Clinical trials are essential to pharmaceutical companies seeking to bring new therapies to market since regulatory authorities want rigorous demonstration of a drug’s efficacy and safety, observes Mike Cintolo, editor of Cabot Top Ten Trader.
And there are a lot of trials underway! According to the National Institutes of Health, there are more than 432,000 clinical trials underway worldwide. Medpace (MEDP) is a clinical research organization, handling the full effort of clinical trials for pharma researchers who don’t have the staffing or desire to handle trials themselves.
The company was founded 30 years ago and over that time Medpace has carved out specialties in managing efforts of small and medium biotechs in the field anti-cancer, neurological, metabolic and anti-infective therapies, which covers the majority of drugs in development.
It’s an expanding business, with Medpace management recently providing revenue guidance for 2023 that wowed Wall Street. The company says next year should bring about $1.7 billion in sales — a 17% increase over the $1.45 billion on track for this year. And that’s assuming an “economic hurricane” that would force a good part of business to cancel, since its customers are on average smaller outfits and presumably economically sensitive.
Investors read the 2023 forecast as very conservative, giving them optimism for greater growth. Under the guidance, Medpace would generate EBITDA in the ballpark of $340 million, up from what should be $306 million in 2022, while earnings would rise 11%, but more rapid (and reliable) growth is a better bet.
Technically, MEDP topped late last year and fell 45% at its nadir in late April before beginning to repair the damage. A sub-peak in August led to more proper 11-week correction and consolidation, and then the latest quarterly report and forecast caused MEDP to go vertical, with shares soaring 38% on 9.5 times average volume! Volatility is bound to be high for a while, but we’re OK nibbling here or (preferably) on weakness of a few points.