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

All right. Great. Thank you, everybody. My name is Casey Woodring from the Life Science Tools and Diagnostics team here at JPMorgan. I'm pleased to introduce our next company, ICON Plc. I'm pleased to be joined today by CFO, Brendan Brennan; and CFO (sic) [ CEO ], Steve Cutler. They're going to do a presentation followed by a Q&A session afterwards, where you'll be able to ask a question in person or via the webcast. So with that, I'll turn it over to Steve.

Thanks, Casey, and welcome to everyone. Thank you to JPMorgan for the opportunity to present here this afternoon or this evening. Casey's mentioned Brendan Brennan, my CFO, who's joined me on stage. Brendan is the one with the tie on, I think the only one with a tie on in this room. And Kate Haven, our VP of IR, is sitting over the table over here. So this is a presentation around ICON. We believe we are one of the, if not the strongest CRO powered by healthcare intelligence. Healthcare intelligence is a term that we've coined to look at the way data, analytics and technology combines to make better outcomes and make us better outcome decisions for our customers. The forward-looking statement, I will let you read and review. I'm sure you've seen a number of those over the last couple of days, and you'll see a few more over the next day or so. So with that, we'll move forward to what ICON does. What does ICON do? What are we about? Essentially, we're an organization who helps biopharma customers. We partner with them to bring their drugs and devices to market faster and more efficiently. We are about speed, and speed often means efficiency in this business. And there are a number of reasons and a number of areas that we specialize in to allow us to do that effectively and efficiently. So if I look at our key differentiators -- and I'll talk about each of these areas in a bit more detail in the following slides. But global scale, those of you who follow us closely will be aware we made a significant acquisition of PRA Health Sciences about 18 months ago. We announced it around 2 years ago. And that is progressing well. I will talk a bit more about that. We have our clinical focus, and that's very important in our business. We don't get into other parts of the business be it commercialization or data or labs. We focus very much in Phase I to Phase IV, and we believe that's a real strength. Data and technology and our decentralized trial positions, again, I'll speak a bit more about our progress in that. The pandemic has enabled us to really move that forward. I think the industry has moved forward 5 years due to the pandemic and the opportunities that has presented us to do trials in a different way, to be more efficient, to be more effective, and ultimately, I believe, to be faster in the way we prosecute trials. And then for us, sites and patients are a big focus. And again, I'll speak more about that. So healthcare intelligence and helping the data, the technology, the analytics to allow us to make better decisions and provide better outcomes for our customers is a very important aspect of what we do as an organization. So the first differentiator there is scale. Scale is a key part of our business. There aren't many organizations who have the scale that we do in the global clinical development space. We have over 41,000 people now around the world, as you can see, distributed there between the key markets of North America and Europe, but also Asia, Latin America, Australia, Africa. There are a number of people we have, an ability to bring forward functional, therapeutic, and obviously, geographic expertise to our customers. The ability to recruit patients, to bring patients and their data into clinical development programs anywhere in the world is very important, particularly as we move forward with rare diseases, those patients that are very hard to find and that we have to go far and wide to find them. And our ability to do that allows us to bring those programs and bring those drugs and devices to market effectively. We are, as I said, focused in the clinical space, Phase I to Phase IV is what we do. We are a world leader in the II, III space where the larger trials are done. We also have significant capabilities in early phase in laboratories. We're the #1 functional service, FSP, provider, a different model that our customers use to prosecute their programs. And we also have comprehensive late-phase real-world evidence expertise as well. Again, as you get more towards the market, our customers need those sorts of services as well. And interestingly or importantly for us, our global site and patient network is a differentiator and one that we have significant scale. We've made acquisitions both in North America and in Europe around site networks that allow us to build and progress those projects more effectively, more efficiently and stay away from some of the challenges that our sites have as they run clinical trials. So that's scale. And that's what we've done and that's what we've done particularly as we brought together those 2 organizations, ICON and PRA Health Sciences, and really brought together now organizations that were #5 and #6 in the industry to be #1 or 2 in most of the segments that we operate in. To move on then in terms of our clinical focus and our ability to prosecute and to focus on the key segments in the market. You can see we're calling ourselves a healthcare intelligence organization, again, around data and analytics. But we have our large pharma solutions there on the left as you look at that slide, a team -- a group of about 6,000 - 8,000 people that focus very much in large pharma. There's been a lot of talk about how CROs need to focus on biotech, and that's what we do as well, as you can see in that second group. But large pharma still spends the majority of the money in development. And so having a focus in that space and being able to manage those sorts of programs with our large pharma and midsized customers is a very important capability and component of what we do as an organization. On the far left, as you look at it, on that slide is the ICON Strategic Solutions, our functional services group. We have something like 14,000 people deployed at customers in various models in that group. They can be people that are sitting in the customer space, working for them, taking instructions for them. They can be people that are in our offices that are working with us, and we provide, say, data management or statistical services. Again, the models vary depending on what our customers are looking for and how they want to prosecute their programs. The point being made here is that whether it be full service or functional, we're able to provide the solution that our customers are looking for. And we have the scale, the focus, the expertise to be able to do that. Our development commercialization solutions is really around our early phase group. We have a number of clinical pharmacology units, both in the U.S. and in Europe. We have late-phase services. As I've mentioned, we have our laboratory services. Our patient and site network is in there as well. And we have a number of groups there that bring together around the paraclinical services that we provide, both either on a full-service basis -- and it's usually on a full-service basis -- or on a functional service basis, where appropriate. Our global business support services are a key function. And those of you who follow us closely, will recognize our discipline around the management of SG&A costs and our ability to drive forward our progress in terms of reducing SG&A across the world. We have a very centralized model here that's being able to be amortized across those 4 services groups and really gives us a significant advantage in terms of our ability to spend effectively in those areas, whether it be IT, our business development, HR, finance, human resources. All of those areas are bundled together and focused on a global basis but in a very centralized way. And we underpin that with a culture of innovation and creativity. We bring and we invest in innovative and creative solutions that we can prosecute our customers' programs and bring them to market. So that culture of innovation is one that we value very significantly within our organization. The next differentiator, as I'd like to call it, is our site and patient access group. Now we've moved this forward significantly. As I mentioned, we've made acquisitions in both North America and Europe of sites. We call them our Accellacare Site Network. They give us an advantage in how we prosecute our programs. We have our own people in those sites. They have the ability to bring patients who come to those sites into our clinical trials and to facilitate the clinical trials for our customers. We're able to recruit increasingly diverse populations of patients in that area. That's an area that you all recognize the regulators are particularly keen on, particularly post COVID, that we see a more diverse group of patients entering our clinical trial so that the results we get are valid right across our population. This helps us to be able to do that. And we certainly -- our involvement in the COVID vaccine trials was facilitated by our Accellacare Site Network and our ability, as I said, to bring diverse groups of patients into those trials. Our ability to connect with patients now is also an increasing focus as we move forward. We have our home healthcare network, nurses that go to patient sites. And I'll talk a little bit more in a moment about how we're bringing that in to our decentralized trial platform. So to talk about our decentralized platform -- and this is, again, one of the advantages and one of the benefits of the acquisition that we made, as I said, 18 months ago. We brought in a platform that we've now been able to develop significantly, we're making continued investments in. And we're now -- we're rolling out as we do more and more of these decentralized clinical trials. It's a platform that looks at not just the platform itself. There are a number of organizations who offer a platform or offer some sort of digital platform. What we're trying to do is wrap our services around that platform. So we have a strong platform, but we have an ability to wrap our services around that and to integrate it. It's all right to have a platform. But as you'll recognize, many of the patients we enter into clinical trials are older people. They don't always understand or able to use the technology that needs to be used, whether it be telemedicine or wearables or anything like that. So we have, to give an example, the concierge services, whereby we facilitate the ability of patients to be involved in their trials through an opportunity to talk with them, to take them through, to counsel them as they use the various components of that clinical trial. So it's -- that's a good example of how we're wrapping our services around the decentralized platform. On the other side of the coin there you look at the management of devices. Devices go back and forward from patients in these sorts of trials. They need to get a phone or an iPad or a wearable. They need to know how to use it. It needs to get to them. It needs to come back to them when the trial is finished. All of those sorts of services are sometimes forgotten when you look at our competitors and what they provide. So this is what we're trying to do in the decentralized space. We're trying to wrap our services around, make sure that our customers, and of course, the patients in their clinical trials can easily participate. It's all very well to talk about decreasing site and patient burdens in a decentralized trial, but you have to make that happen through providing the support and the counseling that's required. In terms of other technologies that we have as well, we have a One Search tool which we've been able to develop internally, allowing us to identify and to bring in a number of sources of data that we have internally and data sources externally to allow us to identify the best sites in a clinical trial. Obviously, when you run a clinical trial, you want all of your sites to be participating; you want all of your sites to be delivering and to be recruiting patients. That, of course, doesn't always happen. The industry average is in the vicinity of 20% to 30% of sites don't recruit a patient. You can imagine the inefficiency and the time and the waste of resources that happen. What we have with our site ID tool, One Search, is a significant reduction in that outcome, in that number of sites who don't recruit a patient. So many more, a greater proportion of those sites contribute to the clinical development program and to the trial. And that's particularly important for us and, of course, for our customers as well. Moving on then from those differentiators. One of the areas that I didn't specifically call out at the start, but which -- where I'm very proud that we've made significant amount of progress is around our ESG program at ICON. Caring for our patients, caring for people and, of course, caring for the planet is something we've taken -- or we continue to take very seriously. We've seen a significant improvement in our EcoVadis score over the last couple of years. We've been awarded an EcoVadis silver fern. We have further work to do there. You can see the targets that we have set ourselves to make progress on over the next few years. It's something, again, we take very seriously. This is important not just because we want to be good corporate citizens and we're good with our planet. It's important for our staff. It's important for our stakeholders, our customers, the patients that we work with. Our investors, of course, are all interested in what we're making and how we're progressing our ESG agenda. And it's something that, as I say, as an Irish organization, we take very seriously. And again, I'm very proud of the performance and the improvement we've made over the last few years. I wanted to make a comment or put a little bit of information out there in terms of what we've done, what we've delivered in terms of our integration with PRA Health Sciences. You'll recognize again those of you who follow us closely, that was a very significant acquisition. We basically doubled the size of our organization 18 months ago. We closed late -- end of June 2021. So we're well into that acquisition. We have some way still to go. As I say to my team, it's a marathon, it's not a sprint. But we've made very good progress in terms of the commitments and the expectations that we had as an organization going forward. So whether it be the customer retention, which we've been able to do nicely. We've built new partnerships with large pharma. We're increasingly building new partnerships with midsized pharma. And as a player in the industry now that's, as I say, in 1 or 2 -- in almost every segment, we are not to be ignored when it comes to making partnerships and building partnerships. We have a partnership orientated approach. We're Irish by origin and we're Irish headquartered. And there's a certain element of that Europeanness, if you like, in us in the way we build partnerships and build long-term relationships with customers. As I've mentioned, we've also brought in the digital platform. That was a very specific -- one of the reasons for making that acquisition. We've developed that. We continue to develop that. And I talked about that a few slides back. On the financial side of things, you can see revenue synergies are moving along at the right pace. We're expecting about $100 million in revenue synergies as we exit 2024. On the cost side of things, we've made significant progress. In fact, we're about a year ahead of what we expected to do. We put out a target number of $150 million in cost synergies in 2024. We'll get that for 2023. We've already realized about $100 million in cost synergies in 2022. And that's, again, one of the reasons that we've been able to see our EBITDA percentages, both currently and going forward at a better level than we initially expected as we made this acquisition. So you can see at the bottom of the slide there, revenue growth of north of 7% on a compound basis -- sorry, on a constant currency basis, and EBITDA -- and adjusted EBITDA and adjusted EPS progress in the 16% to 17% rate. So we really feel we've moved forward very well in terms of the integration of the acquisition. PRA and ICON too, as I say, similar sized companies coming together to form a real powerhouse in terms of a clinical development organization. In terms of the market dynamics, to put out there, again, some of this won't be a surprise to you. We see solid demand in the environment. Having said that, of course, there are some macroeconomic challenges. We all know what they are. I won't belabor the points around inflation and interest rates and the various things there. There is volatility in the macro environment that we are handling, and we're ensuring that our business is well positioned to accept and to understand and to operate within. Our customer partnerships are going well, as I said, large pharma, but also midsized pharma increasingly, companies who have $100 million to spend in their developments and choose either 1 of 1 or 1 of 2. So we can still be making -- have a very significant revenue inflow from those midsized pharma companies. Even if they're not the behemoths of the industry, they're certainly very significant spenders and they don't have the infrastructure that some of the large pharma have. And so our ability to do their work and to prosecute their programs is certainly there. Biotech funding has been a constant source of discussion over the last year, 12, 18 months, 24 months, continues to be so. We have seen some attenuation of biotech funding on the RFP side of things. But we've also seen some uptick in the large pharma, in the midsize space and also in the functional space. So all in all, again, I come back to the top point there, a solid demand environment, albeit some movement within each of the segments that we operate in. And as I said, decentralized trials continue to be an opportunity. The pandemic has accelerated significantly what we've seen in the decentralized there. Not every trial we do, of course, is a decentralized trial, but almost every trial has a component of decentralization in it, be it a wearable, be it electronic consent, be it our home health or our Accellacare Site services. So there is real opportunity, and we see a -- we're positioning ourselves, I think, very well to make sure that as that wave builds and as that moves forward, we are going to be well positioned to significantly benefit from it. In terms of market drivers, you can see that the market perhaps is somewhat attenuating in the next couple of years. We see a slight decrease, if you like, or at least more normalization of pharma R&D spend. On the other hand, penetration continues to move forward. Developments then continues to move forward. We believe we're in a good position given our capabilities, given our scale, given our focus to benefit from what we believe is a solid, as I say, market environment and a solid continuing increase in R&D spend and in outsourcing from our customers. Perhaps not quite at the level that it was in previous years, but certainly continues to be very strong. And we believe we're well positioned to take market share from particularly midsized customers, but also some of our brethren in the larger scale as well. We did release guidance for 2023 last night in a press release. So those of you again who follow us closely, will see that. We are at $7.94 billion to $8.34 billion on a revenue basis. That represents 3.3% to 6.8% growth at the margins there and around about 5.1% at the midpoint on a revenue line, 606 revenue line. On EPS, $12.40 to $13.05, again, representing 6.4% to 10.1%, about 8.4% at the midline. You can see the assumptions we've made down there. There's no M&A in there. There's no share repurchasing in there. That is organic growth. On a constant dollar basis, you could possibly look at adding 1% or 2%. Brendan can talk a little bit more about that in the question session. But we believe we're in a good place on that. We feel confident about our ability to execute. Our track record, as those of you who follow us will see has been pretty solid over the last 20 years. And the 2021 revenue line wasn't organic. I want to be honest about that one. That's where we doubled our size. And so -- but overall, you can see the increase in EPS. You can see the increase in revenue on an ongoing basis. And so I hope that gives you some indication of the track record that we have as an organization and our ability to prosecute the sort of guidance that we're putting out there. We are ultimately an organization that helps customers, helps biopharma companies bring drugs and devices to market effectively, efficiently. We've been recognized in a number of awards across the years here. We're particularly proud of the Scrip Award we won in 2022, so very recently. We're particularly proud of our expertise and our -- in the vaccine space and the contribution we made to the COVID vaccine working with one of our largest and most significant customers. We're also very proud of what we've done in terms of our diversity and the social aspects of our business as we bring opportunities forward. We do, as I said, take our ESG responsibilities very careful -- very responsibly and they are very important to us. And you can see, we've been recognized there as well. So with that, I will return to the desk. I do have a short video to play for you as we take up the question times [indiscernible]. [Presentation]

Thank you.

All right. So now we'll open it up to the Q&A. As a reminder, anybody can ask a question. Just raise your hand or submit it via the webcast. I guess to start. So just on the preannounced 2023 guide, revenue growth is expected to be 3.3% to 6.8%. I guess, first, can you walk through the upside and downside drivers to get to this range? And then I also don't think I saw what you're assuming for FX.

Yes. I think on an upside point of view, obviously, business wins is important for that. The last second half of 2022 and the first half of 2023 will play into that. We're not announcing, obviously, anything for Q4 at this stage, but we feel in a good place from that point of view. We feel we have some opportunities. Again, the makeup of the portfolio, vaccine work, rescue trials, things that burn a little faster, will get us more towards the upside. On the other hand, if the biotech funding really does continue or become more of a burden and large pharma and the FSP doesn't compensate for that, that may push us more towards the lower side. But we feel pretty confident that given the environment that we're seeing, given the RFP flow that we're seeing and we have seen over the last -- not just the last quarter or 2, but the last year or so, gives us pretty strong confidence that, that midpoint is certainly very achievable. And there's potentially more upside, but we're not -- we won't go there until we get into the year.

Yes. Maybe just to comment on the piece around foreign exchange. Our biggest currency pair is that euro dollar piece. So as we saw the significant strengthening of the dollar this year, it's still going to be a little bit of a headwind as we go into next year. So on a constant currency basis, it probably would have been about 1% stronger than what we're seeing at the moment. So it's about a 1% headwind as we go into 2023.

That's helpful. Just wanted to confirm. So the guide still implies book-to-bill of 1.2 to 1.3 on a quarterly basis. Curious what you're assuming for backlog conversion next year and kind of how that dynamic will play out?

Similar to where we were in Q3, around 9, 9.5 percentage is the number we're assuming from a conversion point of view. That may vary a little bit up or down. But at the moment, we're thinking around 9.5% is our conversion on a quarterly basis.

Okay. I guess on the bottom line, EPS guidance came in substantially above the Street. What are you seeing on the margin line that kind of led to the strong bottom line guidance? Anything that you'll call out there?

We're seeing 2 components. Obviously, there's a gross margin component, but there's probably more an SG&A component if I had to put a proportion on it. Probably 2/3 of the uptick there we see in the SG&A. And we see we have significant opportunities to continue to build our organization in an offshoring component or offshoring capacity. We've -- as we brought the 2 organizations together, we've seen significant opportunities there to enhance our low-cost country presence. We've also, again, back to COVID, seen that we can work almost from anywhere. And so we don't all need to be sitting next to a customer. We don't all need to be in high-cost countries even if our customers are. And so there's opportunities there, again, on relocating in an appropriate way and in a way that doesn't disrupt project and doesn't disrupt customers. We have obviously some headwinds with inflation and wage inflation, but we're able to mitigate those to some extent through discussions with customers, which have generally been very constructive certainly up until now. We found that they have a willingness to engage with us on that front given that they're not wanting to see turnover from a project team point of view as well. So as I look at it, the SG&A is probably the main area. There are other areas of SG&A as well. Robotics, AI is an area that we're continuing to push on. We see significant opportunity there. And so overall, we're a very disciplined organization. I talked about our global business services group and their ability to do their work in a most effective way. That's been a really -- I mean, they're a super group and a really great model for us and really one of the main reasons our SG&A has been, I think, world class.

Maybe just going -- touching on biotech funding. So SMID biotech RFPs are down year-over-year per your comments. You've recently stated that the market remains challenged through the first half of 2023. What does that mean in terms of the long-term trajectory of the business, that 7% to 9% growth rate you've laid out and $10 billion in revenue goal by 2025? Is there any risk to that now? How do you see the longer-term market play out for ICON?

Inevitably, there are -- that is aspirational goal. I mean, we're at 5% for this year, given -- that's largely because the biotech funding isn't quite where it's been in the last couple of years. I think what we have seen is a significant uptick in large pharma and in the functional. So overall, the RFP dollars have been solid and been pretty stable. So in the longer term, if the biotech funding continues to be challenged, significantly challenged and the large pharma doesn't -- then that will be a challenging goal. But we still feel pretty confident that in the longer term, we can get to that $10 billion number. We see our focus in these segments, the large pharma focus and the biotech focus, allowing us to prosecute and to execute our projects more effectively and to gain market share. So it really comes down to us and how we can build our technology and develop our technology and our analytics to do what we need to do for customers more effectively. And I think that's the challenge we have irrespective of -- obviously, the market has an important place in that. But we believe we have the capabilities to do that and to take market share to attenuate or to mitigate any of the risks whether in terms of biotech funding or anything else for that matter.

So large pharma has been strong this year. Curious as to how many large pharma partnerships you currently have? What are you doing to expand your presence in this market and gain share in the customer segment?

As we come together as 2 organizations coming together, we had about 60%, 65% of the top 20 strategic relationships. We've moved that up by a couple over the last 18 months. We've added certainly a couple of -- but probably just as importantly or even more importantly, we've added the midsized companies in more strategic partnerships. So the companies that are sort of 30 to 60, 30 to 50, who have significant development spends, but tend to focus then on not choosing 3 or 4 providers but are choosing 1 or 2 providers. And we've been the beneficiaries of a couple of those -- several of those partnerships, and they're starting to produce revenue. They're starting to produce work for us. So we see some significant uptick in that. And again, that was one of the major reasons for the merger, the acquisition of PRA Health Sciences. And it's playing out really well for us in that space.

Curious to hear if you've seen any wallet shares shrink at firms that maybe would have spread spend around to 4 or 5 CROs prior to biotech funding crunch, where maybe now they're only opting to work with 2 or 3. Has that contributed at all to your growth?

Yes. We've seen some opportunities and some -- a couple of instances where we've remained and there've been a couple who dropped out. These partnerships are always under evaluation. They tend to come up formally every 3 to 5 years. But they're all -- we're always being evaluated. We're only as good as our next project in the way we look at it. That's why we place such a high premium on execution and on building relationships with those customers. So there's been a couple. And there's been, in terms of full disclosure, a couple where, as we've come together, we've narrowed their options because we've become one company. Both organizations were partners of the company. And they look to add. We've been able to mitigate that through doubling down and to improve and to continue to develop our services and our delivery. And that's been effective. But we haven't -- we certainly haven't lost any customers. No one's walked away from us. And so that's been, I think, a very positive aspect of the whole integration.

I'll pause here for any questions. It looks like we have one in the front row. Do we have a mic runner?

I can just speak up.

Okay.

So just a question on your long-range plan, the 7% to 9% that you had laid out. What was the end market growth for large pharma versus SMID that you assumed in those numbers?

We didn't make any specific categorization of large versus SMID versus biotech in those calculations. That was more of a broader overall market. Inevitably, in our market, some -- there are times when biotech does particularly well, there are times when large pharma -- so we didn't actually put -- we didn't narrow it down to that level. That 7% to 9% remains a target. As I say, we were sort of focusing on around 5% next year given where we are. So we'll reassess that as we continue to go on. But I think for the moment, 2023 is 5%. And that's a realistic target given the overall challenges that we face and the macroeconomic environment and the market as we see it.

And just kind of following up on that. Can you size -- I think you mentioned your large pharma customers were a bigger piece of your overall business. Can you kind of size the large versus medium sized versus SMID?

Yes. I mean, when we came together as an organization, we talked about the fact that about half of our business was large pharma and about 45% was biotech. We've talked in the last little while about the fact that of the kind of our total backlog and revenue, emerging biotech was about 15% of our overall business. So that gives you an idea of the relative scales of the 3 pieces.

Just had one come in via e-mail. How much of the biotech RFP weakness should affect 2023 revenues versus being more top of funnel and ultimately affecting near-term backlog with revenue impacts beyond 2023?

Inevitably, there's some mitigation or there's some impact on 2023. The biotech sort of flattening, if you like, or downsizing has been in place for the last -- certainly the last couple of quarters. But as I say, we've seen significant uptick in large pharma work and in functional work. And so we do see that countermanding or counteracting the sort of attenuation on the biotech side of things. So overall, if you just had the biotech, focus just on that, yes, there'll be some impact. But it's more than compensated for by the improvement and the increase in the opportunities we're seeing in large pharma and in functional.

Got you. So scale players in the CRO space have fared better in this market versus some of your midsized and smaller peers. Can you just talk towards any sort of customer wins of note as a result of your newfound scale with PRA? And maybe just talk more generally about how customer conversations have changed since the merger?

We don't call out specific customer wins. I can say that we've certainly brought on a couple of large pharmas in a more strategic partnership. Those things, they take a little bit of time to ramp up. We get awarded work. We need to deliver that work. We need to show them that we're good partners, that we have an execution capability. And so that certainly happened. I mentioned the midsize. There's 2 or 3 again in the midsize where we brought on, and we're 1 of 2 or 1 of 1. And that's, I think, very encouraging. And as I said in my presentation, as the #1 or #2 player in the market in pretty much every segment we operate in, we have to be part of the conversation. I don't mean to be arrogant when I say that, but our partners, our customers want to hear from us. They know we have the capability, they know we're making the investments around decentralized platforms and around our technology, and they want to be part of that. And that helps them. We talk to our partner customers about where we should be putting our dollars and where we should be making our investment. You'll note in the guidance we've upped our CapEx spend next year to $200 million. That's a significant improvement, a significant increase, about a 30% increase on what we spend in 2022. So we are making significant investments. And a lot of those investments are in partnership with those customers, particularly those who want to see us and who want to tell us where they want to see those dollars expended and invested so they can -- their development programs can benefit.

I have a couple of minutes left here. Any other questions from the audience? Okay. I wanted to bring up price competitiveness. That's something that has really been in focus for you guys this year versus prior years. Can you maybe talk about the pricing environment for ICON? Has this been a competitive differentiator in 2022? And then maybe what you're seeing from a pricing standpoint in 2023?

Yes, it's been -- the environment has been solid. And as a consequence, then the pricing environment has been solid. This has always been an industry where it's competitive. So to say that we kind of -- we roll in there and we have our say is not the case. But it's always been competitive. But it remains a solid environment where we obviously have been able to successfully develop our margin profiles and be able to continue to deliver on them. I think as we come into the back end of this year, we've seen -- yes, have we seen it being competitive? Yes. Has it been abnormally competitive? Have we seen people acting in a strange way in the environment? No. So I think there is still rational competitive behavior out there, and that continues as we go into '23.

I'd be curious to hear your perspective if you've seen any uptick in licensing deals or M&A in biotech that maybe could prop up some of the biotech awards in 2023?

I don't think I can sort of necessarily point to a significant trend in that respect. There are always these deals that happen. Some are very positive from our point of view, whether it be deals on drug development or whether it be consolidation in the industry. We usually find when that happens there's more outsourcing that goes on. So we don't get worried about that sort of thing, those sort of dynamics within our customers' space. But I don't think I can point out any specific trends on that front at this stage.

Yes, not at this stage.

Okay. It looks like we have about 20 seconds left here. Any closing remarks or things that we missed that you would want…

I would just say that we feel we're in a very good position. If someone has offered me in February 2020 when we first announced the deal that we'd -- sorry, '21 when we first announced the deal that we'd be here in January 2023, I'd have taken it with both hands. We feel very good about the progress we've made on our integration. We are a significant player in the clinical development landscape now. We have a number of great customer partners that we continue to work with and continue to develop our services. We are very focused on what we do and we're very disciplined in what we do. So I think we're a very strong bet going forward over the long term.

Great. Well, I guess we'll leave it at that. Thank you both. Thank you, everybody, for joining us today, and have a great rest of the conference.