Syneos Health, Inc. Investment Research Presentation ...

[Pages:20]Syneos Health, Inc. INnvasedsatqmGeS:nStYRNeHsearch Presentation

MSoenctthoDr:aHy,e2a0lXthXcare Senior Analyst: Jose Grullon Junior Analysts: Garbis Chekerdjian, Ignacio

Fimbres Spring 2018

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Valuation Summary

Recommendation Summary

Company (Ticker) Current Trading Price (04-12-2018)

SYNH $ 37.60

Recommendation Target Price Upside Potential

BUY $ 57.46

52.80%

Recommendation

BUY

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Agenda

INDUSTRY DEFINITION & BREAKDOWN

REIT's COMPANY OVERVIEW

INDUSTRY TREND ANALYSIS

COMPANY TREND ANALYSIS

RISK ANALYSIS

FINANCIAL VALUATIONS

SUMMARY & RECOMMENDATION

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Industry Definition: CRO Market

Contract Research Organizations (CROs)

? Definition: firms that provide outsourced drug development services, regulatory & scientific support, and physical & human capital to help provide fully outsourced research solutions.

End Markets

Pharma & biotech industries, as well as educational & government research institutions.

Charles River Laboratories International, Inc. NYSE: CRL Mkt. Cap: $5.09 billion

ICON, plc. NasdaqGS: ICLR Mkt. Cap: $6.48 billion

PRA Health Sciences, Inc. NasdaqGS: PRAH Mkt. Cap: $5.55 billion

Syneos Health, Inc. NasdaqGS: SYNH Mkt. Cap: $3.95 billion

IQVIA Holdings, Inc. NYSE: IQV Mkt. Cap: $20.35 billion

Sources ? Capital IQ

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Industry Breakdown: CRO Market

Drivers

Increased Drug Development Spending & Pricing Pressures will drive demand for outsourced R&D and

clinical trial services

User-Friendly & Advanced Bioinformatics Tools will drive demand for CRO services as more biometric platforms and customized data systems are needed

Strong M&A Activity will continue to drive value as industry consolidates to provide more services to drug

manufacturing companies

Pharma-Emerging Economies will grow at a 7.5% CAGR, driving demand for clinical trial activity in Asia

Strong Demand for Early Stage & Late Stage Clinical Trials will drive market penetration from 30.5% to 46.5% by 2021

CRO Market Revenue Forecast (billions)

$70

$60

$50

$40

$30

$20

$10 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

8.0% 8.0%

9.3% 0.7% 2.2%

9.9%

CRO Product Segmentation

4.9%

11.6% 10.6%

13.6%

21.2%

Preclinical Phase I Phase II Phase III Phase IV Bioanalytics HEOR Pharmacovigilance

Sources ? Capital IQ, Frost & Sullivan

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Industry Breakdown: Revenue Generation Model

Input

Biotech / Pharma

CRO

Raw Materials

Manufacturing

Clinical Trial Testing

Patient

Organic/Inorganic Chemical

Manufacturing

Laboratory Essentials

Medical Testing Equipment

Master Cell Line Production

Gene & Protein Duplication

Protein Synthesis

Biologic Preparation

Sources ? IBISWorld, PRAH Form 10-K, Amgen

Preclinical Trial Testing Phase I

Phase II

Phase III

Phase IV

Increased outsourcing for clinical trial services, along

with increased R&D expenditures, will drive future value in the industry

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Company Overview: Syneos Health, Inc.

Syneos Health is the only fully integrated biopharmaceutical solutions organization.

Founded in 1985 as INC Research, Inc. Merged with InVentiv Health, Inc. in August 1,

2017 Rebranded as Syneos Health, Inc. in January 4,

2018 Top 3rd CRO, #1 CCO Operates through its Clinical Solutions and

Commercial Solutions segments to deliver endto-end services to its customers

Oncology

Central Nervous System

Cardiovascular

Infectious Diseases

$2,000 $1,800 $1,600 $1,400 $1,200 $1,000

$800 $600 $400 $200

$0

Syneos Health Service Revenue (thousands)

2012

2013

2014

2015

2016

2017

Market Share Analysis

37% 17%

12% 3% 4% 5% 4% 5%

6% 7%

Syneos Health WuXi AppTec Charles River Laboratories ICON PPD PRA Health Sciences Parexel International Covance QuintilesIMS Others

Sources ? Frost & Sullivan, Company Data

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Company Overview: Business & Financial Profile

YoY Growth of 2.6% due strong bookings partially 900

offset by higher cancellations

800

700

Commercial Solutions Segment declined 16.4% due 600

to lower FDA approvals in 2016, higher

500

cancellations, and lower YoY new business awards

400

Better segment integration & cross-selling

300

opportunities will drive future growth

200

100

Increasing drug approvals and lower DFA regulation 0 will drive biopharmaceutical funding

Syneos Health Quarterly Adjusted Revenue (thousands)

Q1 '16

Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Clinical Solutions Commercial Solutions

Q3 '17

Q4 '17

Portfolio and customer diversity, a healthy drug pipeline, and

integrated solutions, give Syneos Health competitive advantage over its peers

Customer Concentration

28%

59% 13%

Top 5 6-10 Remainder

Ending Backlog by Therapeutic Area

12% 11% 3% 4%

16%

31% 23%

Oncology CNS General Medicine CV & Met Respiratory FSP Other

Sources ? Company Data

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