ICON Public Limited Company (ICLR) Earnings Call Transcript & Summary

Okay. Good morning, everybody. I'm Tycho Peterson from the Life Science team. Welcome to day 2 of the Healthcare Conference. Our first company this morning is going to be ICON. [Operator Instructions] And with that, let me turn it over to Steve.

Good morning, everyone, and thanks, Tycho, and welcome to everyone to the JPMorgan Conference, and looking forward to providing this presentation. Could I have the first slide, please? Okay. I can't actually see the slides, but presume they're on. Tycho, are the slides coming up?

I'm checking with our AV folks right now.

Okay.

They're coming back and saying, you guys need to advance the slides. So they're on the conference website.

Okay. Okay. I'm not quite sure how I do that. JC, could you advance the slides for us? How do we do that?

Let me have a look at that, Steve, for you.

Steve, the slides are up on the conference website. So yes.

All right. So I'll just go through. So just to go to the forward-looking statement. I think you've all had a chance to review that. We'll move past that. The agenda for today really is focused around 4 areas for ICON plc. We're going to do a bit of an overview, give you a flavor of what we do and how we do it. Some of the strategic focus that we've been looking at and focusing on over the last several years and what we're doing going forward. We'll talk about our financial performance. And then we'd like -- well we're not giving formal guidance today. We were clear about that in our last call. We do want to provide some indication of how we see the market progressing and how we see the outlook for this year and somewhat beyond. So in terms of the ICON overview, we're a company that started 30 years ago in Dublin with 5 people. As you can see way back on Slide 4. We were -- our founder, John Climax, Ronan Lambe, put us together, as I say, in Dublin in 1990. John Climax is still a member of our Board and still retains a very significant interest in the company. And we've grown over the last 30 years, mainly organically, but also, as you can see, with a number of acquisitions, more-scale acquisitions in various areas of the clinical research area. So we stuck very much within the clinical area. We haven't moved into sales or commercialization from that point of view when we haven't got the preclinical. We believe the clinical space, Phase I through Phase IV and peripheral services or preclinical services is the way to go, and that's been part of the reason, I think, for our success. So we've moved from a company that did something like $500,000 in revenues, 30 years ago to close to $2.8 billion for last year. That's the midpoint of our guidance. So we've been a strong growth story over the last 30 years, and we believe the market is strong, and we're very optimistic about the next 30 years as well. We go to Slide 5. You can see we are a global player. We have over 15,000 people around the world, predominantly in North America and Europe. But you can also see out in Asia, we have a significant presence with almost 4,000 people in that part of the world and also in Latin America as well. So we are a global player with the scale to carry out large drug development programs for our customers. And that's what certainly what we've been doing across the 40 countries and 94 locations that we are present in. Going to Slide 6 to give you a flavor for the comprehensive service portfolio that we have as an organization. As I said, we stick within the clinical space. We believe that's the right place to be. We do consulting and drug development services. We're able to provide consulting and expert advice in a variety of areas, not just in early drug development, but you'll see in our late phase space as well, we have a consulting group. So we're able to do healthy economics. Pricing and market access, that sort of thing as well. Our clinical research services group, our Phase II, Phase III is the largest part of our business. They're the large-scale clinical trials that we do around the world. We are well set up to do those right across the spectrum of services required from site services. You may have heard of our Accellacare Site group that we've developed recently over the last few years right through the biometric, clinical monitoring, project management, et cetera. We also have a Functional Services group, which is more based on allocating people on a functional basis. It's a slightly lower-margin business. But it's a business that's been expanding significantly over the last few years. And it allows us to move people between our Clinical Research Services group and our Functional group to maximize our ability to be flexible with resources going forward. Our Laboratory group has been growing nicely over the last few years, the Central laboratory and the Bioanalytical laboratory and that ties in nicely with our Clinical Research and our Functional Services group. And then our commercialization and outcomes group, which is really around our late-phase services, real-world evidence, Phase IV, our product line extensions, registries, those sorts of things. And as the drug and the molecule that we're working on gets close to market, these folks come more into play. And then really where I probably should have started was our Early Phase Services group. We have a clinical pharmacology unit in San Antonio, in Texas. But we really do Phase I PK/PD-type studies all around the world, particularly in academic units. So that's an early -- a part of our service that really focuses on the early stage of the drug development life cycle. Going to Slide 7. Part of our differentiation, I think, across the market is the way we utilize our technology, our differentiated technology solutions and data collaboration. So at the top right there, we use that to identify patients, and I'll speak a little bit more about that in a moment through our patient site and data strategy. But that's a very important component for how we find patients, particularly in the larger Phase II and Phase III trials. Our real-world data collaborations, we believe, in being agnostic in terms of where data comes from, and we partner with a number of different groups to access data to allow us to do real-world studies or to find patients at the sites and countries where we need to get them. We also have our own proprietary systems. In this business, there aren't always commercial systems available. And so we do, to a limited extent, develop our own, and we have a number of our own proprietary solutions in ICONIK, which allows us to look at data in real-time as it collect and as it accumulates across the trial. FIRECREST, which is a site support system. ADDPLAN, which is a statistical adaptive trial design, a piece of technology that allows us to plan and design trials in a way that makes them more efficient. And then our EVIDENCE platform for enhancing observation research, again, more in the later phase space. And then we have a number of world-class collaborations and partnerships with other groups, whether it be Power BI, Amazon Web Services, Oracle, et cetera, to allow us to power the technology that we have. So we believe the combination of our own internal solutions, our focus in patient identification and site selection as well as our collaboration with other groups, allows us to provide a unique and a differentiated service. We've been widely recognized across the globe as being one of the preeminent CROs in our space and certainly one of the top CROs. A number of awards there. We're most proud of, and most recently, the Vaccine Industry award, which we were able to secure as the Best Vaccine Developer in the CRO space. And on that note, we were involved -- and just recently, involved in the -- well, probably the most famous clinical trial that's ever been done, perhaps if I could make that claim. The trial that was done with Pfizer and BioNTech to get the first vaccine to market. You'll all be aware of that clearly, and we were highly involved in that, involving -- well, it was 44,000 patients at the time of submission. So it's continued, and there are about 47,000 patients in there now. We had 150 countries involved -- 150 sites involved, 6 countries, and obviously, got that vaccine to market in a record time. And that's certainly something we're extremely proud of, and our contribution to that along, of course, with our Pfizer colleagues has been something that we, as I say, very keen to acknowledge and to be extremely proud of. If I go to Slide 10, over the last, as I say, 30 years, we've developed nicely. You can see annual revenues have gone up almost year-on-year, notwithstanding the pandemic-related, 2020. Earnings per share have also had a nice general trend up. So overall, we've been a strong growth company over our history, over that 30 years. And we believe our market is such, and our company is primed to continue that sort of growth over the next 30 years as well. On Slide 11, now capital allocation priorities. Usually, we look at 3 areas where we've traditionally deployed our capital. Certainly, the internal capital area. As I mentioned, we've developed some systems of our own, but we continue to invest in our business, whether it be in our OneSearch capability, which is one of the systems I looked at, I touched upon. Site ID and Feasibility, FIRECREST, et cetera. So we invest about $50 million to $60 million a year in our technology and in our organization to continue to drive forward our processes and our execution. In terms of external investment, we've invested around about $1 billion since 2008 on M&A. You can see -- you saw a number of those acquisitions in the first part of the presentation. And then also since -- over the last sort of 6 years or so, about $1.3 billion invested in share repurchases. And I'm happy to talk about that going forward as well. If I go to Slide -- well, Slide 13 now as we move into more of the ICON strategic focus, you can see the pillars that we focus on. We're very focused in the partnership and customer area. That's an area we believe we have some expertise in with regard to some of the large partnerships we've been able to develop and move forward across the industry. We do focus very much on operational excellence and quality. It's something that is somewhat under thought of in our industry. People ought to talk about new technology and new sexy things. That's all great. But really, the technology needs to support a culture of operational excellence, accountability and execution, and we focus on that very hard within our business. Our talent and people development. We are a large group of people, 15,000, as I mentioned. So focusing on that, developing those people, giving them career progression, opportunities, et cetera, et cetera, we believe is incredibly important. And we've been able to do that and develop that over the last number of years as well. And then finally, our patient, site and data solutions, and I'll talk about that a bit more in the next few slides. So as I go to Slide 14, building our foundation for data accessibility and insight. I won't go through all of these systems. And a number of them are proprietary, but a number of them are also being helped by our external partnerships. So whether it be driving site performance, our FIRECREST acquisition that we made about 10 or 11 years ago now has been an important part of how we drive our site performance and how we support sites. In the patient engagement space, we've been developing that through our Accellacare network but also through our patient portal. And then developing opportunities for patients to go in, find out what clinical trials are ongoing and what opportunities there are for them to participate in clinical trials. And that's been a really important part of the pandemic or the sort of -- I guess if there's any silver lining to what we've been going through over the last 9 or 10 months, it's the people are much more aware now of clinical trials and the opportunities for clinical trials. And we think that's certainly going to have a benefit for us and for our industry as we go forward. In terms of clinical trial efficiencies, there are a number of systems that we've worked on there. ARCADES is probably the most significant. And it's a system that we've developed internally that brings all of our data together in an integrated fashion. One of the challenges we have as a business, as an industry is we get data from a variety of different sources. ARCADES is our system that allows us to integrate that data and present it in a manner that's actionable for our operational people. On the analytics, AI and machine learning, this is an important part of how we're driving our SG&A costs going down over the last few years. We've shown we have a good track record in cost management. We believe there's more to do there in AI, particularly using our OMR, OneSearch and some of the new digital endpoint tools is an important way to do that. On mobile health, we also feel we have some operational advantages, particularly in the wearables area where we have some specific expertise that our competitors don't always have. And again, one of the silver linings, I suppose, around the COVID pandemic is that the decentralized virtual clinical trial has become much more current, much more focused in our sponsors' minds. They're all looking at how they can make their trials more virtual. And certainly, we've had a lot of interest in that space. And in our Symphony home health services, as well, where we have a service that allows our nurses and health staff to visit patients at home, obviating the need for them to go to sites. And that's also -- there's been a lot of interest in that over the last few months as well. And then from an innovation point of view, we continue to innovate, whether it be in automated area, whether it be in advanced analytics or our cloud adoption going forward. So the innovation component of our business remains fundamental to our growth plans going forward. To Slide 15 and just to talk a little bit more about our patient site and data solutions side of things. We have a number of tools here that we use that are in the cloud that allow us to identify the right sites and the patients that connect to those sites for our clinical trials. So whether it be our feasibility intelligence tool, our OneSearch tool, access to electronic health records. They all allow us to execute our clinical trials in a manner that's more efficient and faster than our competitors, and we've certainly had a number of successes in that area. So the focus on data and the tools to make that data actionable is a very important part of our strategy in our patients, site and data process. In terms of fleet on the ground, we have our Accellacare of sites. These are based on 2 acquisitions that we made a couple of years ago in the United States where we acquired the PMG Group and then we acquired MeDiNova in Europe 1.5 years ago now. And we've combined those to make our Accellacare network. And these are network of sites where we have our own staff, or our investigators that really focus on doing the trials in a much more expedited manner for ICON. And we've seen significant benefits from that over the last few months, particularly as sites have been impacted by the COVID pandemic. So overall, in terms of looking at how we're looking at patients as well, we're focusing there on allowing and engaging with patients, and much more increasingly developing our links with patients through portals, through databases and through targeting them to allow an increased predictability in recruitment. So this is the sort of third leg, if you like, about patient, site and data strategy. And increasingly, we're seeing engagement with patients. And this is, I think, important for our company to do this, not just our sponsors because perhaps traditionally, it's been the pharma companies who've tried to be the connection with patients. I think going forward, it's important for our company and ICON to make that connection with patients as we develop our clinical trial offering in the future. And so just to sum up, really, in terms of what we have with Accellacare and the benefits of our Accellacare site network, which we've certainly seen over the last sort of 9 months, but increasingly, right across our portfolio, not just in the vaccine space. In terms of speed, we've been able to show that we're about 30% faster in terms of enrollment. So we get patients into those trials faster. There are more patients in those sites that makes it more efficient. For our monitoring, we have fewer 0 recruiting sites, and we have more patients at the site. So when a monitor goes to a site, it's a more efficient model for them as they review and monitor the data. And then the quality side of things as well, all whether it be audit findings, number of queries, which take time to answer and take resource to answer, we've been able to find the qualities also, the quality of data that we collected from those sites is also better. So overall, we have a network of sites within our Accellacare network that really provides us a head start to any program. Particularly focused in the non-oncology area, and of course, oncology is an important part of our portfolio, but we are also in the process of developing an Oncacare network of sites as well. We have a JV that's doing that with one of the people that came into our business through our MeDiNova acquisition. So the oncology network site is also a very important focus for us going forward, and we anticipate seeing some benefit from that start to play out over the next year or so. So just a word or 2 on financial performance as I move to Slide 20. And focusing really in 2020, looking at our -- at the progress or the challenges we had in 2020. So I showed, I think earlier on, that track record of growth over the last 30 years, which we anticipate will continue. 2020 was a challenging year, no question about that. And that's been challenging for not just our industry, but right across the world. We were able and we have been able up until quarter 3 to grow our backlog at about a 12% growth rate. We've seen continued strength in business awards at the end of the year. We haven't reported our quarter 4 numbers yet. Excuse me, but we certainly see -- we've seen positive trends in our RFP numbers and our business wins are in good shape. Revenue, as you can see, across the last 5 quarters or so, you can see the dip in quarter 2 at the depths of the pandemic, but we made a nice progress in quarter 3, and that progress has really continued in quarter 4. So we haven't -- as I said, we are not specific about our quarter 4 results, but we've seen continued progress coming out of that quarter to dip. And we do anticipate while -- even though we do acknowledge some resurgence in the pandemic at the moment we're working through, we do believe that as we get back towards the middle of the year, the summer kicks in, the vaccines get out there, that our business and our industry is going to be in good shape to move forward significantly in 2021. Our operating margins, as you can see, have been strong, a little bit of a dip in Q2. But again, bounced back in Q3, and we see that continuing. And our earnings per share, similar sort of pattern there. So overall, we've weathered the pandemic extremely well. Certainly, COVID has had a silver lining in terms of the amount of work we've been able to get on the vaccine side of the space. I referenced the large sale, a Pfizer trial that we did. We're involved in other large vaccine trials as well, and as well as treatment studies as well. We do believe there's some opportunity to continue involvement in the COVID work for 2021 and even beyond. But they -- and we also see the rest of our business in terms of coming back as well as sites reengage and reemerge from the challenges of the pandemic. Just to look at market trends and outlook in the final section of the presentation on Slide 22. You can see -- we see generally a very positive outlook for our industry and for our company. At the top left there, the CRO market size continues to increase on the basis of increased R&D spending and on increased penetration of the CRO services into that spend where we're probably around about 50% at the moment. But I think that can continue to advance on an annual basis at about the 1% to 2% per year. And as we see R&D budgets growing in the in the mid- to low single digits, there's a generally positive rising tide for us in that space. I suppose the real -- I mean, one of the big stories, I guess, really over the last couple of years -- it's not just the last few quarters, but the last couple of years and even the last 10 years, as I see on the top right there, is the quarterly biotech funding. A lot of the new drugs are coming from the biotech companies. And our engagement with those companies has been very significant over that period of time. And we certainly -- our new awards have certainly benefited from our traction in that space. And you can see the biotech funding over the last 3 quarters has been at record levels. And really, over the last 10 years, has grown substantially to the point where it's about 5x what it was 9 or 10 years ago. So really, it just reflects the fact that a lot of the innovation in the drug development -- drug research, probably rather than development, drug research space is coming from the biotech companies. Investors recognize that and are investing in those companies. And the FDA, as you can see down the bottom right, are also playing their part. 53 drugs came to market or got approved last year, not quite a record. I think that was back in 2018. But you can see that, that then will trend up the friendliness, if I can use that word, of the FDA towards new compounds coming to market. The speed at which they approve for emergency use of the vaccines just shows how they've moved forward in terms of their ability and their willingness to move new compounds through, particularly in the oncology therapeutic area. But increasingly in other areas of inflammation, immunology, C&S as well. And then we've seen -- that's been a huge benefit for our industry and a huge benefit, I think, for investors who are putting money to work in this space. So you can see the areas of growth, and we see around about 5% sort of industry growth conservatively, we believe, as an organization. We can grow faster than that because we are one of the large players in this industry, and we do believe that scale and size is important as you work in this industry. So on to Slide 23, which is really just to summarize, I think, what I just said in the previous slide, biotech funding remaining robust. You can see the record levels there. The RFP environment is strong. We certainly benefited from that. We haven't seen any abnormal sort of cancellations due to COVID. There's certainly some volatility. Those are large-scale trials. There are vaccine trials. They burn quickly. That's an opportunity for us as well. But the revenue can be a little volatile. And so there are some challenges from that point of view. But overall, we've seen a very much -- some great opportunities come out of the vaccine, not just in terms of the therapeutics of the vaccine trial. But in terms of, as I said, the awareness of decentralized trials, the opportunity that customers have given us in terms of devolving a little bit some of their strategies in the past. For example, in the lab space, where they've been focused particularly on 1 or 2 of the larger labs, they're now coming to us as one of the key players in the lab space, but certainly one of the smaller of the sort of 4 key global labs. And we've seen some opportunities from those customers to be involved in their longer-term thinking from a lab partnership perspective because they don't want to just connect with one of the larger ones, given the risks that they've seen through the pandemic. So the pandemic has had a silver lining in a number of areas, not just in terms of the vaccine work, but in opportunities for decentralized trials, remote monitoring, our home health system in Symphony was -- well, there aside, a fortuitously timed acquisition that we made. We've seen significant demand for that sort of services where customers are happy to have nurses go out to patients' homes and monitor them and manage them within their homes to avoid the risks of coming in to a trial center, and we've seen unprecedented demand in that area. So as I said, the pandemic, while it's been challenging for everyone, has certainly given us some opportunities around the preclinical space going forward. And then just to finish off to provide some outlook and financial objectives while not specifically getting to guidance. We'll be doing that at our quarter 4 call towards the end of February. But I did want to just outline where we think the market is, particularly for 2021 going forward. So strategic focus in the key areas continues for us. We focus in the patients, the sites and our data strategy, as I've outlined, is fundamental to us. We believe we're getting paid dividends on that. It's working nicely for us. Our Accellacare sites, our virtual trial offering, our Symphony home health services are all playing nicely into that strategy and giving us some opportunity to grow ahead of our competition and certainly ahead of the overall market. Our scale and capabilities are in place. We believe that's important within our industry, but we believe we have the scale and the capabilities to benefit from those positive market trends that I outlined. New business has been very positive. RFP flow has been excellent. We do believe we can continue at, at least the 1.25x book-to-bill revenue. We've shown over the last few quarters, we've been above that. We believe that can continue certainly in 2021. Our year-over-year revenue, we anticipate in the low to mid-teen percentage range. That's what we expect to be able to guide at the end of February, with no reason given the business wins we've had and the way those wins are burning that we can't be in that, as I say, low to mid-teen range from a revenue growth point of view. We do believe our gross margins will be stable. There's always challenges with that. We have plans, obviously, to maintain or improve. But really, we believe our operating income leverage can come from continued improvement in our SG&A. We've shared a track record of showing we've been able to do that. We're now under 12% of our revenues. We believe that can continue to go as we grow our business, and our scale continues to increase. And we'll do that around robotics, around machine learning, around technology and around process development. We believe -- even with the offshoring, and we've done that substantially over the last 10 years, really. We believe that ship hasn't completely sailed yet even. There's still some opportunity to develop that. So there's plenty of opportunity around our SG&A platform in which we've shown a strong performance, as I say, over the last decade or so. Taxes, being an Irish company, headquartered in Dublin, we are -- we do benefit from that Irish tax rate, and we're anticipating that will continue at about 13% to 14% tax rate. So we have a significant advantage there over our competitors. And that will all basically lead to an EPS growth rate in the low to mid-20% range, we believe. For 2021, obviously coming off the 2020 year, which has relative -- been relatively flat, we believe we can get that mid- -- low to mid-20% range growth from an EPS point of view. Obviously, that will modify as we go forward into 2022 and beyond. But we do believe continued growth in the EPS area is with us. Our cash conversion continues to be strong. We anticipate DSO in the 45 to 50 days. We've shown some good progress on that over the last year or so, a couple of years from, I think in the -- around 60 days early in 2019, and we're now certainly in the 40-something days. And we'll -- again, we'll be reporting on that in a few weeks' time. But some good progress there. We haven't seen a significant bad debt franchise within the biotech industry, has not yielded any major problems with respect to debt payments or invoice payments there. And we manage that very carefully and very tightly. And we've seen some significant progress around DSO, as I say, over the last several quarters. And I think just finally, in terms of our balance sheet, we have a strong balance sheet. We are the strongest balance sheet in the industry, very low leverage and an opportunity to be acquisitive. As we see those opportunities, we'll continue to do that, particularly if we come out of the pandemic. It was a slow year last year, no question about that for obvious reasons. But we do believe there'll be opportunities as we come out of the pandemic into 2021 and beyond. And we'll certainly be looking to deploy our cash predominantly in a priority manner around M&A, but we'll be opportunistic around share repurchases. And we, as always, as each year, we commit to buying back the 1 million or so shares that we issue to keep us holding that space. So with that, Tycho, I'll hold up and give it over to questions.

Perfect. Thanks, Steve. Maybe I'll start with the guidance outlook. Revenues low to mid-teens. The street's at just over 12.5%. Maybe talk about the gives and takes, what could get you to the higher end? And how are you thinking about kind of non-COVID work as COVID work tails off, non-COVID work picking up? Can you maybe just talk about how you think about those dynamics?

Yes. I think we see the COVID work. I mean it will certainly tail off from the highs of Q2, Q3, where we had a significant amount of our awards were COVID related. But I don't think it's going to 0 anytime soon. We certainly see a number of treatment opportunities. There will be continued vaccine work, I believe, going forward, consulting. So the COVID work will -- it's going to go well into 2022 and beyond. And we think that's going to help drive. We also see our sites coming back. There are still about 40% of sites impacted by the pandemic. That hasn't changed dramatically from what we reported in quarter 3. And I think that will probably be the case for the first half of the year. I think we'll probably be back to 80% as we enter the second half of the year. So I think that will help us to drive. We certainly see patient recruitment recover in our non-COVID areas. So we see that driving our revenues on the top line, and we'll get back to our cost control and leverage around our robotics and automation on the fixed cost side of things or on the SG&A side of things. So all of that, I think, plays well for us in terms of how we come out of this pandemic. I mean I do think, as I said, it's not just the COVID-related opportunities, which have been a nice fill-up, if you like, for the non-COVID work and the slowdown perhaps in other trials, but we do see that fundamentally changing the way all clinical trials are run. For instance, we see people understanding what clinical trials are now. We see patients, I think, or people with a much greater willingness to be involved in clinical trials. So that all plays nicely to our patient, site and data strategy as well. Brendan, I don't know if you got anything to add to that?

No, I think that was a very good answer, Steve. And I think Tycho, to your question, as we come through the first couple of quarters, certainly, we're doing a lot of fast burn trials, as Steve mentioned. These are some of the fastest trials we've seen, and I think that will help us get off to a good start in 2021.

Can you maybe talk about the advantages of the site network and how that helps you on coming out of the pandemic? And then have you won any strategic deals because of the site ownership strategy?

As I said in the presentation, Tycho, we're seeing -- and we're generating this data actively. We're seeing faster pace in recruitment. We're seeing better quality. We're seeing faster start-up times on the site network. And that's our Accellacare site network. We're also going to play that into our Oncacare network, which is in the process of being developed as well. Now that will be an oncology site network. So we're seeing -- those sites contributed significantly to our vaccine work, the Pfizer trial. I mentioned they were there. They're very much involved in the current vaccine work. So we're getting good traction in terms of individual projects. I can't say that we've won partnerships directly because of these, but they're all part of our patient, site and data strategy, which plays well with customers. Customers recognize that for us to really add value, we need to recruit patients rapidly in a quality manner and with a minimum of start-up delays. And we've been able to do that. And these sites really give us a head start, we believe, in that area. So increasingly, customers are aware of that and are giving us some advantage because of that.

If I might just add to that as well, Tycho, one of the areas where we have seen the huge amount of interest, as Steve referenced it during the presentation, was obviously in our nursing-to-home business. The Symphony acquisition, which we did at the end of last year, which again sits under that kind of broad banner of that part of our organization. And that has certainly derived a lot of interest from some of our noncore customers, if you like, as well over the last -- since we've really had it. And that's been doing extremely well from a business development side over the last couple of months.

As we think about some of the changes that may be lasting coming out of the pandemic. Well, 2-parter here. One, we've heard some of your peers suggest it could be a big year for real-world evidence, given how quickly a lot of these drugs and vaccines are brought to market around COVID. So is that your view as well? And then number two, I think, Steve, you're on record saying that virtual remote monitoring could get to 30% to 40% over time. How long do you think it kind of takes to get there?

Yes. I think in terms of real-world evidence, I think that's probably right. I think we've seen the regulators -- flexible is a wrong word when you talk about regulators, and I don't want to sort of say it. But they've certainly been accommodating with the way that we've been getting drugs to market and collecting data. And I do think the real-world evidence aspect of it is going to be an important component going forward, even for the follow-up monitoring of these sorts of vaccines and new treatments as they come to market. They recognize -- everyone recognizes that getting these drugs and vaccines to the market quickly is critical. And perhaps in the past, we've been a little bit conservative in terms of the way we do that. And real-world evidence, I think, gives us that opportunity to move forward faster. And so I do see some growth in that area, and we're, I think, well positioned to be able to benefit from that. In terms of the remote monitoring, I think there's no question, all of our customers are much more aware of it now. We were able to literally pivot on a nickel in April and May to move our trials from being very much on-site to being remote and monitoring them remotely. And in some cases, that just meant going from on-site visits to telephone visits, which is not quite what we mean by remote. But in others, we were able to actively remotely monitor. And certainly, the large-scale trial we did with our partner, Pfizer, that got that vaccine into market, very much a remote -- we were monitoring sites in Argentina, from Japan and from Europe. That was a sort of opportunity we're able to deploy resources in a way that was effectively through our technology able to make that remote monitoring approach work very well. And I think that, that's super sale. That's going to move forward, I think very -- I'd be surprised if 80%, 90% of the trials that we do going forward won't have a remote component. And that makes it much more efficient for us and certainly for our customers as well.

Question for Brendan that came in on the tax rate. 13% to 14% is slightly higher than the 12% to 13% we've seen in the past 3 to 4 years. Is there a systematic change in the tax structure here to think about?

Well, Tycho, it's a reflection of the global taxing environment in different geographies around the world. And where we make our revenue, of course, is just a -- our tax is just a function of where our revenue comes. We have the benefit of the Irish piece, but we have seen changes, in particular the U.S. taxing structure over the last number of years. And that means there's additional charges, different kind of charges in your tax structure like the GILTI charges that we've seen, and that has probably been the largest piece in terms of the movement. I don't see it as a greater than 1% movement, I think 13% to 14% is still a safe range for ICON without any issues there.

Okay. Steve, I had somebody else asking about just the size of the real-world evidence business today, what percentage of revenues is it now? And how big do you think it could get over the next couple of years?

Yes. It's a relatively modest part of our business at the moment, Tycho, in the vicinity of 10% of our business. But it's an area that I think has shown significant potential for growth. And so I would say it will grow certainly at the rates we've talked about in terms of low to mid-teens this year. And then going forward, I think, probably in the high single digits, maybe getting to double digits. We believe we've invested well in that space, not just in terms of technology but in terms of people. And again, with the tide moving in the market, we believe we're going to be well placed. So it's an area I would say that, along with probably labs, it's going to grow perhaps above our sort of overall marketplace.

Last one before we wrap up. Just on M&A, Steve. You did the MedPass acquisition a year ago. How should we think about your appetite for deals and particularly bigger deals to the extent there are bigger transactions out there?

Yes. We're open. We have, as I think I said, Tycho, a strong balance sheet, and we do believe we're well positioned as we come out of this pandemic. We have momentum as an organization. I think that's important. We believe that the clinical trial industry development has momentum. The people are aware of clinical trials, the technology is moving, customers are more open, because they've had to be. And so that also plays into our appetite for acquisitions and for being assertive and aggressive in that space. So nothing to announce, but we certainly feel that it's a good time for us to develop the organization significantly as we go forward.

Great. Well, I want to thank you for taking the time today. It's was a great overview, and enjoy the rest of the conference.

Thank you, Tycho.

Great. Thanks, Tycho.