senior Vice President Finance PPD.
You may begin.
Good morning, everyone and thank you for joining earnings call.
Today, we will review our economic results.
2020.
Joining me on the call today as David said these people use chairman and CEO Bill Sharbono, our COO and Chris Scully CFO.
Please note that today's discussion contains forward looking statements based on current business environment.
So I'll conclude certain risks and uncertainties, which could cause our actual results to differ materially from such forward looking statements <unk>.
More information about the central those factors can be found in our 2019 form 10-K filings.
Our upcoming form 10-Q filing.
Also in addition to U.S. GAAP recording will be discussing <unk> do not before.
We believe these non-GAAP measures on duty understanding of our performance because there are more representative.
Early measure on business.
Please note these non-GAAP units and what you should not be considered in isolation from <unk>.
And as a substitute for that matter is a.
A reconciliation of GAAP to non-GAAP results is available in the press release, we issued last night.
In the supplemental investor presentation posted to our Investor Relations website.
Lastly regarding the basis of presentation today's discussion.
Please note that all piano metrics discussed, including revenue segment revenue and adjusted EBITDA on an assay 66 basis.
For commercial metrics discussed, including net authorizations that book to Bill.
Backlog in backlog conversion, Birmingham historical I was awarded easy to find did not do because unless otherwise noted.
With that I'll turn the call over 2 billion.
Thank you made good morning, everyone and thank you for joining our second quarter twice wanting earnings call.
I hope everyone well.
Despite the headwinds that Kogan 19 owed to our business. This quarter, we were able to exceed our Q2 guidance.
Liver and positive year on year growth.
I'm very pleased with the resilience of our business and the adaptability of our management team and colleagues to face the challenge and to minimize the negative impact.
As we did in our first quarter earnings call, we will provide an update on the impact to our business stemming from the virus.
I'll start with our Q2 performance and then turn of the future, giving some color on the positive signs of recovery, we're seeing and the impact on our ability to convert our growing backlog in the profitable revenues.
Regarding guidance.
The fluids nature of the operating environment, a mid October 19 makes it more difficult to guide with precision in particular, the further you go out.
For this reason, we're only providing quantitative guidance for the third quarter on todays call. However, it's Chris will expand upon his remarks, she's key operating metrics continue to improve.
They did they have over the last several months.
We expect year on year growth rates for Q4 revenue and adjusted EBITDA to be similar or higher than Q3, which we're guiding to be higher than Q2.
Well take a look at the second quarter in a little more debt.
Second quarter results were at or above prior year second quarter results, reflecting positive year on year growth.
I would like to call out and we bought.
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That authorization reached $1.5 billion, representing 12.4% year on year growth.
Our net book to Bill was 1.3 Board car.
In addition, we experienced no unusual cancellation activity related to go to 19.
Second.
Our ending backlog of $7.6 billion, it's a new record representing 13.3% growth year on year.
It is also worth noting that we achieved a relatively strong cinco five backlog conversion rate 10.7 for example.
Despite cove and 19 operational challenges.
And third we achieved positive year on year revenue EBITDA growth.
Notably strong performance in our lab segment, which achieved revenue growth of nearly 20%.
The second quarter, probably the challenges and opportunities for BBD, we're successfully navigating the complexities pose bother pandemic and seizing opportunities to support our customers.
Our priorities have remained consistent at the beginning of the pandemic flu.
First employee and patient safety.
Business continuity and maintaining financial strength.
And third being part of the solution to go to 19.
I will provide a few summary comments on these priorities, which go and Chris will expand upon my remark.
But.
Our top priority has and continues to be calling in patient safety.
We continue to take a thoughtful approach to office three opening and the resumption of travel.
We are using our own judgment, where local regulations or guidance, maybe more permissive than the internal views of our medical experts.
But.
We are erring on the bottom caution.
Successful implementation of policies and procedures is not just important safety.
But also to our second priority business continuity.
For example.
The revised practices that our lab teams have adopted has allowed us to continue to operate at near full capacity across all the labs.
This has been a key driver over the last performance we experienced in Q2.
Let's go little deeper into our second priority business continuity.
While we continue to see impacts uncoated 19. The majority of studies are continuing and we're seeing a gradual lessening of the impacts.
Notably despite ever changing local conditions.
Our teams are effectively progressing ongoing studies and kicking off new work.
Brendan.
Exactly activated nearly as many sites in June of this year as we did in June of 2019.
I credit Arctic set the three fundamental strength of PBD.
First our global footprint, which allows us to flex up and down as regions are impacted and also offers customers mitigating strategies keeping studied right.
Exactly.
Tenure of our management team across the globe his experience and adaptability has been causal and enabling our relatively strong backlog conversion rate to continue.
Bite the impediments codes October 19th.
Third our recent investments in sight network data and technology are enabling faster implementation of all alternate strategies.
We're in.
We are now supporting more than three times as many digital and virtual studies as we were before the pandemic.
While still less than 5% of our backlog our client conversations the jet lube acceleration will continue.
So I couldn't be more proud of our employees, whose commitment to oppose this in Michigan our unwavering.
Shifting from business continuity to maintain financial strength I shared on the last earnings call and we thought to minimize the impact of cost mitigation measures are calling.
Taking a targeted set of actions such as voluntary sabbatical or part time work through our choice program.
These actions.
Coupled with our continued strong prosecution of our large backlog, including Coven 19 were allowed us to deliver positive EBITDA growth for the quarter as well as preventing deterioration in our margin profile.
While we continue to monitor and deployed mitigating actions as needed we have begun to wind down.
Yes.
DAP returning from reduced work schedules.
PPD is actually grown on.
During the pandemic to more than 24500 colleagues and we are actively recruiting more than 1000 new position.
We are well suited to service our record book of business.
This is a clear signal of our optimism for continued recovery in clinical trial.
Finally, I'm proud to share that we have established a leadership position in coven 19 work.
On the Q1 call I shared that we had 139 awards and I can now report this is growing to over 85 awards ads on today.
I'm most excited about the breadth of this work and then encompasses both vaccine and treatment programs.
Span phases from early development to large phase three program to non interventional studies and it represents more than 50 need clients, including bio pharma biotech and government agencies.
And the spectrum of these awards applies to our enterprise too.
Many foodservice clinical work.
Our labs and accelerated enrollment solutions are also playing a significant role with many studies planned regardless of whether Pbds zero running this study or not.
Lastly, we are applying all of our innovative solutions to the study whether it be our data capabilities to select sites. Our site network to enroll patients quickly were direct to patient capabilities to support patients remotely.
While this has been a challenging year for us all I continue to be inspired by Pbds colleagues every day and energized by imaging of our organization to deliver life changing therapies.
The need for innovative medicines has never been more clear I genuinely impressed by how our industry come together to respond to the pandemic and how our industry.
The collaboration feature.
He achieved positive signals.
Covers on the customer.
Biotech funding is robust and R&D budgets continue to be strong.
Our proven PBT biotech model puts us in a good position to further strengthen our leadership position.
Site access continues to improve both per patient and Crs.
We now have access to more than 55% of sites globally and patient access is even better.
More than 80% sites reported in a recent survey they have resumed normal Asian operations.
And on a related note, we are seeing patients increasingly willing to participate in clinical trial.
We have a unique view of patients.
By now work in patient recruitment business.
As of this past week, we're nearly back to Q1 volumes per patient consent.
This is that whereby paces declare their willingness to participate in a clinical trial.
We believe this is a solid leading indicator of patient enrollment in a positive step forward to return to normalcy in clinical trials.
I feel confident over a broader pharmaceutical development industry will emerge even stronger from a pandemic.
For PBT in particular, I believed that our industry, leading Alan and our Caulfield quality execution will continue to enable our success.
Looking towards the future our business is not deteriorating, but rather accelerating.
I'll close with my high level view business.
On the commercial.
We continue to win with our customers achieving double digit backlog growth.
On the operational fraud.
Adapted more strongly that could have imagined.
Even with the impact from the pandemic that Weve, Scott we've done a strong job converting our backlog to revenue we emerged from the Pandemics Greg.
We expect to further accelerate as we catch up on pause to work and initiated work on New Awards, and lastly from a financial perspective.
We outpaced our second quarter GAAP guidance projection and maintain a margin profile in line with the prior year performer.
Whatever challenges go that present.
I feel confident that we will be able to adapt.
I'll now turn it over to Bill Sharable, our Chief operating officer to review our operating results.
Thanks, David and good morning, everyone similar to last quarter. My comments will again focus on the underlying drivers of our performance.
Culture of quality execution, and the leadership positions that each of our businesses has established continue to position us well.
Before diving into the segments and to reiterate what I stated in Q1 operating metrics are inherently difficult to compare across appears due to lack of common definitions and data sources. So keep in mind as you consider these data points.
I'll start with our clinical development services segment.
And the impacts we are seeing to ongoing studies.
He pauses and new awards.
The majority of studies are continuing.
While we saw many sponsors implement enrollment pauses they are gradually being lifted as sponsors gain more comfort operating in the pandemic.
And as regional and local circumstances improve on the Q1 call. We shared the 10% of our clinical backlog was impacted by these pauses.
Which we've now seen improved to 7%.
We are actively working with customers to start up new studies.
And restart enrollment on studies that were put on hold.
Our accelerated enrollment solutions business is helping clients to more quickly enroll paused studies as well as new coded 19 studies using our unique patient recruitment capabilities and those global site network.
Similarly, we have seen steady improvement in resumption of site based activities with flu access to more than 55% of.
Sites globally during the quarter, while access was limited at some site.
We continue to deploy remote.
And are now seen total activity near pre pandemic levels.
At the peak of site access disruption, we were conducting nearly 90% of our monitoring activity remotely and now as on site visits resume that has shifted to approximately 60%.
We expect this trend of increased site access and increased flight activity to continue and accelerate into Q3 and Q4 over.
Although with greater levels of remote activity persisting due to efficiency gains.
On the patient front, while some sites are not accepting CRH visits the vast majority or resumed Asian visits and related activity.
I'll also note that we are seeing patient enrollment or non curve in 19 states begin to trend up.
In addition, we continue to support studies like direct to patient shipment digital and virtual solutions and our site network, which has remained open throughout the pandemic.
We are also leveraging our site network to deploy virtualization technology faster than we could add traditional sites.
As David shared we're working on a large and diverse backlog of covert 19 work these programs span multiple phases.
Mechanisms of action and cut across both our clinical and labs businesses.
The organization is working tirelessly to execute these studies and our teams have demonstrated a relentless focus on execution.
I'd like to share a few examples to provide some color on the scope of work within clinical and our unique capability.
Our data capabilities are important in medium enrollment target.
Usually epidemiology models and our scientific expertise within ever Dara, we are building predictions in scenario clients to optimize and adapt site selection to account for new and emerging hotspot.
Our accelerated enrollment solutions business includes the world's largest vaccine site network.
Hi throughput sites across all major geography, we are supporting clients to meet aggressive enrollment timelines and milestones.
And lastly, we're running several treatment and back feed studies with a high degree of virtualization, which leverage internal investments and partnerships, which we believe will become increasingly important.
Next shifting to the laboratory services segment.
I'd like to highlight that in Q2, the last delivered strong revenue growth of 19.9%.
It's worth noting this performance was driven by double digit growth across all of our labs.
So first and foremost we've been able to ensure business continuity. The implementation of shift work remote work work pod has ensured that our scientists we're able to safely access facility and continues to progress there work for customers.
As I shared with our key on coal or bioanalytical vaccines, and GMP labs are driven primarily by staff availability and facility capacity not sample volumes.
Second while our central lab saw an initial disruption to sample volumes. This abated during the second quarter and volumes have returned to pre pandemic levels.
This was driven by our diverse backlog and the ability of the team to quickly these opportunities presented by coded 19.
Lastly, our labs are supporting a significant number of coated 19 programs in the pipeline is robust going into the second half of the year.
I attribute this success to our scientific expertise.
Global infrastructure and capacity combined with can do leadership in culture.
As an example, the lab team quickly develop new asked days molecular serology and functional designed specifically for coated 19 vaccine and therapy development programs.
To summarize we're very pleased with lab performance in Q2.
Given the continued strong growth and large backlog of work, we're continuing to invest in infrastructure to support our customers' needs and expect approximately 75000 square feet of new lab space within China, and North America to come online by year end.
I expect our scientific expertise and our proven ability to execute will translate into solid growth within this segment.
I will now turn it over to Chris Scully, Our Chief Financial Officer to review our financial results.
Thanks Bill.
Good morning, everyone My prepared comments I'll be covering our quarter to result.
Updating you on balance sheet metrics and capital structure, and lastly, providing you with an update on our forward guidance before opening for Q1 day.
Before diving into the numbers as on previous calls when referring to our PML I'll be doing so on an 86 to six basis.
When referring to commercial metrics such as net authorizations.
Backlog and net book to Bill ratios My commentary will remain unless otherwise noted on a historical AMC Cisco five basis to maintain comparability to prior period.
However.
Last quarter. We've included these metrics in our Investor supplement on an 86 six basis, both with and without indirect.
In addition, we have provided analysts request.
Metrics on a one time basis for all four quarters of 2019 in the appendix of the document.
The added information will aid everyone in their modeling efforts.
Finally also similar to our last call given the exceptional circumstances surrounding cobot 19, we have expanded the operational and financial metrics that we provided today along with sharing guides for the upcoming quarter.
That said, we are likely to provide all of these disclosures on an ongoing basis post the endemic.
Turning to our court to result.
As David noted it was a strong quarter bookings.
Despite the disruption from the pandemic, we recorded 1.05 billion in that authorization.
Which was up 12.4% year on year, resulting in a net book to bill ratio of 1.34 X.
Providing some additional detail RFP award volume to a solid across biotech and biopharma customers with double digit growth in new bookings in both clinical and our lab segment would not go unusual cancellation activity related to covert 19.
As we saw a customer shift RFP volume towards coping 19th therapeutic vaccine programs in the quarter. We did see a change in mix of studies by therapeutic area with roughly 25% although were delayed Coker 19 program.
Given that the dynamics and the behavior of these studies could differ from more traditional studies and hence we have limited historical precedent.
Out of conservatism, we increased the haircut or discount applied to covert award and determining the dollar amount at the authorization to backlog beyond the historical averages that we've applied to non cope with work under our policy.
One additional item to note.
Which is different this quarter in depth authorizations growth and net book to Bill ratios were notably higher on an 86 six basis than either an 86 of five or.
Six direct only basis as outlined in the Investor supplement.
The reason for this is.
The mix of indirect to direct with significantly higher uncovered are ones that we won in the quarter in particular.
Feed studies with a high magnitude of Investor Grant.
With respect to the personnel Curt do revenue of 1.01 billion increased 1.4% over the second quarter 2019.
This was driven by 19.9% revenue growth in our laboratory services segment.
Partially offset by 2.2% decline in our clinical development services segment revenue.
Which would impact into a greater degree from disruptions associated with the pandemic.
On an adjusted EBITDA or our adjusted EBITDA of 194.4 million increase 0.8% over the second quarter between 19, generally keeping pace with revenue growth.
Adjusted EBIT performance was aided by because the cost mitigation actions, we put in place and discussed on the quarter one call.
As Dave noted earlier, both revenue and adjusted EBITDA, which significantly above the high end to the range provide for quarter two guidance last call.
Let me provide some additional context of the drivers to the B.
Hurt.
When we initially gave in Q2 guidance, we noted that given the uncertain nature of coated 19, we conservatively assume that may and June with further deteriorate persons or April experience across a number of metrics such as site access patient enrollment and lab sample volumes.
As it turned out not only do we not TV metrics deteriorate, but in most cases being approved in May and June versus April.
Second the coated 19 programs that were supporting have generally expanding scope and fat burning revenue from these studies helped offset part to the business, which were more negatively impacted by Copel 19.
Third as Bill noted within our labs business, we were able to maintain a higher than anticipated level of productivity in our GMP bio and vaccine flat.
And we actually saw sample volumes increase intercept central labs in most weeks compared to quarter one levels as a result of coated work and successful conversion of other studies in backlog.
And finally and equally as important our longstanding focused on operational excellence has allowed us to adapt to pandemic redeploy those colleagues working on studies that were pause to other studies are productive activity.
Mitigate the operational financial impacts of Cobot 19.
We have been able to find alternative ways to progress work for customers, even more successful than we had anticipated when we issued quarter to guidance.
Overall, we're very pleased with these results.
Turning to cash and liquidity.
During the quarter, we continued to see strong operating cash flows underpinned by stable or improving trends across key metrics, such as CFO aid, our aging and cash collections.
As a result, if not for the full repayment of our quarter. One revolver borrowings are ending cash balance would have been 843 million.
Which is over 100 million higher than our quarter, one ending balance.
With respect to the revolver, you'll recall that we drew down 150 million from our 300 million credit facility in March out of an abundance of caution given the volatile global markets at that time.
In light of improving market conditions strong cash flows and continued strong operating performance. We repaid this amount full at the end of June.
Collectively our revolver capacity and our key to balance our cash balance of 693 million leave us with nearly 1 billion in total liquidity, which represents strong liquidity position the company had over 10 years.
During quarter two we also recently.
Got you bet.
Excellent of new 2025 in 2028 senior notes at lower rates.
Which reduces our annual cash interest expense by approximately 19 million and extends the maturity.
As of June Thirtyth and debt leverage ratio was 4.48 times trailing 12 month, adjusted EBITDA, which declined from 4.54 times.
Yeah.
Excluding the 77 million cash used to pay fees and expected for the refinancing debt leverage with declined to 4.38 times.
As noted in the Investor supplement we are reiterating our original objective to reduce that led to the locally by the end of 2020 and into the three in 2021.
Now turning to our Q3 revenue and adjusted EBITDA guidance.
The company expects revenues of 1.065 billion to 1.085 billion, which equates to plus four plus 6% growth versus Q3 of 2019.
And adjusted EBITDA of 211 million to 215 billion, which increased 4% to plus 6% growth versus Q3 in 2019.
Finally regarding our outlook for the fourth quarter and as David noted shoot site access patient enrollment and other key metrics continue to improve at the same pace that they have over the last several months.
PPV expected year on year growth rates per quarter for revenue and adjusted EBITDA to be similar or higher than Q3 per the guidance that I just shared.
So to wrap things up.
Right. The pandemic Q2 was another strong quarter from a commercial perspective with double digit year on year growth in net authorizations and we continue to see no unusual cancellation activity related to cobot 19.
Second quarter revenue adjusted EBITDA will materially above the top end of the previously provided guidance with positive growth versus last year and minimal erosion in margin.
Cash collections and other balance sheet metrics that continue to remain extremely strong we've refinanced the most expensive traci bad debt and our capital structure, we've reiterated our expectations to reduce leverage the level guided to before the pandemic in our liquidity position is the high since been over a decade.
We expect increasing year on year growth in both quarter three in quarter four assuming at the pace of recovery continues as it has the last several months.
We're very proud and working on so many promising cobot 19 vaccine and therapy.
With that I'll now handover the call back to the operator to open the line for doing that.
Thank you.
We will conduct a question.
If you like two questions. Please press star one.
Okay.
HM indicate your line is in a cost in Q.
We ask that.
Question and one follow up so other than the opportunity to ask questions for participants use and speak we could you maybe necessary to pick up your handset.
Sparky, one moment post office cost.
Our first question comes from.
From there please.
Thank you good morning.
I'm good focus on the new business commentary related because of a 19, how should we be thinking about the burn rate to this business do you expect most of it to convert and next year and.
How did the economics through some of the vaccine worked changes didn't move from seems to win in the phase three four years.
All right so Jack the burn rate on Uncoated 19 awards it.
A bit faster than it would be on non kobe towards the give you an idea we estimate the duration of our cobot studies are anywhere from from six to 18 month versus basically three year on traditional kind of backlog.
Overall economics, when we cut speak not for the question of the two versus phase three but overall in terms of co bid 19 kind of award.
What we.
The vast majority of that this work is at either existing MF day kind of partnership kind of level.
Turn to pricing or prenegotiated kind of gotten that rate and we're not expecting any material change in our margin.
Overall, the as a company as a result of an increasing shifted cut cobot 19 toward versus others at least on a direct only basis as I did note on my comments earlier on this call.
On the studies where of course, we kind of have a higher ratio of indirect to direct.
That could be basically something that plays out.
From Jerry.
But as CFO I'm perfectly okay with that as it will result in higher EBITDA growth.
Sounds good and then just as a follow up just curious to get your thoughts on how you manage through the work right now there's been delayed work from the last few months amidst the pandemic, which I imagine you want to catch up on during the second half a year now you're layering on top.
Some additional work related to co. The main gene How're, you prioritizing that and what are you looking view in terms of managing labor to execute upon it.
Yeah.
Hi, Jeff It's David I'll start with them go under 1 billion some more more color.
First of all the worst staffing to run the build backlog of work coded and non coated so.
As you heard in the script we finished.
In the pandemic, we've actually grow unemployment the 24500 people and we've got open wrapped for 1000 unique position. So we're not having we're not going to be and up to see ourselves in a position, where we have to prioritize certain parts of work over the other we plan on executing all of it as we're predicting more more.
Moving side at that.
Hi rates, the patient enrollment getting back to normal so that's the first point.
The second question. This is we've done a good job being able to reallocate resources away from site. They don't have that gets on the activities billable activities, where we can get access to our billable activities adult require study backlog so they've been more under the.
Under the New York is an iceberg, we're using the tip on all the financial results, what's going on underneath and clinical though on the data Asian customer by customer study by study meeting figuring out how we can put in mitigation strategies to keep the studies running so our labor utilization has actually been pretty high higher than we would've thought.
It would have been given the pandemic impediments. So we feel like we're in a good zone of knowing how to have the workforce deployed and that sizing the workforce to handle the work coming in final comment I'll make is we do have the.
We also move somewhat complicated projection scenario of projecting the recovery inside access and patient enrollment and calibrating the staffing to that so because we have this.
Big backlog of work that's been troublesome to get full access to the Ronald because of the flight impediment.
And when we do get back to normal we're going to catch up on that work and we have all of the work that's been built them up so that in non coded for new volume. So there's going to be a spike of activity, we're going to apt to do some extraordinary efforts to prosecute but we feel like we're really well positioned for that.
Those in the color to that yeah.
To your point turnover is is down year over year, a pretty significant significantly for us and obviously retention is key in this environment, but we're hiring aggressively when it comes the actual sort of catch up you're talking about as I've said in my comments, 55% of site. That's how we define it had complete.
Only unfettered access sort of returning to normalcy.
The rest of the sites just had some degree.
It the way we define it could be anything maybe they were require only you know visiting a certain part of the institution or maybe they require some kind of testing before entering or or you've got to.
Look at a certain part of the of the.
The material at a time when you did something small but basically.
Sites are opening back up.
Page connectivity, 80% Cyto resuming you know patient participation and seen seeing patients. So thats opening up quite quickly we're sending to monitor is out sometimes to catch back up so as David said, it's a site by site sponsored by sponsored study by study discussion, but we're in a catch up mode as more.
More on site visits or loud, which allow us to get after a lot of the source data and allows us to get after drug accountability and some of those activity that cannot be done through a virtual or remote.
Is it.
Great. Thank you all.
Our next question comes from Michael Peterson with JP Morgan. Please proceed with your question.
Hey, Thanks wanted that keeps up yet clinical services recovery. He could provide any color just on how things are creating a crossover development stage Q3 versus Perry and posted one have you ever quantified the contribution so the faster burning coal the tailwinds at this point on clinical.
Yes. Thanks Tyco. This is bill as I said in in last quarter early development. It was a part of our business that was hit the hardest to meet you know really though those clinics were closed down because you're bringing healthy normals into an environment that that's done state since then.
We put in a lot of procedures and measures testing is widely available of our own staff as well as the volunteers that come into that business. It's open back up again, we are running those for sponsors so while hit hard. It is recovering back up you know our site network was a little bit of the same scenario, where you got to put in procedures.
And have tests available to get that back up and running but in terms of the two three activity as as we said it's been at a at a blistering space. There's been a lot of code would work on both the treatment side in the vaccine side. There's a lot of different modalities that are being tested and we were able to continue studies with.
You know remote visits and Oh, you know telemedicine technique et cetera. So you know.
Tobin certainly been a tailwind course in both clinical and in the labs no doubt about it we think when a leadership position, but basically now what we're seeing is activity continuing there's just a shift from remote back to on site visits that is occurring slowly and methodically and metrics have improved leading indicator metric.
But improved May June and July so we kind of stated in our commentary assuming that trend continues.
We feel good about the back half of the year.
Great and then a couple of quick follow ups on a coded commentary yellow lab was much stronger at 20% is that more tied to coded work with facility expansion GMP and then any comments you can make on enrollment on public related vaccines therapy parking lot and you talked about needing to enroll over 13000 patients on the original 39.
Cloud I'm just curious.
Hey issues around patient recruitment enrollment.
And then lastly, just curious on share gain share because last quarter, you talked about transferring clinical trial patients. Some sites that remain closed from competitors and curious.
At some share under that as well thanks.
Maybe I'll take that the first piece to the take or three pieces to that question Tyco that the first pieces on the lab footwear in the quarter, what I would say that all three of our lab actually grew at a double digit pace within the quarter.
Both basically bio and vaccines in GMP.
We're less impacted by copious disruption that central lab.
That said in Central lab, we did see an initial reduction in.
Central lab samples volumes early in the quarter, but things kind of recovered I think up fairly quickly and promote month were above pre cobiz levels due to both the combination of having Cobot Award and.
Executing on the backlog of awards, we won last year. So all three lab had some really healthy performance in the quarter on both second question, which is around our thoughts on recruit ability that's word on kobin work.
One one thing we learned with some early work we did was the need to be able to activate sites in the non traditional way for example, the.
Activation Alba.
Elderly care facility in the initial outbreak of the study and speed of getting that activated and getting investigational product into the site. So we actually playbook that we will close Rama with applying it so on therapeutics orbactive slightly different but it goes the hot spot.
Being able to identify the hotspot in some ways to predict the hot spot, which would want whoever they are up and be ready to go it's really putting palm out of this on when we do that well the recruiting pay on the global studies, both the vaccines and therapeutics has been on spec will continue to be back. So we don't see any impediments to.
Crude in these studies and we expect them to recruit much more quickly than we have traditional study and I think the third question was.
Share gain share shaygan that specifically around patient that may not be able to get access to them.
Leveraging Wallace does not work, we do have been well what will not be seeing there bill yes that is a real advantage. We have is that we've got the largest vaccines site network.
Out there and if you look across the U.S. Europe Asia. We're you know our network is about 180 sites, which we've said before.
But is perfect lead position then designed to conduct vaccine trials. So we've got broad geographic scope across the us business and I said in my comments, we can sort of.
Moved to where we see hot spots or outbreaks, Dan same is true in Europe less sites, but very capable sites. So these are relatively easy studies to.
To run so when you combine our patient finding capability with our site network, we're able to recruit and process patients very efficiently and our site networks. So that's that's that's one of the things that make it capable obviously we've got.
One of our largest therapeutic areas is is the infectious disease and vaccines and that's both at our clinical business and our laboratory business, so well position there and in our ever Darragh business as we mentioned.
We have epidemiologists analytics that help us predict.
The best site.
You know to place studies in and again, that's taking data all the way down to the county level and in some cases.
And even even.
Smaller smaller bits of data around us in Europe, we're operating mostly at the country level, but.
There is really good data and so we can empower analytic about where to go to find these patients we feel really confident about about the recruitment you'd mentioned a number of I didn't think 13000 patients where we're going to be recruiting orders of magnitude more patients in that across our code backlog.
Okay. Okay.
Our next question comes from the lead with Jefferies. Please proceed with quest.
Hi, Thanks for taking my question good morning, congratulations on the results.
I wanted to see if I could.
Slides a couple of these things a different way. So appreciate the data on on the percentage of bookings in the quarter that came from Covidien given the the more rapid burn rate expected here.
Can you help us to understand either how you think about that flowing into revenue like what you're covert concentration in revenue in the coming quarters might be or a slightly different way to come out that would be.
I look at what the implied burn rate on backlog is for the third quarter based on your guidance, it's improving as as you suggest it's still lower than the first quarter.
And I guess thinking about coven layering in could you could accelerate could move higher are pretty pretty markedly and I guess I'm trying to understand how to titrate that.
Yeah. So thanks, Dave I think that attitude.
Division.
I think one of the things that I would kind of note on that is yet burn rates due basically incrementally kind of improve in Q3 versus Q2 odd, but basically be environment is still not is clean it or an orderly. If we had in quarter. One so I think its natural for to be lower is one element of the answer to your question.
The second basically kind of piece that they would add is.
Well basically these studies ticket to progress on at Cobiz basis on a very rapid kind of basis in the next several months at least on a direct basis on some of those large kind of again vaccine towards where you had a lot of.
Indirect associated with them from investigator grant.
Our experience has kind of been an investigator graph that it takes time for those to be process by kind of sites and submitted to the company. So we are expecting thats going to be a little bit of a tailwind in terms of our burn rate at least on a full to co six basis within the quarter. So that does kind of slowed a little bit but in terms.
Of the contribution what we will share is that in quarter two.
About just under $50 million to about 4% of our revenues came from covert award.
We would expect that to improve somewhat in basically Q3, but don't want to get into kind of giving them more precise figure from that but hopefully from those data points. It helps frame out the way should think about yeah. That's very helpful. Thank you. So my follow up question on you mentioned a couple of things that that struck me as per.
Slightly different than than some of the concerns I've heard expressed from others and those were remote monitoring efficiencies and patients showing greater interest in participating in trials and so on those two things I guess I just wanted to hear more color. So on the remote monitoring.
I hear folks, saying, yeah, we can do remote monitoring, but we still have to get on site to complete the site visits so it's a little redundant and it's less efficient. So if you could kind of clarify on that and then we also here concerns about patients.
No concerned about exposing themselves to covert therefore concerned about about kind of participating in trials in the west its cancer or something like that sounds like you're a little bit more optimistic on both of those so if you could could you elaborate I'd appreciate it.
All right, Dave I'll take the second one on the patients Olympian one well take the first walmarts I'm not sure were different than what you others are saying on the remote monitoring but over them, but the efficiency power level and that that question on the patient resiliency I got to deal with the survey said, but we're we're recording is our.
Data on volume of patients that are consenting to participate in particular clinical trial. So it's not what they incur what they're concerned about what they're doing and at the very positive leading indicators. So that does seem counter if you were born and begin to patients aren't resilient, there's a lot of beer and patients aren't showing up.
What we're seeing his office into that so that is a bit commerce I can validate the you are seeing something different and what we're talking about patient resilient now that from the consent coming out of our site network and patient recruitment capability, which only the quota proportionality element on the maybe.
180 sites again 10000 global site, but it is we were seeing today that is very important to our business going to look solid gogo and pulled up the remote monitoring efficiency out today, Let me answer your question I don't think any oh.
Oh.
In my view here here's the situation. We we are in favor of anything that makes the conduct of clinical trials more efficient more effective and lowers costs for our customers and and increases access to medicines for patients I think all of this virtual and digital and remoteness is helping to.
Do that now as I've said in my commentary you know kind of add that Pete we were doing 90% of our visits you know remotely and now it's down to 60% and that trend is moving downward and it's true as I said you got to go back at some point and clean up some things that you need to do on site requires an on.
Site visit and that's why we said certainly studied certain indications.
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Don't lend themselves to being totally remote you noted some kind of combination a hybrid hybrid trial, but net net you know anything it helps you screening of patients faster in roll a patient faster than the patient faster and makes it easier for the site to do easier for the patient to understand.
Easier to show sponsors transparently, how the studies progressing that the good thing and so we're we're in favor of and use the.
You know that kind of technology I think the coded pandemic crisis is accelerating the use of that pbds been thinking about upper while we're well positioned by and large.
You know remote based monitoring and reduced source data verification technique and technology has been put in place by companies like PBD for quite some time, so it's not completely new unheard up I think ultimately.
A dominant design will emerge that is the most effective way to conduct trials and I think what that will do in the long run push up clinical trials volume sponsors will be able to stretch their dollars blogger and test new medicine and that volume will be positive both for us as a company be positive for pharma Olivia will.
The patient code, there's more trials participated in a more drugs coming to the market. So I mean, yes, yes, we're reacting the pandemic, it's a little bit of little bit of work to do between the remote they depend on site visits but.
It's not a problem what the said at a multiple monitors al you realize that has to do that the regulators have been very.
Helpful and positive in terms of guidance, both sponsors and CRM. So were quite a good spot at the good thing.
Great. Thank you.
Our next question comes from all the Jones with Goldman Sachs. Please proceed your question.
Great. Thanks for taking my questions. Each after about Bob I wanted to ask about the higher productivity in a labs is this productivity space or individuals and is there an opportunity for this to be more limited as or is this more unique political environment.
I'll go ahead and take that I mean are our labs are we're constantly searching for Bert productivity. So we see productivity I think of things like electronic lab notebooks I think about you know systems that good sites as well as customers and our teams transparency into where samples large et cetera.
I think about.
No.
You know ordering ordering and good good kind of inventory management techniques et cetera, but the bottom line is.
This crisis has allowed us to.
As I said use different shifts.
And please putting employees in pods.
Letting them do some of the wet lab bench work on site, but then moving home to do some of the analysis in QC type work and report writing et cetera, I think it's I think it's made its more productive and it's given our employees more flexibility while at the same time.
Helping us go after our number one priority, which is business continuity for customers, which we've been able to maintain and I think that's where our labs have really shine, none apart lab shut down.
We've got a couple cases of coded for those employees they've been quickly identify do testing isolated.
And again the labs are working.
Diligently around the clock. So thats every single one of our labs as Chris said, all growing double digit during this time period, so really effective and efficient could change the way we do some work but.
In the future, but they're doing a great job in growing robustly.
For the back half year.
Thanks, that's helpful. And then the either extension are there any meaningful expansions or changes to that relationship we should be aware of.
No. It yeah, we've been apartment Pfizer since 2015, and this is just a continuation of the business with them, we have with them. So I wouldnt.
More than that in a very good Dom I think the probably the biggest strategic thing to revisit reflect the quality of the work. We are executing coupon bonds is very good drug development very strict and our expectation.
Makes sense. Thank you.
Our next question comes from.
With Morgan.
The question.
Oh, Thanks for taking my call.
I want.
Okay.
How do apples.
Hi, how am I can profile.
But we.
Yes.
I'm talking.
Although I.
I will now provide color on what drive margin, while I'm wondering if the margin opportunity Oh, well like all the time to more historical level.
Well I would say one thing you do have to take into consideration is what we're doing great and kind of labs.
Effectively.
There could be a mix between kind of lapse in terms of growth rates in the second thing is while we've been able to keep things open we did have to introduce different protocols and other types of things that may be made it a little bit less efficient than what we've had in the path I think but overall, we feel pretty.
Good about basically the way, we've been able to mitigate any decline in margins and not only within lab, but within the company overall delivering results yet for the quarter yes.
One thing is in the lab.
Wire much about personal protective equipment.
In the GAAP fueled by the monopoly.
So with that I was a little bit more and stall numbers.
Great. Thanks.
Our next question comes from.
They didn't believe.
Yes.
Hi, Thanks, very much can you talk a bit about how the flow of awards in RFP has been different across kind of your different client cohorts in a larger pharma versus med versus small biotech.
Yes, it's it's been strong across all segments of the summary comment.
We have seen.
Both in biotech and bio pharma.
The whole industry mobilized around Covidien. So you have seen focus attention and capital allocation shifted coded. So we've seen a flight actually more slight than we had predicted.
Got it slow down or lower volume of of RFP volume on the traditional work when you take over into consideration budgets and say we were expecting more of a pullback in salt so much cove and work coming out of both segments. So both very strong if you took out the code would work we're.
Actually would be pretty satisfied with where we would have posted the quarter from an authorization standpoint, that's what I said it on a done the traditional work actually be expecting but it was a slight pull back from what we would've thought would have been an enormous amount of a volume with the where the market was developing.
So so thats I think theres a co good non coded piece that going on.
And then I think there's a large biopharma biotech.
Got a dynamics that are going on biotech, maybe having a bit of a long time to get their head around how to it.
Restart study kick off new studies in the middle of the pandemic. It seems like large thought biopharma adapted in GAAP or had around that.
Going back off owed on more studies little more quickly so we'd expect biotech a follow suit going forward.
Going back to authorizations, both segments have been very strong.
Great. Thanks, David and then.
My follow up as you guys have clearly been very successful winning covert work curious if years, having any issues with being maxed out either from that kind of a lab capacity standpoint, or the ability to enroll. This many studies that are presumably competing for a lot of the same types of patients. Thanks.
We don't think so the short.
Short answer to that saw like the labs capacity, our biggest concern was keeping both among teens infection, while the workforce with we've been very effectively.
But.
Collagen patient safety is one of the one most proud of Robinson.
If we had to make law will make a borrower protecting our people in patients.
By putting involved with thoughtful ultimately grew so cooperate with very little inflection spread than anything that even a warm.
For later than dealt with so capacity and in the lab.
Well, it's sufficient we've always that offset the park central labs, all water volume coming through central labs as well.
Welcome what Doble arms now on the on me the clinical side as I try to point out in my comments to get ahead of this question.
We've been expanding our colleagues population, which will go back into Q1, we didn't take any aggressive cost actions towards our workforce. We had been very small number of furloughs and our early development phase one twox what was the limited on the off of this towards close lumbar colleagues to take sabbaticals apart.
Moreover, but we're trying to back it back their new family.
Complications with kids being hall from school and not not having school lot of I'll call. It put that out. So we were able to save costs. They were about the lives of coming back. So we're getting a whole workforce, Bob as bill mentioned or an overlay to the low bit ever Bob.
And now we've added a mother thousand rock for new positions. So we think our capacity to prosecute the work is right on where it needs to be including going some catch up work once the buyback that continued to improve in patient enrollment.
Yeah, I would add to David's comment that the the headcount figures that he shared earlier on the call represent the double digit increase in our headcount base versus being in the quarter two of last year.
With an awful lot of hiring requisitions that are kind of out there. So we've continued to keep pace in hiring through this.
Pandemic to make sure that when a good position to.
Convert Baker with backlog into kind of read in the course.
Sounds great. Thank you.
Our next question comes along.
Thank you.
Yeah.
Hi.
My question is on the recent covered award, but I don't want to focus on the burn grade I want to focus on the patient recruitment and potential future cancellation.
I understand but there will be a lot of competition for workover patients. So can we do expect every program late stage trials before we recruited and also.
The result of it back.
There appear to Canada Bam.
Phase three data later this year should we expect an uptick in cancellations on the call that project are a little bit more.
Yes, I'll start.
First.
Coated awards coded work.
A new phenomenon of award.
And we don't necessarily think that they will behave.
In terms of risk of cancellation or modification of the study upscale and were down scaling. The study. We don't believe that we should rely on our tradition traditional historical trend analysis on awards and now they behave in backlog as slots, we have haircut code.
Towards more dramatically in what we put into our backlog to take a more conservative view.
Ready in case, there were some cancellations that said.
We're not seeing anything.
Yet that would suggest that there are going to be.
Extra ordinary cancellations or out of the norm cancellation.
If I look at maybe split therapeutics from that being.
If you look at vaccine there's a theory.
Phase three that are going up across the industry. All looking at approximately 30000 patients by some of what and go ahead.
I've seen the job volunteer patient registry are registering it's all of the up over 150000 people, who said the volunteer for the best feed study. So in terms of patient offset now there's that registry, but there's also need to go into the right geographic location. The run this Bobby and yet you Barry.
GAAP give on that so I don't think you're going to see.
At least right from what the right now I don't see an impediment to all of that they were going into phase two being over crude on the therapeutic side is the same thing with Abbott had trouble recruiting yet.
I think we've seen probably the biggest bolus of award activity a pure a co in Q2, I think we'll see another sizable ball.
But maybe a little bit less to where we're getting the maximum number the somewhere not struggling yet from what I can see in terms of recruiting and run them. All so all I can say this is a new world.
I don't think looking at our historic traditional backlog and our words of the age of backlog will necessarily imply disposal.
Before there maybe some more cancellation rates and the code work, we've tried to be conservative when that all that being said so far we haven't seen it manifests itself in terms of more cancellations.
David I just might add.
One that's a good question is what's the cancellation risk of of coded backlog generally speaking we've been looking at that.
If you think about the treatment side of the equation. There's a lot of sponsors who are repositioning some of their drugs obviously.
You know this corona viruses, new yet the Sars virus, there's some knowledge about it but I mean, it's being scientifically study and.
No whether its anti Inflammatories antiviral anti coagulate as many companies are trying their drug. So we just think there's a wide variety of mechanisms of action that are that are being tested here, which is a good thing. So there's antiviral monoclonal antibody.
Plasma human plasma components, there's immunomodulators, there's novel agents, that's just on the treatment side and so our backlog across a bunch sponsors on the vaccine side you know, we're perfectly positioned with a great wrap that a site network and a lot and know how here and grade labs thing about the vaccine, but DNA vaccines are in Asia.
Themed live attenuated inactivated protein sub unit you know.
Replicating viral vectors non replicating that so I mean, let's think about it.
Healthcare industries throwing the kitchen sink at this thing and.
We actually think there's a lot of a lot of energy and a lot of activity and a lot of ideas. We don't think that cancellation risk is any different than the rest of our backlog. However, as noted kind of earlier, we prefer to be considered.
That's how we kind of always manage a backlog policies in the path in light of that you know we discount that these more than we normally.
Got it appreciate it thank you.
Thank you at this time I would like to turn call back over to Mr. Smith for closing comments.
Thank you operator.
Close by saying, how proud I am of all our employees and their dedication to delivering for our customers in patients during the very uncertain times, while maintaining the high quality operating standards for which you know.
We continue to prioritize the safety of our employees in patients and remain confident the strategy, we put in place position us well for continued momentum exiting and its strong second quarter. Thank you all for joining the call today stay safe and we look forward to updating you on our progress on the next call.
Thank you. This does concludes todays teleconference. You may disconnect. Your lines. This time, thank you for your participation.