Executive Summary / Key Takeaways

• Medpace (NASDAQ:MEDP) is demonstrating robust growth, fueled by its specialized full-service Contract Research Organization (CRO) model and a strategic pivot towards faster-burning metabolic therapeutic areas.
• The company reported a strong Q3 2025 with 23.7% year-over-year revenue growth to $659.9 million and a record 1.20 net book-to-bill, alongside a 24.9% increase in EBITDA to $148.4 million.
• A significant 30% year-over-year increase in awarded work not yet in backlog, particularly in metabolic studies, underpins confidence in future revenue generation and backlog replenishment.
• Despite a historically challenging funding environment for biotech, Medpace's operational efficiency and disciplined approach have allowed it to convert opportunities effectively and maintain strong profitability.
• Preliminary 2026 guidance anticipates low double-digit revenue growth and high single-digit or greater EBITDA growth, with continued high pass-through costs reflecting the therapeutic mix.

Setting the Scene: Medpace's Differentiated Approach and Market Position

Medpace Holdings, Inc. stands as a specialized global contract research organization (CRO), singularly focused on delivering scientifically-driven clinical development services across Phase I-IV for the biotechnology, pharmaceutical, and medical device sectors. Founded in 1992, Medpace has carved out a niche by partnering predominantly with small- and mid-sized biopharmaceutical companies, a segment often seeking a more dedicated and expert-led approach to clinical trials. The company's global footprint spans North America, Europe, and Asia, with a workforce of approximately 6,200 employees across 44 countries as of September 30, 2025.

Medpace's core technological differentiator lies not in a single proprietary hardware or software, but in its disciplined operating model and integrated service delivery platform, underpinned by deep therapeutic expertise. This operational "technology" encompasses its end-to-end service suite, from development plan design and project management to regulatory affairs, clinical monitoring, data management and analysis, pharmacovigilance, and specialized laboratory and imaging services. The tangible benefits of this integrated approach include enhanced efficiency in trial execution, which translates into timely and cost-effective delivery of clinical development services for its customers. This specialized operational framework allows Medpace to streamline complex processes, reduce potential delays, and maintain a high standard of quality, thereby fostering stronger customer loyalty and potentially contributing to superior margins through efficient resource utilization. For investors, this operational excellence forms a critical part of Medpace's competitive moat, enabling it to attract and retain clients in a competitive market and support its long-term growth strategy.

In the competitive CRO landscape, Medpace operates alongside industry giants like IQVIA Holdings Inc. (IQV), Thermo Fisher Scientific Inc. (TMO), Laboratory Corporation of America Holdings (LH), and Charles River Laboratories International, Inc. (CRL). While IQV leverages extensive data analytics and a broad technology ecosystem, and TMO offers integrated lab services and clinical research through its PPD division, Medpace emphasizes its full-service clinical development and therapeutic specialization. This focus allows Medpace to compete effectively by providing a tailored approach, particularly appealing to clients who prioritize dedicated expertise and efficient execution over sheer scale. The company's win rate, while subject to quarterly fluctuations, has shown resilience, even as the broader market has seen more CROs invited to bid on opportunities.

The broader industry has faced a challenging funding environment for biotech, leading to increased scrutiny on trial costs and timelines. However, Medpace's strategic emphasis on therapeutic areas like Metabolic Disease, Oncology, and Central Nervous System (CNS) has positioned it to capitalize on shifting market demands. Notably, the company's significant exposure to metabolic studies, with GLP-1 related programs constituting approximately two-thirds of its obesity work, has become a key driver of its recent performance.

Financial Resilience Amidst Headwinds: A Look at Recent Performance

The period of 2024 and early 2025 presented Medpace with significant headwinds. The company experienced a "high level of cancellations" throughout 2024, particularly in pre-backlog awards, which created a "challenging backdrop to growth in 2025". The business environment "weakened somewhat" in Q4 2024, and by Q1 2025, RFP quality was "variable" and decisions were "slowing," with cancellations remaining "modestly elevated." This led to initial 2025 guidance projecting low single-digit revenue growth and flat to slightly declining EBITDA.

However, Medpace demonstrated remarkable resilience and a significant turnaround in the latter half of 2025. The second quarter of 2025 saw cancellations "down across the pipeline" and "very well behaved," coupled with "improved funding" for challenged programs and "accelerated client decisions." This momentum carried into Q3 2025, which reported "record net bookings" and a robust 1.20 net book-to-bill ratio.

For the three months ended September 30, 2025, Medpace reported net revenue of $659.9 million, a substantial 23.7% increase year-over-year from $533.3 million in Q3 2024. This growth was primarily driven by the Metabolic, Oncology, and Central Nervous System therapeutic areas. EBITDA for Q3 2025 surged 24.9% to $148.4 million, up from $118.8 million in Q3 2024, with an EBITDA margin of 22.5%. Net income for the quarter increased 15.3% to $111.1 million, resulting in diluted EPS of $3.86, compared to $3.01 in the prior year period.

The company's liquidity remains solid, with $285.4 million in cash and cash equivalents as of September 30, 2025, and a negative net days sales outstanding (DSO) of 64.3 days in Q3 2025, reflecting efficient cash management.

Operational Excellence and Strategic Momentum

A key driver of Medpace's recent acceleration has been a strategic shift in its therapeutic mix towards faster-burning studies, particularly in the Metabolic area. Revenue from Metabolic studies grew an impressive 59.75% year-over-year in Q3 2025 to $199.3 million, and 47.94% for the nine months ended September 30, 2025, reaching $495.1 million. This shift has led to a higher concentration of reimbursable costs, which favorably impacted Q3 2025 revenue. Management anticipates these pass-through costs to remain high, representing 41% to 42% of revenue in 2026, potentially peaking in Q4 2025 before moderating.

The company's backlog, as of September 30, 2025, stood at approximately $3 billion, a 2.5% increase from the prior year. Crucially, the total dollar value of awarded work not yet recognized in backlog (the "pre-backlog bucket") increased by approximately 30% year-over-year in Q3 2025 and is now "larger than our backlog itself." This robust pre-backlog, which is "over-indexed in metabolic," provides a strong foundation for future revenue generation and backlog replenishment, mitigating concerns about a potential "air gap" in growth.

Medpace's operational efficiency has been a consistent theme, with EBITDA margins benefiting from "productivity and lower employee-related costs" in Q3 2025. The company's headcount growth was relatively flat in 2024, but it anticipates accelerating hiring in the second half of 2025 and into 2026, particularly in North America (United States) and Asia Pacific (India), to support continued growth. This disciplined approach to staffing, coupled with low attrition rates, has enabled high staff productivity. Furthermore, Medpace has actively engaged in capital allocation, repurchasing approximately 2.96 million shares for $912.9 million year-to-date through Q3 2025, with $821.7 million remaining under its authorization program.

Competitive Dynamics and Sustaining the Edge

Medpace's competitive positioning is defined by its specialized, full-service model, which contrasts with the broader, more diversified strategies of larger CROs. Against IQVIA, which excels in data analytics and integrated healthcare solutions, Medpace offers a more focused and efficient clinical trial execution, particularly for small- to mid-sized clients. While IQVIA's technological breadth in data provides comprehensive insights, Medpace's operational discipline aims for faster and more cost-effective trial delivery. Similarly, when compared to Thermo Fisher Scientific's PPD division, Medpace's tailored approach to clinical trials stands out against TMO's extensive lab and instrumentation resources. Medpace's emphasis on regulatory and trial execution expertise is a key differentiator, fostering client loyalty.

Against Laboratory Corporation of America Holdings (LH), which integrates diagnostic testing with CRO services, Medpace provides a more holistic drug development suite. Medpace's focused operations can lead to faster trial data analysis, complementing LH's broader diagnostic support. Finally, compared to Charles River Laboratories (CRL), which specializes in early-stage development, Medpace offers comprehensive Phase I-IV coverage, potentially building stronger long-term client relationships through its end-to-end support.

The CRO industry faces high barriers to entry, including the need for extensive regulatory expertise, established client relationships, and significant capital for global operations. These barriers help Medpace defend its market position, though they can also favor larger, more established competitors. Despite increased competition and pricing pressure, particularly from funding-challenged biotech clients, Medpace has maintained its competitive stance by focusing on efficiency and value. The company's ability to adapt and "jump where we need to be" in response to client needs underscores its strategic flexibility.

Outlook and Risks: Charting the Path Forward

Medpace has significantly raised its full-year 2025 guidance, reflecting the positive trends observed in Q2 and Q3. Total revenue is now expected to be between $2.48 billion and $2.53 billion, representing 17.6% to 20% growth over 2024. EBITDA is projected to be in the range of $545 million to $555 million, indicating 13.5% to 15.6% growth. Net income is forecast between $431 million and $439 million, with diluted EPS of $14.60 to $14.86. These upward revisions are attributed to lower cancellations, improved client funding, accelerated project starts, and the favorable therapeutic mix shift.

Looking ahead to 2026, Medpace's preliminary outlook anticipates low double-digit revenue growth and high single-digit or greater EBITDA growth. This guidance assumes that cancellation rates, identified as the "biggest sort of wild card," will remain at reasonable levels, albeit potentially slightly higher than Q2 and Q3 2025. Pass-through costs are expected to stay elevated at 41% to 42% of revenue, primarily due to the ongoing prevalence of metabolic studies and the back-loaded nature of these expenses in clinical trials. While high pass-throughs may temper EBITDA growth relative to revenue, core direct service margins are expected to remain strong due to continued productivity and low employee attrition.

Key risks to this outlook include a potential resurgence of high cancellation rates, particularly if the biotech funding environment deteriorates further. While the funding environment has shown signs of stabilization, it remains "acute for many of our clients." Regulatory changes, such as those introduced by the One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025, could also impact the company's tax provisions and operational landscape. Medpace's strategy to mitigate these risks involves disciplined operational execution, a focus on high-quality RFP opportunities, and strategic hiring to support growth.

Conclusion

Medpace Holdings, Inc. has demonstrated a compelling turnaround in 2025, moving past a challenging period of elevated cancellations and a cautious biotech funding environment. The company's specialized, full-service CRO model, coupled with its deep therapeutic expertise and operational efficiency, has proven resilient. A strategic shift towards faster-burning metabolic studies has been a significant catalyst, driving robust revenue and EBITDA growth and underpinning a strong outlook for the remainder of 2025 and into 2026.

The substantial increase in awarded work not yet in backlog, particularly in high-growth areas like metabolic disease, provides a solid foundation for sustained expansion. While the competitive landscape remains dynamic and funding challenges persist for some clients, Medpace's disciplined execution and ability to deliver timely, cost-effective clinical development services position it favorably. Investors should monitor cancellation trends and the broader biotech funding environment, but Medpace's current trajectory, supported by its operational strengths and strategic focus, presents a compelling investment thesis for continued growth.