As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q3. Today, we are looking at drug development inputs & services stocks, starting with West Pharmaceutical Services (NYSE: WST).
Companies specializing in drug development inputs and services play a crucial role in the pharmaceutical and biotechnology value chain. Essential support for drug discovery, preclinical testing, and manufacturing means stable demand, as pharmaceutical companies often outsource non-core functions with medium to long-term contracts. However, the business model faces high capital requirements, customer concentration, and vulnerability to shifts in biopharma R&D budgets or regulatory frameworks. Looking ahead, the industry will likely enjoy tailwinds such as increasing investment in biologics, cell and gene therapies, and advancements in precision medicine, which drive demand for sophisticated tools and services. There is a growing trend of outsourcing in drug development for nimbleness and cost efficiency, which benefits the industry. On the flip side, potential headwinds include pricing pressures as efforts to contain healthcare costs are always top of mind. An evolving regulatory backdrop could also slow innovation or client activity.
The 7 drug development inputs & services stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 3.1%.
In light of this news, share prices of the companies have held steady as they are up 2% on average since the latest earnings results.
West Pharmaceutical Services (NYSE: WST)
Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE: WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.
West Pharmaceutical Services reported revenues of $804.6 million, up 7.7% year on year. This print exceeded analysts’ expectations by 2.1%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ full-year EPS guidance estimates and a beat of analysts’ EPS estimates.
Eric M. Green, President, Chief Executive Officer and Chair of the Board, commented: "I am pleased to report that we delivered another solid quarter, with both revenues and profits exceeding our guidance. Our strength was broad-based, across both our Proprietary Products and Contract Manufacturing segments. We achieved double-digit growth in our HVP Components business, driven by our continued execution in GLP-1 products, increased HVP conversion, including Annex 1, and an overall improving demand environment. As a result of the solid performance in the quarter, and the ongoing momentum in our business, we are again increasing our full-year guidance expectations."
The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $275.34.
Is now the time to buy West Pharmaceutical Services? Access our full analysis of the earnings results here, it’s free for active Edge members.
Best Q3: Medpace (NASDAQ: MEDP)
Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ: MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.
Medpace reported revenues of $659.9 million, up 23.7% year on year, outperforming analysts’ expectations by 2.7%. The business had an exceptional quarter with an impressive beat of analysts’ organic revenue estimates and an impressive beat of analysts’ full-year EPS guidance estimates.
Medpace achieved the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 8.3% since reporting. It currently trades at $593.02.
Is now the time to buy Medpace? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: IQVIA (NYSE: IQV)
Created from the 2016 merger of Quintiles (a clinical research organization) and IMS Health (a healthcare data specialist), IQVIA (NYSE: IQV) provides clinical research services, data analytics, and technology solutions to help pharmaceutical companies develop and market medications more effectively.
IQVIA reported revenues of $4.1 billion, up 5.2% year on year, exceeding analysts’ expectations by 0.5%. Still, it was a mixed quarter due to its lackluster performance in other areas of the business.
IQVIA delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 3% since the results and currently trades at $211.
Read our full analysis of IQVIA’s results here.
Charles River Laboratories (NYSE: CRL)
Named after the Massachusetts river where it was founded in 1947, Charles River Laboratories (NYSE: CRL) provides non-clinical drug development services, research models, and manufacturing support to pharmaceutical and biotechnology companies.
Charles River Laboratories reported revenues of $1.00 billion, flat year on year. This result surpassed analysts’ expectations by 1.1%. It was a satisfactory quarter as it also recorded a narrow beat of analysts’ organic revenue estimates.
Charles River Laboratories had the slowest revenue growth among its peers. The stock is down 3.1% since reporting and currently trades at $172.41.
UFP Technologies (NASDAQ: UFPT)
With expertise dating back to 1963 in specialized materials and precision manufacturing, UFP Technologies (NASDAQ: UFPT) designs and manufactures custom solutions for medical devices, sterile packaging, and other highly engineered products for healthcare and industrial applications.
UFP Technologies reported revenues of $154.6 million, up 6.5% year on year. This print topped analysts’ expectations by 3.3%. It was a very strong quarter as it also put up a solid beat of analysts’ revenue estimates and a beat of analysts’ EPS estimates.
The stock is up 10% since reporting and currently trades at $219.49.
Read our full, actionable report on UFP Technologies here, it’s free for active Edge members.
Market Update
Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
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