Q4 2020 PPD Inc Earnings Call
Good morning, and welcome to Ppd's fourth quarter, and full year 'twenty and 'twenty earnings Conference call. Please note today's call is being recorded.
At this time I'd like to turn the conference over to Tracy Krumme, Vice President and head of Investor Relations for PPD. Ms. <unk> you may begin thank you.
Good morning, everyone and thank you for joining our fourth quarter and full year 'twenty and 'twenty earnings call with me today to discuss our results are David Simmons, Ppd's, Chairman and CEO and they'll Sharma, our CFO and Chris Scully our CFO.
During todays call, David and Chris we'll be referencing our press and patients that can be found on the events and presentations section of our Investor Relations website.
Before we begin I would like to remind everyone that our discussion includes forward looking statements that are subject to risks and uncertainties that could cause material differences and our actual results on this topic and also regarding our discussion of non-GAAP measures.
And all your attention to slide two of the presentation.
I would also like to remind you of a few important details which are consistent with previous earnings calls.
When referring to our financial performance will be doing so on and ASC 606 basis, when referring to our commercial performance, including metrics related to net authorizations and backlog will be doing so on a historical ASC 605 basis to maintain comparability with prior periods. These metrics are include.
And the presentation on an ASC 606 basis, both with and without indirect to aid investors.
And finally, given the exceptional circumstances surrounding COVID-19, we have again expanded the operational and financial metrics provided. Please note that post pandemic, we may not provide all of these disclosures on an ongoing basis.
And with that I'll turn the call over to David.
Thanks for joining us today.
I'm pleased to share with you our Q4 and full year 2020 results it.
It was a remarkable year performance for PPD, despite operating in the throes of a pandemic and co.
And not be proud of and what our team has accomplished we posted strong financial results, beating our Q4 guidance for both revenue and adjusted EBITDA and surpassing our original 'twenty and 'twenty guidance, which was provided prior to the pandemic.
I'd like to take the opportunity to thank my colleagues around the world for their hard work and dedication.
The level of commitment and determination that day exhibited over this past year has been truly amazing.
Together, we worked through the challenges of the pandemic and today, we are a stronger more agile and more unified company than ever before.
Turning to slide three Chris one pack more details on our Q4 performance and advance I'll share with you that the results are industry leading.
I'd like to focus on our full year performance because this was a challenging year, yet we still met our goals.
I'll share a few key highlights first.
We achieved net authorizations growth of 21% year over year and ended the year with our highest backlog in company history up 16%.
This is a great accomplishment, especially given our backlog conversion rate experienced little deterioration from 2019 levels.
Next we realized revenue growth of 16% with double digit growth and both our clinical and our lab segment and adjusted EBITDA growth of 13% well above the industry overall.
Our balance sheet is the strongest it's been in a decade with net leverage decreasing to 4.0 times at year and in line with the goals established in the IPO.
And lastly, and January of this year, we refinanced our term loan and extending the majority of our capital structure and driving future interest rate savings, which Chris will discuss later.
Turning to slide four I'll focus my comments first on the macro environment and then on PPD position within it.
While it's challenging year globally pharmaceutical and biotechnology companies responded providing hope to society.
And leading crows were critical to their development efforts and outcomes.
We and other large global Crows demonstrated our importance to the innovative medicine ecosystem through the fastest ever shepherding of COVID-19 therapies and vaccines to patients in need.
In addition.
And we adapted to Covid related impediments to progress ongoing development programs by leveraging new technologies and processes, such as E. <unk> E Koa telemedicine and direct to patient shipments.
Consider some of the accomplishments achieved this year.
For instance, a leading biotech company, bringing a new product to market and the fight against Covid and record time with no track record of having done so before.
How does this happen.
Our partnership with PPD that Leverages, all of our capabilities and Madison development experience. This exemplifies the power of our biotech offering and illustrates why we are the ideal partner for biotech companies.
The innovative medicine ecosystem is robust.
Capital inflows are growing for us.
Instance, look at the biotech funding levels in 2020 more than double 2019, when you look across Ipos VC investments and alike.
Large biopharma R&D is expected to remain strong into 2021 and governments have increased spending on infectious disease and vaccines.
Against this vibrant CRO market backdrop, PPD is best position if.
And if we flip to slide five consider which therapeutic areas are attracting the most R&D investment.
Chronic disease oncology and infectious disease and vaccines represent about 75% of R&D spend by some estimates.
And with more dollars flowing into these areas as we look towards the future.
We are uniquely positioned to gain share and each of these therapeutic areas.
Our wholly owned site network with a differentiated patient recruitment capability specializes in chronic disease.
Oncology is PPD largest therapeutic area and we bring experience and the fastest growing areas like immuno oncology cell and gene therapy and novel trial construct such as master protocols.
Infectious disease and vaccine saw a tremendous growth this year, but this is a PPD franchise that has been strong and growing long before COVID-19.
We are uniquely positioned with a rich history of infectious disease experience World class labs, specializing and vaccine assay development and dedicated high throughput vaccine sites for patient enrollment.
Looking ahead, we expect COVID-19 to become an evergreen component of our infectious disease franchise as the virus Mutates follow up studies progress and incremental innovation occurs.
I don't see a COVID-19 cliff.
And the next year alone our RFP flow suggests that we'll bid on well over $1 billion to $2 billion of COVID-19 related work and.
As we speak we are already bidding on more than 750 million COVID-19 related rfps.
From a customer segment perspective capital flows into biotech are extremely strong.
PPD pioneered a dedicated biotech unit within a large global CRO and we have gained share since we launched this offering and 2014.
More than 45% of our backlog is now biotech and.
And as the government invest more heavily and pandemic preparedness and we are.
We're well positioned as an approved government partner within the U S and and other geographies.
Only a select few crows can say this.
Think of the momentum and positioning of PPD as we enter 2021.
Beyond our core clinical business consider our labs.
Each are a top three leader within their respective markets, including bioanalytical vaccines central labs and GMP.
This means we are and our leadership position with room to grow.
Another example is our investments and late stage capabilities, our most recent expansion to our addressable market.
Late stage studies are rapidly growing as regulatory bodies and healthcare payers look for additional data, including real world evidence.
Our peri and post approval business, including <unk> has more than 750, epidemiologists health outcomes, researchers and other scientists with the expertise to utilize and analyze large datasets.
Also worth, noting while still and emerging area decentralized trials are becoming more commonplace.
As we continue to invest and our capabilities, we are winning with customers, including more than 60, New awards across all therapeutic areas and 2020 debt leverage PPD is unique digital trial design and delivery model.
More broadly we see the deployment of the digital or decentralized point solutions like E Cola and home mobile healthcare relevant to about half of our portfolio.
Flipping to slide six.
Culture and stability of our organization has never been stronger our retention rates are industry, leading and we grew our colleague base by nearly 10% and 2020 alone.
Moving to slide seven.
We start 2021, and the strongest position we have ever been and.
Our backlog is 16% larger and it's not just COVID-19 work.
In fact, our total backlog stood at over $8 billion as of year and.
And Covid has only 6% of our backlog.
Our unique services have been tested and the fire of the pandemic and been recognized by our customers, both new and old.
We have tremendous momentum with our customers across both biopharma and biotech and we're well positioned to take advantage of growing R&D spend.
We delivered strong adjusted EBITDA margins, despite investments and growing head count to support growth.
Lastly, we are committed to a disciplined strategic capital allocation to drive increased shareholder value.
With that I'll hand, it over to bill.
Thanks, David we finished the year strong and enter 2021 with momentum across both segments.
Starting with clinical development services on slide eight we achieved 28% year on year revenue growth and Q4, driven by effective prosecution of our backlog.
This yielded industry, leading full year revenue growth of 13, 4%.
I will again share some metrics to contextualize the underlying operating environment, but again urge you to look at our financial results themselves.
While we saw steady improvements to site access and Q2 and Q3 site.
Site access plateaued and Q4 and ended the year at approximately 60% as the virus surged around the globe.
Nonetheless, our total volume of monitoring visits was robust and Q4 and demonstrates the adaptability of PPD and our sites.
Site Activations are tracking to historical averages and new patient enrollment is healthy.
More recently in 2021, we are seeing site access hover around 60%.
More broadly as I reflect on the year and its entirety.
And I'm proud of our collaboration with clients sites and regulators nearly all of our studies had to implement at least some modification to keep running we.
We alter staffing to enable site visits where possible and rolled out new technology tools to manage regulatory changes and re forecast studies.
And deployed direct to patient strategies with.
With more than a thousand clinical trial projects ongoing.
Including greater than 90% unrelated to COVID-19 development. This is no small feat.
And even with these adaptations, we outperformed industry benchmarks related to site Activations and enrollment.
As David mentioned, we also partnered on high priority programs with pharma and biotech and government organizations, which are becoming a growing part of our ecosystem. We contributed to all phase III COVID-19 vaccine trials funded by the U S government via operation Warped speed.
And we are also directly awarded programs from operation and Warped speed that included and adaptive platform trial design.
As part of these programs and others, we enrolled more than 80000 patients and COVID-19 studies.
Looking ahead to 2021, our clinical segment is well positioned.
We have grown share of wallet with customers many of whom leveraged the PPD capability. They had not used before the pandemic such as our site network. Our labs are call centers and our post approval services. The pandemic has accelerated the pace of innovation and our investments and capabilities like real world.
Evidence virtual trial techniques and data science.
This type of innovation improves business continuity with customers, which they value and patients who need it we have a robust and well diversified backlog, which we stand ready to prosecute and 2021.
Turning to slide nine our.
Our laboratory services segment delivered a strong quarter of 41% year on year revenue growth while contributions from Covid programs were sizable we would've delivered double digit growth without COVID-19 work on.
Our labs are firing on all cylinders and we established leadership positions on many fronts, including vaccines, both COVID-19 and non COVID-19 cell and gene therapies and antibody drug conjugates during Q4 Central lab volumes remained above pre pandemic levels and utilization remains.
Strong across all of our labs. In addition, we opened our new flagship lab and Suzhou China.
Across all of 2020, our labs at more than 100, new customers and expand our capacity by approximately 10% most of which is fully utilized.
Looking forward to the rest of 2021, we plan to expand our lab capacity globally by approximately 100000 square feet.
And we will continue to invest in technology and capabilities to ensure we maintain our competitive edge.
I'll now hand, it over to Chris for detailed financial results.
Thanks, Bill good morning, everyone I want to begin by reiterating David's acknowledgment of our employees hard work and significant accomplishments over the past year their resilience through the pandemic is reflected and the strength of the company's financials and that'll be discussing with you today.
Turning to slide 10.
We had another extremely strong quarter of bookings and quarter four net authorizations grew 28, 1% over quarter four of last year, resulting in a net book to bill ratio of 130 acts RF.
RFP and New award volumes were once again robust across both Biopharma and biotech customers and we recorded double digit authorizations growth and both our clinical and our lab segments.
As with prior quarters, we had no unusual cancellation activity due to the pandemic.
For the full year net authorizations grew 25%, resulting in a net book to Bill ratio of 132 X. We closed December with a record ending backlog that was up 15, 9% over the prior year and.
This is the largest year over year increase and our year end backlog in six years setting us up for another strong year of growth and 2021, which I'll be discussing shortly.
Important to note is that this growth and our backlog comes despite the company delivering backlog conversion of 11, 7% and 2020, we're close to our 2019 level of 11, 9% despite the pandemic.
As discussed in the past the strength and stability of backlog conversion is often overlooked but it's a key distinction when comparing backlog growth and net book to bill ratios across the industry.
Moving on to the P&L I'm delighted to share debt in quarter four we beat our guidance for both revenue and adjusted EBITDA. We also finished the full year above our initial 2020 revenue and adjusted EBITDA guidance provided on our quarter four 2019 results call, which was before the world health.
<unk> and classified Covid as the pandemic.
Fourth quarter revenue increased 33%, which as Bill mentioned was underpinned by double digit growth and both our clinical and our lab segment.
For the full year revenues increased 16, 1%.
As in quarter, three both quarter four and for the full year, we achieved positive revenue growth excluding Covid studies.
Turning now to slide 11, adjusted EBITDA grew 17, 9% over the fourth quarter of 2019 on.
Full year adjusted EBITDA grew 12, 7% over 2019, making it the fifth out of the last six years with 10% or more adjusted EBITDA growth.
This adds to the company's long term track record of share gains and above industry top and bottom line growth.
Similar to last quarter on quarter, four and full year revenue growth outpaced adjusted EBITDA growth, primarily as a result of a higher mix of indirect revenues on Covid vaccine studies, which resulted in an optically lower adjusted EBITDA margin.
And excluding indirect revenues grew 12% and adjusted EBITDA grew 13% and 2020 within approximately 20 basis point margin improvement over 2019.
Lastly, adjusted diluted earnings per share grew 18, 2% over quarter four of last year and was up 16, 7% over full year 2019.
Moving on to slide 12 to discuss our balance sheet and.
And quarter four our Unlevered free cash flow conversion was lower than historical levels due to a combination of factors which included.
First the implementation of our ERP system in October 2020, which resulted in an extra payroll period and from quarter four and caused a temporary delay and invoicing activity during system cutover, which increased our DSO from 30 days in quarter, three to 37 days and quarter four.
Aging remains on impacted.
And a timing lag between making investigator payments and being reimbursed on COVID-19 vaccines programs, which were quite substantial and quarter three and quarter four and resulted in a temporary decrease in cash and lastly, the one time cash payout associated with the switchover of our <unk> program.
To a stock based program with our transition to a public company, which we've discussed previously and it was accrued earlier in the year, but processed and quarter four.
As nonrecurring items past and DSO and timing differences on investigator payments returned to normal we expect our cash flow conversion to improve and future quarters.
Despite the above we ended the year with a cash balance of $768 million.
Together with our revolver capacity. This brought our overall liquidity position to 107 billion up 66% over prior year for our strongest year and position and the last 10 years.
Turning to leverage and.
In line with our commitment at the time and the IPO to reduce net leverage to the low fours by the end of 'twenty and 'twenty, our net leverage ratio decreased to 4.0 times trailing 12 months adjusted EBITDA at year end down.
Down from four two times at end of quarter, three and four seven times on a pro forma basis at the IPO.
Going forward, we expect net leverage to continue to drop into the threes and 2021.
Where we ultimately land within this range will be a function of.
Of course, our business results, but also a capital deployment decisions and response to opportunities that arise as the year unfolds.
Since year end, we further improved our capital structure. If you turn to slide 13, Youll see the details of our refinancing completed in January with a new 3.05 billion term lumpy due 2028, and the doubling of our revolver capacity from 300 million to $600 million.
The refinancing both extends the maturity of our term loan and reduces annual ongoing interest expense by greater than $20 million per year at the initial interest rate of LIBOR plus 225.
The loan includes an additional step down provision upon achieving net leverage of 375 X or lower or us further improving our credit ratings.
Now, let me turn to our forward looking guidance on slide 14.
As Youre aware, we traditionally guided to revenue and adjusted EBITDA, which lines up to the growth measures we focused on during the IPO.
Starting this year will also be providing adjusted diluted EPS guidance.
For the full year 2021, we are projecting revenue of between $5, one and four five to $5 304 billion, which equates to 10% to 13% growth.
Adjusted EBITDA of between $970 million and $1 billion.
Which equates to 11% to 14% growth.
And adjusted diluted earnings per share of between $1, 37, and $1 45, which equates to 15% to 22% per month.
And when comparing this guidance to that for the industry. Overall I would encourage you to put growth and the context of our 2020, where results were PPD continues to deliver double digit growth on all metrics versus many of our peers, who had flat to declining growth.
Over a two year period the guidance, we provided for 2021 equates to 28% to 32% growth and revenue, 25% to 29% growth and adjusted EBITDA and 34% to 42% growth and adjusted diluted earnings per share over full year 2019.
When viewed on this basis and underscores the strength and the consistency of PPD is operating and financial performance and our resulting growth relative to the peer group.
As for quarterly facing the dynamics associated with Covid will result, and unevenness of quarterly growth rates during the year.
And such we will continue with our practice of providing next quarter guidance. In addition to the full year.
In general, we expect higher growth and the first half than the second half with the most positive year on year comparison and quarter, two and the toughest and quarter four.
For quarter, one 2021, we expect revenues of between $1 $2 77 billion to 130, 2 billion, which equates to 19% to 21% growth adjusted EBITDA of between $225 million to $229 million or 14% to 17% gross.
And adjusted diluted EPS of between 30, and 32 per share, which equates to 25% to 33% growth.
Our assumptions around items, including foreign exchange and tax rate.
Interest expense and share counts are included in our IR supplement and earnings release.
In conclusion, we had another exceptional quarter, beating the high end of our quarter four guidance and pre pandemic full year expectations.
We delivered double digit growth across all key metrics in 2020, including net authorizations backlog revenue adjusted EBITDA and adjusted diluted earnings per share.
We continue to strengthen our balance sheet and net year and net leverage targets that we committed to and our IPO prior to the pandemic. We entered 2021 with our highest ever backlog and expect another year of double digit growth and revenues adjusted EBITDA and adjusted diluted EPS and we are as bullish as ever on the long.
Term outlook for our business.
Before opening the calls to.
<unk> I would like to let you know that we will be attending the Barclays Global Healthcare conference on March nine.
This conference will be held virtually and we hope to see you there with that I'll open up the line for Q&A.
Operator.
Thank you at this time, there will be conducting a question and answer session. We ask that you. Please limit yourself to one question. So that others also have the chance to participate if you have a follow up question. Please feel free to queue up again.
We would like to ask a question. Please press star one on your telephone keypad.
Formation tone will indicate your line is and the question queue. You May Press Star two if you would like to remove your question from the queue.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
And please poll for questions.
The first question is from Robert Jones from Goldman Sachs. Please go ahead.
Hey, good morning, Thanks for taking the questions.
Just first on on the comment David around Covid I think the one to 2 billion and Rfps that you highlighted I clearly think that's a significant opportunity and likely probably bigger than what the market was thinking about as far as continued COVID-19 related work out there. So.
And if we assume you win your fair share clearly could be a meaningful contributor to bookings over the next 12 months. So my first question was just around how are you thinking about that opportunity relative to the guidance.
And what's factored in as it relates to Covid both from the carryover work from 2020, and then this huge opportunity that still seems to be out there in front of you and then I have to ask just given what's going on and the market. This morning, just any thoughts on on scale and the competitive landscape and the wake of and some of the consolidation that we now know about.
Thanks, Bob Let me start with the first question and this is in relation to Covid work and the remarks I had around expecting to bid on somewhere between 1 billion and $2 billion of Covid related rfps throughout 2021, and the fact that we had $750 million of RFP value and <unk>.
And that we're bidding on as we speak.
Those are accurate figures.
And I'd say, what we're trying to do there is to support the assertion that we don't see a COVID-19 cliff. We think this work is durable I know theres a lot of the discussion.
<unk> going on out there. So that's 0.1 and we do think it's durable our assessment of what we might what we've won and that's in the backlog and what we might win against this space is incorporated into our guidance for the full year.
And I'd also say that our pipeline and.
Cross both Covid and non Covid work is extremely strong. So I also don't want anybody to walk away, saying that COVID-19 strength highlight some weakness and non COVID-19 work and just not the case, we're strong across COVID-19 and non COVID-19 work and the strength of showing up and the pipelines that we have and also when we look at win rates and 2020, we look really strong.
The final point I'd make on the Covid work.
Is that there was a question another question around.
And the burn rates on these and in case that comes up I think on the burn rate type of question, we're seeing accelerated burn rates on vaccine work, but therapeutic work.
Looks more similar to what our traditional backlog might be so in terms of how that would play out and it depends on what proportionality of work, we see coming in on vaccines worth versus therapeutics, and thats very difficult to forecast on the second question around.
The announcement I assume you're talking about the eikon PRA announcement this morning and.
First I'd say I respect both competitors and I really don't want to comment on a decision they would make but in terms of our view of scale and the CRO industry. We think there is a binary.
Rubicon that one crosses and to be considered a scale player and we think that the elements of that scale type.
Rubicon passing includes.
Does one have physical presence with employees and control of how those employees execute their work and the main geographies around the world as opposed to two.
Trying to conduct a study by sub contracting out a lot of work to other <unk> that are not.
Within the company that and different geographies. So once one has that and has a track record of consistent standard operating procedures and processes that customers Trust will deliver the highest quality evidence and will sustain audits from regulators around the world. Once you get to that level globally you have scale.
And our view the benefit of adding scale to that isn't meaningful custom.
Customers don't value more scale on that front and as long as you can resource the programs that you are running and I would point to the volume of employees. We added last year on on that front. So I think that gets to your second question I appreciate you asking.
No. Thank you David Thats very helpful.
The next question is from Jack Meehan of Nephron Research. Please go ahead.
Thank you good morning.
I wanted to focus on the burn rate. So historically this business has been very consistent and when you look at bookings and AR.
The burn rate you, obviously ended 2020 on a really strong note.
So back on the burn rate how much of the improvement sequentially was the dynamic on the Covid work and it seems like the guidance assumes this kind of returns to more normalized levels. In 2021 is that right and do you think it's possible you know anything you learned amidst COVID-19 could actually enable you that carry some of the efficiency.
And the new year.
And.
Yeah, So Jack I'll take a stab at this.
So the answer is and quarter four yes, our burn rate was higher than historical levels.
At 12, 7% versus 11, nine and 2019, so contributing to that improvement versus quarter, three and earlier this year, where a combination of us both progressing non COVID-19 and Covid studies, but I would not expect debt, we would be 80 bps basically above historical.
<unk> and perpetuity.
A lot of that did kind of come from the benefit of some of these faster moving large COVID-19 vaccines trials.
And that had progressed at record pace, but we do see it kind of going back down closer to historical levels and 2021.
Great and I appreciate you walking through some of the cash flow dynamics I was wondering if you could also talk about maybe on the earnings side.
Look at the relative drop through in terms of the revenue upside versus the EBITDA upside and the quarter.
It was a little lower than we might have expected I think some of that's due to pass throughs, but I was wondering if.
Some of the crazy ramp and in terms of revenue throughout the year.
Maybe there was some.
Some impact on the timing of cost recognition and the quarter as well.
Yes, if you took a look and you extracted pass throughs from our quarter three or excuse me quarter. Four results you would see that revenue growth and quarter four was a little bit higher than.
Adjusted EBITDA growth. So our expenses went up on a full year basis that wasn't the case.
As we kind of had 20 bps margin improvement excluding the impact of pass throughs and so we did have a phasing of investments that we made in quarter four to support the growing backlog of business that we have and make sure. We're in great shape for 2021.
Thank you.
Yeah.
The next question is from Erin Wright from Credit Suisse. Please go ahead.
Great. Thanks, and can you breakdown at least anecdotally the trends youre seeing across the different labs segment for instance, the performance across our core central labs versus the other parts of the lab business and you noted that expanded lab capacity, how should we think about the timing magnitude and incremental on that.
Yeah, Hi, Erinn. Thanks for the question this is bill.
Obviously, our labs in fourth quarter and throughout 2020 performed really well you can see that and the results.
Going forward, we expect our labs to continue with sustainable growth, we think the mid to high teens is.
Is realistic if.
If you took out COVID-19.
Work from our labs, we still were growing in.
And the double digit rate there, but in terms of contribution of individual labs to your question. We don't go down to that sub segment level, but in Q4, all three of our of our constituent labs were contributing to the results you see here I mean growing strongly in the double digit.
And so.
Really well in terms of the Central lab, and particular, which you asked for I can tell you that.
Sample levels are above pre pandemic levels, performing well and that's a combination of COVID-19 and non COVID-19 work. So the central lab is.
Pulling its weight in this in this business for sure.
Okay, Great and then with the sizeable deal that obviously hit the tape and follow up on that and if it does represent an opportunity for you with CRE infections, potentially and and associated disruption and just curious what your thoughts are on that as well as further consolidation and of course CRM.
Short answer yes.
And historically the reason I say that is historically when these like for like large scale tie ups occur there and creates uncertainty for our employees and the firms and that does seem to have.
And impact on our recruiting ability.
<unk> normal times, when such mergers arent occurring and customers at their best are neutral on these types of tie ups and our experienced and sometimes customers are negative on these tie ups for a variety of reasons, one being concerned for disruption to their ongoing study conduct.
Based on this so the short answer is yes. This is tended to provide.
Near term opportunity for PPD.
Great. Thank you.
The next question is from Tycho Peterson from Jpmorgan. Please go ahead.
Hey, Thanks, I'm wondering if you could just provide any color on outlook by segment right now we've got both growing about the same level, but given the momentum exiting the quarter seems like lab services.
A bit faster this year and any thoughts on that.
Yes Tycho.
For our clinical segment, we expect growth to be and the high single digits to low double digit and in the lab segment, we expect mid to high teens growth.
Thanks, and then.
David a question on on the site access comments Youre at 60% now I'm just curious if there are steps you're taking to try to kind of work around.
And the current dynamic and I know you talked at our conference about a three <unk> increase and kind of virtual trial awards still lesson and I think five per cent of the backlog. So what do you think that that business goes as well.
I'll start the answer Tycho and and Bill will come on with some details first when we talk about site access I listened to some of our competitors speaking and I'm hearing I think we use 60%.
Access others have used 70, I think roughly where all saying the same thing and this is roughly our definitions might be a little different on it. So I think that's all relatively the same and I.
The reason that we saw some static nature of access to sites was the spike and coronavirus cases, and hospitalizations that occurred towards the end of the year as thats already dissipating and as the vaccines rollout, we expect access to the sites to improve and likely and the second half of the year.
Air during the second half of the year, we will get back to pre pandemic norms.
Now in terms of the adaptations that have gone on and I think we've said in prior calls that when and the second quarter of 2020, when we got hit with the pandemic impacts first you saw the crows on our customers react and adapt pretty well and those adaptations just got better and better so as we got to the end of the year when we saw.
The spike up again on coronavirus cases, and hospitalizations and impact on sites, our ability to burn backlog was better than it was and the second quarter remote monitoring flexing up and down is clearly one element of us doing our job on this front.
Adaptations to be able to have patients continue and studies by taking more of the screening more of the follow up visits virtually through telemedicine and tallow type approaches on screenings and have obviously out so the adaptations have been effective and I think they're here to stay low.
I think I covered a lot, but let me see if I I think bill wants to add any color.
Yeah, Tycho I think maybe to just add to David's comments, he covered I think the foundational pieces, but.
Lot of questions have been asked about site access.
About it this way in.
In general our total number of monitoring visits has remained high throughout the year and.
And actually has increased over last year. What has changed is the proportion of those visits that are either done on site or remotely.
And that has ebbed and flowed as the pandemic has developed and and.
Researched.
Think we're talking about Q4 here and I talked about 60% I think thats parity with what you know or.
Others in our.
Industry are reporting we're reporting the same thing and as David said as people are vaccinated and cases go down I think this site access question will it will become less and less important but the main thing is we've got the ability to deal with it.
<unk> because of the investments we've made.
Previously and the ability of our teams to adapt so.
Bottom line is I think a back half of the year as David said things should improve significantly with regard to site access, but it has not really.
Slowed down our ability to properly conduct and execute clinical trials.
Okay. Thanks, that's helpful. And then one last one just on the scale question and I know you've had a number of questions on it today, but should we think about another 10% ish increase and head count. This year and then how are you thinking about bolt on M&A now that your debt will translate it.
Thanks.
I'm sorry, what was the second part of the question Tycho I Didnt catch and I got to put at the top.
Good day for bolt on M&A.
Okay on.
And the first question generally as you look at our revenue growth projections, you can pretty much track billable resource growth in line with that so.
And it will hold SG&A, a lot tighter and expect to get leverage of our of our scale on that front, but it turns on billable resources all the people conducting trials scientists and the labs technicians and the labs that should grow proportionately with revenue roughly maybe a little bit lagging, but roughly in line. So if you have the 10% and your mine.
And that's probably accurate.
On the M&A front as a source of capital allocation we are.
We're pretty clear on our strategic growth drivers for the business over the planning horizon and are planning horizon is five plus years.
And we're clear on where we see opportunities to reduce cost or time of evidence generation again, evidenced being safety and efficacy of medicines and evidence also on value of medicines to support pricing and reimbursement outcomes. So how we define ourselves. So we're constantly looking for tuck in acquisitions that have service capabilities that we don't think.
We can build organically or the value of acquiring them would be better than the value we would get by investing organically most of what we're seeing right now is the.
The return profile of us investing organically as far surpassed anything we're looking at on the on the M&A front and you can see where we're growing really well so I think that validates where we're going.
That said, we're constantly looking so should something come up that's a good strategic fit and those zones and help us reduce cost and time of evidence generation.
And we will be looking to executed if the financial rationale solid Chris anything you want to add to that and the only thing I would add would be to emphasize Tycho is pointed at the beginning as our balance sheet is in great shape, and we have a lot of flexibility to pull the trigger if and when those opportunities arise.
Makes sense. Thanks.
Yes.
The next question is from Dan Brennan from UBS. Please go ahead.
Great Great. Thank you very much I'm, just I'm, just wondering sorry, I joined a little bit late and maybe the first question would just be about.
And sort of your <unk> business could you just give us a little flavor I know we've discussed obviously at the time, you and I did the IPO, but and just wondering as you look ahead and 'twenty, one and beyond just more broadly speaking like how are you leveraging that asset in terms of helping you to find patients any other color about other investments, you're making and some of your.
And.
No.
Patient identification and strategies that were lagging and more successful and then the border interest rate.
Yeah, Hey, Dan Thanks for the question this is bill.
So you referred to it as our carrier business, we refer to it now as you know.
Our our accelerated enrollment solutions business and it's a combination of a cure and and our site network, but.
But the bottom line here is we think site ownership is an advantage because it gives us more control over the ecosystem and.
It has proven to be really effective over the last couple of years with the Covid pandemic and our ability to execute vaccine studies, but it's also really valuable as we've mentioned before and chronic disease conditions and general and let me give you a couple of data points to explain what I mean here.
From recent work so you know using our data we can drive patients to pre screening visits and.
And.
You know that allow it through telemedicine and because we've got and App and so.
That not only allows us to pinpoint that patient, but it offers a really convenient at home option and it helps us determine if that patients eligible for the clinical trial or not and a really quick and effective manner and then we can direct that patient to our own site and this is really very different from the traditional model, we're going direct to the patient here.
And so I think.
Traditional models were CRO select sites that they think will have patients, but they are never quite sure and there's a much more direct manner to do it.
Kind of a second example here is once we have identified a patient we can really.
And accurately schedule the patient for their for their visit and subsequent follow up visits and.
We can manage the priorities.
Appropriately with all of the trials at that site and we can really enhance productivity and an example of that is in the pandemic. For example, it was really important to make sure that there were diverse patient populations participating and COVID-19 trials and our site network allowed us to accomplish that objective.
Active for sponsors.
Was really important and debt.
And what I would say here is we've got one of the largest site networks integrated site networks out there, it's quite a valuable asset and a unique and different assets and you know as it relates to vaccines and infectious disease and chronic disease.
Got you now.
A couple of hundred sites here across multiple countries on different continents, and it allows us to.
Give sponsors are really unique solution to run clinical trials.
Great Great. Thank you for that and maybe just as a follow up just on real world evidence can you just remind us kind of you know.
How big that business is for you obviously.
One of the faster growing areas and just wondering kind of what youre seeing in that business and kind of what's assumed as we go forward into 'twenty one guidance. Thank you.
Yeah, Thanks for the questions David.
First let me start by just saying, it's we're really pleased with our competitive positioning and late stage services and real world evidence being a part of that and.
And I want to start with some definitional work because I think the term gets thrown around and we want to lock in on what we're talking about so first we agree world evidence is growing as a growing area is data and technology enables us to unlock greater insights without placing burden on the patient. So can we generate evidence without patient burden.
Which is generally put in on a randomized controlled clinical trial and we view real world evidence is the use of real world data such as electronic Medical Records claims data and registries to support regulatory approval the demonstrate safety and efficacy of the medicine, but also supporting value of medicines arguments around <unk>.
Pricing and reimbursement outcomes. So that's our definitional piece there are a few capabilities that are critical to effectively deploying real world evidence programs for clients.
Namely and specifically the expertise to identify and interpret the right data related to a specific question.
And the second is access to the best data sources available to inform that question. So there's two components.
First on the expertise front, we acquired ABA Dara and 2016 to build our expertise and now have hundreds of epidemiologists health economists outcomes researchers Phd level colleagues on staff, we have experienced as well with more than 125 registries that have been completed.
And more recently and most recently, we have deployed our expertise to assess long term outcomes associated with COVID-19, So im just and forming of our expertise and how strong. It is and why we think we're really competitively positioned here on the data front and we all have access and we also have access to the right data for Vas.
Number of questions that are being interrogated for real world evidence spin.
Specifically, we have experienced with more than 100 rear world massive data sources and established partnerships and networks and the U S and Europe and in Asia.
And where and when we see unique data offerings, we look to get more exclusivity for PPD related to them and our acquisition of <unk>. As an example of this so overall, we feel on a really strong position to continue to win real world evidence.
I'm not going to go into what size of our business that is it's all on the clinical segment that we report out and were not impacting specific service lines within that.
Yes.
And thank you.
The next question is from Eric Coldwell from Baird. Please go ahead.
Hey.
Thank you very much good morning, sorry, I think a number of us. Unfortunately missed some of the earlier comments. So I hate it if this was already asked but.
Clearly today Big news and the sector two of your closest peers are involved and and the merger.
Got it.
Hello.
The joke, sorry go and what happened this year.
Yeah I believe me today is not a day to Joe cake calendars are insane.
And so.
Look I'll jump to the point Ciros need staff to grow 10% to 20% and this market pretty much across the board everybody is going to gross staff in line with service revenue and Thats you know double digits for just about everybody if not everyone.
The other side of the equation as you.
Your two combining peers are frankly, and a lot of regards very similar to you.
Very similar mix and top 20 pharma as they have a lot of overlap. So I think one of the street's concerns here is going to be that while theres a lot of exciting attributes to that merger. The flip side is is that those companies.
Could individually be ceding share don't and share not only as clients, but also the employees over the next couple of years as they go through a merger, which historically has never been easy and this group.
The question is those are opinions. The question is what have you seen in recent.
Large transactions and this group on both of those fronts and I'm thinking specifically about Labcorp covance.
And see research plus and then of IMS plus Quintiles I'm curious if the experiences where the same if they were different and how you might think about employee and client share donations from companies that otherwise could be distracted for a period of time. Thank you very much.
And the <unk>.
Simple response to this is our historical experience across like for like mergers as we would call them, including the ones that you specifically call out.
Support your opinion, okay, both on the colleague <unk>.
Attraction, when we recruit the attractiveness of PPD and our stability at this type of time and these mergers stands out we see the data our ability to recruit people increases customers that their best are neutral when theres someone theres customer overlap and some cases customers are negative I personally have and experienced cut.
<unk> being excited about.
And for like mergers. So that's been our experience I don't think I have to expound on a more U.
And kind of answered the question and probably more eloquently than I could with your opinion on the other thing I'd say is your point on and we do need people to.
To grow we need specifically need highly trained highly skilled knowledge workers technical people and our labs.
So doing our clinical work and monitoring so.
That's an important element of growth for us. So there's two pieces of this one as well.
When and how well do we onboard train and develop our people and can we retain them and I had a chart in the appendix. If you missed it for the other cloud ask you to go back to our slide deck and look on the slide deck itself and Youll see our retention rates relative to industry benchmarks.
And I think youll see its compelling the difference of PPD on this front. So one on how many people do you have to recruit and add and part of that is you got to replace turnover. So turnover being higher you first have to get back to square one just to replace your turnover then you have to add for growth So our lot and why.
Life looks a lot easier and then others that are up and that industry benchmark range. So I just didn't want to lose that point you brought out because it is a key element of our business model.
And I think it's actually a competitive differentiation among the group, but it's not so much what businesses you own but how you how you treat your people and how you retain them and how you train them and it's it's been a key point for decades in this space I wanted to just kind of flip the original.
Thesis.
Monologues and would say that I threw at you I'd like to flip it on its head a little bit.
At the same time, the emerging companies might have challenges with retention.
Does this not also increase your ability to retain and other words.
Or maybe it's not the case because as you said they they'll have to replace a higher they'll have a higher gross turnover soaked for net net increases they might have to get more aggressive, but it might seem easier to retain talent. If two large direct competitors are involved and a and a merger.
Generally I would say when there is a feeling of industry related uncertainty it has a positive impact on retention rates.
And most recently was the pandemic and the pandemic hit how well our colleagues felt that we were taking care of them ensuring that they were able to safely conduct their work that we were giving them options of managing their work and a way that they can balance work and family life on their kids and many of them who.
Children when their kids are home and couldn't go to school.
We think we did a really good job on that to the extent that we're responsive and area and problems of uncertainty. It does have a re tenant about effect.
I would believe that would also be the case, when we see industry mergers and consolidations, but it's a feeling I don't I mean, I think that.
Flip side, we have data to support our billing to attract talent now on the retention side and the causality of.
Mergers going on and the industry to us being able to retain a with more bet on the quality of the relationship of our line managers with their teams and the feeling of individual team members with their colleagues all buying into the same purpose and mission of the company that has a stronger force than what's going on outside of the four walls of PPD.
Bills running the vast majority of our people operations.
Like to hear his comments on this.
Yes, I think you're right David I mean, if you think about the.
The effect of retention and are in a company like ours, which is a service based people based organization. When we had the big recession back in 2009, and 10 and that.
It was positive for retention.
You know this pandemic has been positive for retention.
And your point whenever there is any uncertainty people kind of hold tight battened down the fourth and I think when you add to that.
The emphasis that we place on people because they are our product essentially.
And how we look after their wellbeing their professional growth training et cetera, It's a real advantage for us and PPD, we kind of articulate that usually through that project manager example, but there are other.
Examples of that all across the company and different geographies and different roles. So.
It will remain to be seen Eric whether your proposition there whether it helps our retention.
Is.
And is accurate or not but.
It does seem like past experience.
I would suggest so.
Thanks, very much guys really appreciate the answers.
Just as a reminder, we ask that you. Please limit yourself to one question in Afghanistan and that too please feel free to do that again.
The next question is from Elizabeth Anderson from Evercore ISI. Please go ahead.
Hi, Thanks for question and this morning.
And you guys think about just from a technology perspective, there's obviously a different philosophy is and the market there about owning that kick.
Our cash that like in <unk>.
House, Russell and externally how do you feel about your positioning there.
And sort of what do you see on sort of areas you might be interested in HR.
Yeah.
I mean, it's a broad question can I, just clarify that when youre using technology, what what is in your mind is the move towards using digital technologies to be able to decentralized trials and do more virtual alright. Thank you would've been more I should've been more specific yes that is right. Okay. Okay, because I I think what we've learned outside of that.
The early stages of technology and electronics day electronic data capture <unk> system. We are quite happy that there is industry leaders like Medidata Aviva and Oracle that are serving the whole industry and are able to perfect those tools rather than on trying to own on ourselves. So let's move those off to the side now and when we go into it.
And as some digital virtual realm.
The first thing I would say is as we've been.
Focused on this area strategically for a number of years. So this isn't new to us and the pandemic actually showed that we were really well positioned and what we've been doing so our competitive positioning and enabling our customers to take advantage of digital technologies to move more and more of their trial steps or in some cases entire trials too.
To the patient.
As Ben been tested and the pandemic and we've come out well.
We've been investing in this space through a combination of building internal capabilities and identifying and partnering with the best vendors for each service and technology vendors in particular that you bring up and we've even invested and a few ones that we think are unique and their technology abilities Tech players such as science 37.
And and medical to be specific.
We believe the Keystone factor.
And for success in this arena of taking more of the trial to the patient has the ability to architect the optimal decentralized solution for a study and I'll ask everybody to remember that every single clinical trial is a bespoke design and there's no cookie cutter stamp out everything as a scientific experiment that has its own unique design so the applicable.
<unk> ability and the appropriate applicability of these types of technologies and some are not technologies, but processes like direct to indirect from patient distribution.
And for clinical trial supplies also phlebotomy draws at the patient's home and things like that so when you put it all together the key Keystone factor is the ability to architect appropriately with the customer how their trial could benefit from this so we've invested a lot internally and colleagues and talent.
Who are great at doing this and we're learning capturing the learnings and spreading them across our study teams.
On top of this it's critical that we have end to end capabilities to seamlessly implement that trial design for that debt bespoke trial designed for and individual customer and.
Through our internal capabilities and partnerships with tech companies and also partnerships for some that are not tech related like on the distribution side. We cover the full gamut of what's needed to bring our operational expertise to bear for the deployment of that specific clinical trial and as I shared in my prepared remarks, our reward volume has been <unk>.
Strong I quoted in the prepared remarks 60, plus awards that are based on this digital design capability that we have and internally and we believe we are and our leading position.
Perfect. That's very helpful. Thank you.
The next question is from Patrick Donnelly from Citi. Please go ahead.
Hi, This is Kara animoto on for Patrick and so thank you for taking our question.
And I just wanted to touch on margin cadence for 2021, and I know you talked to the revenue cadence.
But I was wondering how you expect the impact of Covid trials and higher pass throughs, maybe balance outlet.
Ladies and travel coming back into the model investments and capacity et cetera. Thank you.
Yes.
So in 2021, we expect roughly 25% to 26% of revenues that come from indirect or passers.
Fairly consistent slightly kind of lower than what we had in 2020.
Albeit that the phasing of kind of those pass throughs will be more weighted towards the early part of the year on some of the Covid studies rather than later in the year. So you should see some optical margin improvement as the year goes on if we exclude pass throughs in their entirety.
We are currently expecting the guidance we've given.
Somewhere between 10, and 20 bps basically improvement and our margins excluding pass throughs again in 2021, as we kind of deliberate and 2020.
Great. Thank you that's helpful and just on the back of <unk>.
And that capacity expansion sorry, I know this has been touched on a few times, but how.
How are you thinking about capacity expansion moving forward and are there certain areas, where you're seeing greater demand, whether that's by customer type therapy.
Therapeutic area or geography and.
How does that fit in with your overall capital deployment priorities.
Yeah.
Yes, Karen. Thanks. This is bill when you say capacity expansion are you, referring to the laboratories or more broadly about about the company.
I was referring to the laboratory specifically.
Yeah.
So listen I.
Our lab business and.
Is great and it's growing.
I talked about it earlier I think we're in the early innings of laboratory outsourcing not related to the central labs, but related to our GMP buyout bioanalytical biomarker and vaccine labs and remember the work. We do is similar to the in house capabilities.
<unk> of a pharma company and it takes a long time to build these capabilities at both a global scale and to become a trusted partner.
And I think we as a CRO have a solid competitive moat here, but that's because historically over time, we have systematically been adding capacity and work.
We're going to add another 100000 square feet in 2021.
And we're adding new capability, new new technology, and we're updating facilities and that gives our customers confidence and our ability to do their work and not only by the results, but when they when they walk in and they see.
And.
Our facility and scientists who are on par and equal to their capabilities. So you know.
I think we're methodically going to do that we planted a flag in China that lab is open and we're talking to customers about work there and have a couple of anchor projects that are moving forward, but we're expanding all of our laboratories with the exception of the central lab because.
Theres a lot of automation and high throughput capability. There. It just really comes down to having having the right people and and the right instrumentation, but look we're going to continue to take advantage of.
Capacity expansion, we're going to do it in a careful way just ahead of demand so.
And so that we don't get out in front of ourselves too far, but it's important to do and the reason PPD is growing is because we've been methodically doing it over the over the past decade and we've got.
And the capability that is top two and the in the marketplace.
Thank you.
The next question is from David Windley from Jefferies. Please go ahead.
Hi, Thanks. Good morning, Thanks for taking my question I was hoping to ask two first one is on on lab Bill kind of leveraging your your last answer.
You are.
Sounds like Youre expecting going forward the lab business.
In total to be able to grow and the mid to high teens.
And I gather from what you just said about early innings of outsourcing the bigger drivers of that are the non central lab parts of the lab business. If you could kind of give us a view on on that or confirm that and and how does that compare if I look at 2020 growth, which was extraordinary but kind of 2020 gross ex COVID-19.
Was it also in that ballpark.
And then my last part of this question would be I'm hearing that the.
The kit supply.
Process for predominantly central lab, but kit supply is severely bottlenecked and the industry right now and I wondered if you could comment on that so multi factor on central lab. Please.
Yes, Dave I'll start and and others can add in and I'll try to get to your questions here. So.
Yup confirming that we see.
Mid to high teen growth and our laboratories moving forward as I said, even without COVID-19 that is happening and.
And I expect that to continue.
One of your questions was that primarily.
Outside the Central lab, and the other laboratory businesses and I would say no. We're seeing it across all of our all of our labs and our central lab is well positioned in terms of experience and capability. It's got everything it needs to grow and one of the reasons is we're seeing really strong cross sell activity and.
We made mentioned that we've got a pretty robust.
Biotech book.
Book of business and you know as biotechs are generally.
<unk>.
Willing to buy.
All the services associated with a company when they sign them up and that includes our labs and we've been strong on the cross selling front. So that's central lab is also growing quite strongly.
Just to give you. An example in October of 'twenty and 'twenty.
We were selected after 2020 World vaccine Congress.
As the best Central Laboratory, we are the winner of that award and that's a reflection of 25 years of experience and and.
And lots of capability in our central lab, particularly in vaccine infectious disease et cetera. So a central lab is going to continue to grow now your question on supply chain glitches and hedges related to the pandemic, yes. They have existed out there I think it PPD we were smart.
<unk>.
Load it up and stocked up as we could early and the pandemic and have a pretty robust inventory, which has allowed us to service customers and even have had.
Some customers coming to PPD for rescue work, because they weren't able to get things done with their provider. So I mean have we felt a little bit of pain and yes, we have but we're in a good spot and it's actually loosening up a little bit right now so I think we're through the worst of it.
But I'm, telling you is we're pretty well positioned to grow and I think through the pandemic in particular, we've enhanced our reputation as a laboratory enhanced our ability to keep studies going and you know from a scientific perspective been thought partners with pharma companies in terms of assay developed.
And et cetera, So I I think I think we're strongly positioned.
That's great and my follow up question to change gears and David and one of your earlier answers you were talking about I think site access metrics and.
Monitoring levels kind of moving up but it just depends on how much of that is remote vs and <unk>.
Person as you think about these these DCT or hybrid type capabilities, and moving forward and that type of and environment.
How are clients.
And willing to pay for the remote capabilities does that change the pricing and structure of deals does it change the cost structure commensurately as you know is margin about the same and.
And and how do the DCT capabilities and your site network.
Complement or compete with each other as the world moves to trials that don't use as many sites.
Yes firstly.
And our own paradigms, we look at remote monitoring as a way of conducting.
Clinical research and the monitoring monitoring and and investigator site separate from using digital technologies for a decentralized approach to this study where we take portions of the study to the patients on.
On the on the site access piece as Bill had mentioned our total monitoring activity is pretty much where we need it to be and the percentage of that total monitoring activity that's on site versus remote.
Varies based on access to the sites. So while after this is all over we expect there to be more remote monitoring and then what the norm was pre pandemic.
We don't expect it to fully take over from on site monitoring and we need on site monitoring.
On that front on that.
Decentralized trial front.
And well, let me go back to the pricing piece I don't see any pricing impact around the use of remote monitoring and the trials. We're using there is an impact on less travel from our so the flow through of travel costs to customers to benefit of the customers to have more remote but were not profiting on that anyhow. So it's neutral to us and that happened.
And it gives us more productive capacity of the monitors we've trained to do more work. If they are not traveling so much. So that is good for the customer is good for us Thats a net net answer to your question on pricing.
On the decentralized trials, it's far from clear what the economics are going to be on these and total it depends on.
If you go to the extreme of a fully virtual trial. Your cost structures are completely different you do have a decrease and number of sites use but you have an increase and.
Point to point solutions on on.
Taking parts of the trial to the patient's home nurse practitioners visiting a patient and their home instead of all the patients coming to one site.
Supply chain of investigational product and our.
Biologic elements that would go back for testing from the patient's home instead of from a central site. So it's too early to tell on the economics of this and is the benefits of reduced patient burden and access to patients and wont do it at the same cost or is it going to be more costly for customers and what they pay for that or would it be less costly.
It wouldn't be wise for me to comment where that shakes out just it's not clear yet.
The next question is from Ricky Goldwasser from <unk>.
Morgan Stanley. Please go ahead.
Hi, Yes, hi, good morning, and thank you for taking my question. So I have one follow up on the site and then one other question.
So you know its interesting gradually if we think about at 60%.
And 6% that excess but then to your point and you really kind of like a performing on.
On par.
And I understand that remote monitoring and telehealth visits are going to come down.
And this pandemic, but do you see <unk> sort of come back and longer term opportunity.
And you think about potentially.
Printing more efficiencies to decide to kind of like rethinking.
And the footprint and how many sites do you need and that's my first question and then the second one.
Ask about biotech and 45% on backlog at IPO and I think biotech was $30 35 per cent of backlog so.
So can you talk a little bit about what's kind of like market gross versus share gains versus the COVID-19 contribution so what percentage of that 6% of COVID-19 and backlog as biotech and then as we think about this.
Backlog converting into revenues and I right to assume debt.
We should think about it is higher margin revenues compared to more traditional pharma.
And so you've got somebody you'll have to help me with all the questions.
Hold on.
Im sorry, Greg you asked like five questions and that.
Site access Okay, you want to take the site exits one day, yeah I'll start I'll start Ricky this is bill.
And you ask a great question here.
Is.
This level of remote monitoring and this move towards sticky move towards.
Decentralize their virtual trials is it going to create more efficiency and in kind of the process of running a clinical trial and could potentially result in the need for less sites. It's a really good question I don't think anyone fundamentally can answer that.
At this point.
We clearly think it's capable to run a clinical trial with a fewer number of sites that's what our.
And one site network is proving out right, but it's still early days and.
And.
I think the whole key here is quick identification of eligible patients abilities to get to them and then the pushed I mean, either to your own site network or sites that are close to them and capable of running but.
It depends what your definition of efficiency is if your efficiency.
Our definition is his time I think the answer is yes. If your definition is cost it's unclear now because it just shifts the costs around and in a clinical trial and I and I think as David its previous.
Answer was were not quite sure. So so far we haven't seen it necessarily result in less cost for our clinical trial. It just moves those costs around a little bit it depends how long. Your view is I think if your view is really.
A really long view like a decade I think it is going to help bring down the cost of clinical trials, but at this point, it's shifting them around because it's early days, that's my personal opinion.
And maybe one of my colleagues and wants to add and I agree with that.
I think there was there were other parts of the question can you can you refresh our memory.
Sure. So the other part was on on biotech and just as we think about that all rose from 70% to 75% pre IPO to 45, and how should we think about.
On the margin profile of that book of business moving to converts to revenues.
Going back to the beginning I think biotech and our backlog that's maybe going back to 2014 was and the realm of 25 per cent of backlog. So that the drivers from then till now which includes your debt IPO point as a step and the journey to where we are now there are two elements. The first was we were challenging ourselves on.
And on how much visibility that we have to all the RFP volume occurring at biotech companies, who were funded and had cash on their balance sheets to run the studies and we found that our visibility back in 2014 was bare.
Very low compared to what our aspirations should be so we went after that we did a very good job on lead generation and finding access those companies engaging them early getting access to new Rfps as we started the early engagement on access and increased volume our win rates started to increase and the increase and win rates hasnt stopped even through.
Through 2020, so you look at there is capital flows and an increase in R&D spending and biotech and total debt increased it may be let's say seven or 8% a year, maybe 9% a year, that's part of what drove it but the bigger catalytic driver was increasing our visibility on competitive.
Decisions and then increasing our win rate against that increased opportunity set.
The really.
It really COVID-19 versus non COVID-19 is not relevant to us.
Christmas has something to add Ricky I think on your numbers.
I don't think it was at the time and the IPO as low as the 30 to 35 I believe it was closer to a 60 40 split if my memory is correct that said I think the point that Youre, saying is the right one which is that the strength of PPD biotech capabilities are underappreciated by investors today.
On a big reason for our success and Covid with not just basically a strength and infectious diseases and vaccines, but it's really the dominance that we kind of have within the biotech kind of thoughts.
Segment.
Okay.
The next question is from George Hill from Deutsche Bank. Please go ahead.
Hey, guys and I'll try to keep the simple and good morning, and thanks for taking the question I guess the public profile of the clinical research process has never been higher than it is right now and I guess my question is.
Do you guys have a way to quantify maybe how many people were not even aware of the clinical research process before who who might be willing to participate now and kind of how are you best positioned to capitalize on that opportunity.
And don't have figures on you talked about the general population.
Yes, I think the general population was probably oblivious to a lot of the clinical trial process before and now with Covid everybody knows that the trials are going on and stay and opportunity to participate.
I don't have numbers, but we do have a phenomenon that debt.
The clinical trial process, historically has enrolled about 3% of people, who could participate and meet the criteria of those clinical trials, so which and that's what was needed to run the trials, but the thing that we were always looking at is ties back and the last question if to fill.
And that 3% and people who could participate how many actually were contacted we're aware of the trials who were asked if they wanted to participate and we think that that volume was very low and we had an earlier question around the <unk> business. We bought that's part of enrollment solutions that thesis of that businesses going to the <unk>.
<unk> to make them aware of clinical trials that are conducted using predictive analytics that would predict underlying disease conditions. So the probability that the outreach would connect them to a trial that they would fit for and it would benefit them would be higher.
<unk> seen that that's been wildly successful in terms of the ability to pre screened patients bring them on chronic chronic disease conditions bring them into the clinical trial process, which accelerates the trial reduces the number of sites needed of tying into the this last construct so.
I think that there's been more awareness in the general population of clinical research, but at the patient level. It's a head scratcher. They don't even know where to go to try to connect they might talk to their physician their physician doesn't know where to go so I think more and more work that our customers and we as an industry do.
To address this and given the easier path for patients to engage to identify if they can participate letting them know that they can participate and and connecting them to the trial. So it'll be it's good for the patients. It's also will help the speed of enrollment and the studies.
Okay. Thank you very much.
Okay, ladies and gentlemen, we have reached and the question and answer session and I'd like to turn the call back over to David Simon for closing remarks.
Well I want to thank you all for joining our call and we really appreciate your interest and look forward to addressing you again on our first quarter 2021 call and we also hope to see some of you at our upcoming presence at the Barclays Global Healthcare Conference on March 9th and as always we're available for follow up should you need it. Thank you all.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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