Any potential coronavirus treatment or vaccine could run through ICON (ICLR), a large clinical-research organization (CRO) that helps pharmaceutical companies develop new medications, asserts Richard Moroney, editor of Dow Theory Forecasts.
The company focuses on late-stage trials of experimental drugs, enrolling and monitoring patients throughout the world. ICON isn’t immune from the coronavirus-related disruptions. But the company posted better-than-expected results for the June quarter and appears positioned for growth to rebound next year.
Even before the coronavirus pandemic, ICON was experiencing a lengthier conversion rate due to increasing emphasis on oncology drugs, which require more complex trials. Encouragingly, ICON says it isn’t seeing biotech companies or large drugmakers postponing decisions on new development programs.
Nevertheless, the pandemic has interrupted many of ICON’s phase 2, 3, and 4 trials, slowing patient enrollment, forcing the closure of testing sites, and in some cases putting new trials on hold.
Although management does not anticipate a full recovery until early next year, it has begun to see conditions improve. Patient enrollment trends are recovering, helped by a rise in remote monitoring of patients.
Management suggested that 2021 results should exceed the original, pre-coronavirus 2020 forecast, which had called for profits of roughly $7.70 per share and revenue of $3.03 billion.
Those comments imply 2021 growth could exceed 23% for earnings per share and 12% for revenue. ICON’s new profit and sales targets for 2020 and 2021 surpassed the consensus at the time of the announcement.
ICON shares have rallied 7% in 2020, while the S&P 500 Index has been stuck in neutral. With a Value score of just 24, ICON shares will never be confused as cheap. But they seem attractively valued compared to other life-sciences stocks in the S&P 1500 Index.
At 28 times trailing earnings, the stock trades above its five-year median of 23 but below its industry median of 31. ICON shares offer a 12% discount to peers based on estimated 2021 profits. ICON is a Focus List Buy.