Syneos Health, Inc. is well-poised for growth in the coming quarters, backed by strategic partnership deals and contributions from the Syneos One portfolio. The company’s Clinical Solutions arm holds potential, despite registering a year-over-year decline in the segment’s revenues in the fourth quarter of 2022. However, a strict regulatory environment and a tough competitive landscape do not bode well for Syneos Health’s business.
In the past year, this Zacks Rank #3 (Hold) stock has declined 42.8% compared with the 20.5% fall of the
industry and a 3.3% rise of the S&P 500 composite.
The renowned biopharmaceutical solutions company has a market capitalization of $4.10 billion. SYNH projects earnings growth of 14.63% in 2024 as it remains confident about the long-term strength of its business, given the robust backlog and the unique market position.
Syneos Health surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an earnings surprise of 1.7%, on average.
Let’s delve deeper.
Upsides Value-Added Partnerships: Syneos Health has been progressing well with its partnership deals.
In February 2023, Syneos Health entered into a strategic partnership with Haystack Health – a Roivant Health portfolio company developing advanced Artificial Intelligence and Natural Language Processing solutions. The combined capabilities of both companies are expected to enhance the identification and enrollment of patients for clinical trials.
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The collaboration with Equicare allows Syneos Health to use proximity — an innovative cloud-based software platform that advances the transfer of clinical trial subject data from multiple electronic health records to the sponsor’s electronic data capture systems.
Earlier in January 2023, Syneos Health entered into a strategic partnership with Fosun Pharma USA. As part of the partnership, Syneos Health will provide full-service commercial support through its Syneos One team for the launch of Serplulimab — a novel anti-PD-1 antibody for extensive-stage-small cell lung cancer (ES-SCLC) — in the United States.
In the same month, Syneos Health entered into a new strategic partnership with the temperature-controlled supply-chain company, Cryoport. The partnership will support the global advancement of cell and gene therapies, providing the industry's first fully integrated biopharmaceutical and supply-chain solution.
Earlier, in December 2022, Syneos Health extended its strategic partnership with Medable — the technology platform provider for patient-centered clinical trials.
In October 2022, Syneos Health expanded its partnership with Datavant to leverage the full suite of capabilities in Datavant Switchboard and Datavant’s large data ecosystem to accelerate the clinical development and commercialization of new therapies for patients.
The Potential of the Syneos One Portfolio: SYNH coordinates integrated solutions across the entire clinical development and commercialization continuum. This offering provides a cost-effective option for divesting, out-licensing or co-promoting assets for small to mid-sized customers. It also gives large biopharmaceutical customers an opportunity to decrease their fixed-cost infrastructure as well as an alternative approach to develop and promote their non-core assets.
In the fourth quarter of 2022, Syneos Health’s Commercial Solutions business registered 2.5% revenue growth, driven by higher reimbursable expenses and growth in Deployment Solutions. Excluding reimbursable expenses and on a constant-currency basis, Commercial Solutions revenues increased 0.5%, driven by Deployment Solutions, primarily due to the contribution from the Syneos One portfolio.
The company also initiated planning activities for other product launches in 2022, subject to the fulfillment of final regulatory approval. Meanwhile, additional launches are expected in 2023 and beyond.
A Strong Clinical Solutions Arm: The full-service portion of SYNH’s Clinical Solutions segment represents nearly 60% of the company’s total revenues. More than 70% of the clinical businesses comprise essential therapeutic areas that are experiencing the reduced impacts of the COVID-19 outbreak.
For example, oncology, rare disease, orphan diseases and other complex diseases are the areas where patients have limited treatment options. Although the impact of the pandemic might continue for the full year, it is diminishing, with the economy gradually getting back to normalcy.
In the fourth quarter of 2022, the segment’s revenues rose 0.7% at CER, including reimbursable expenses. The rise was driven primarily by growth in the large pharma business and partially offset by lower net awards and backlog conversion delays.
Clinical Solutions’ book-to-bill ratio was 0.4 times in the third quarter, excluding reimbursable expenses resulting in a 0.77 times TTM book-to-bill. The commercial demand environment remains healthy, with particular strength in the larger pharma customer segment as the company leverages Kinetic and new digital capabilities to drive new growth opportunities.
In February 2023, Syneos Health launched a Decentralized Clinical Trial (“DCT”) Site Network to drive appropriate DCT adoption and enable the high-quality delivery of DCTs and digital health technology solutions. This complements the company’s existing Site Advocacy Group, continuing the momentum for decentralized solutions to bring clinical trials closer to patients.
Downsides A Strict Regulatory Environment: The biopharmaceutical industry is governed by stringent governmental regulations in domestic and global markets. Within the Clinical Solutions business, the FDA regulates the clinical trials of drug products in human enrollments and the form and content of regulatory applications. Globally, clinical trials are governed by the laws and regulations of the country where these are conducted. A Tough Competitive Landscape: Syneos Health operates in a highly competitive environment, dominated by firms varying from large Contract Research Organizations (CROs) and smaller specialty CROs, large global communications holding companies, smaller specialized communications agencies, contract sales organizations and a wide range of consulting companies.
In the Clinical Solutions segment, Syneos Health primarily competes with full-service CROs and services offered by the in-house R&D departments of biopharmaceutical companies, universities and teaching hospitals. Some major players the company has to compete against within the segment are Laboratory Corporation of America Holdings, PRA Health Sciences, Inc. and ICON plc. among others.
Moreover, some prominent competitors in the Commercial Solutions segment are Ashfield, IQVIA, Havas SA and Omnicom Group Inc. among others.
Syneos Health has been witnessing a negative estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 9.4% south to $3.28.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $5.03 billion, suggesting a 6.7% decline from the year-ago reported number.
Some better-ranked stocks in the broader medical space are
Zimmer Biomet ( ZBH Quick Quote ZBH - Free Report) , Hologic, Inc. ( HOLX Quick Quote HOLX - Free Report) and Insulet ( PODD Quick Quote PODD - Free Report) .
Zimmer Biomet, sporting a Zacks Rank #1 (Strong Buy) at present, has an earnings yield of 5.35% compared to the industry’s -2.55%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. You can see
. the complete list of today’s Zacks #1 Rank stocks here
Zimmer Biomet’s shares have increased 19.9% compared to the industry’s 25.2% decline in the past year.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.62% compared to the industry’s -7.01%. Shares of HOLX have risen 15.1% against the industry’s 9.8% rise over the past year.
HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.
Insulet, carrying a Zacks Rank #2 at present, has an estimated growth rate of 56.4% for 2024. Insulet’s shares have risen 71.7% against the industry’s 25.2% fall over the past year.
PODD’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average surprise being 80.2%.