ICON PLC

NASDAQ:ICLR

Earnings Call Transcript 2022-Q1

[Operator]

Good day and thank you for standing by. Welcome to the ICON Plc First Quarter results 2022 Conference call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session [Operator instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kate Haven. Please go ahead.

[Kate Haven, Vice President Investor Relations]

Thank you. Good day and thank you for joining us on this call covering the quarter ended March 31st, 2022. Also on the call today, we have our CEO, Dr. Steve Cutler, and our CFO, Mr. Brendan Brennan. I would like to note that this call is webcast and that there are slides available to download on our website to accompany today's call. Certain statements in today's call will be forward-looking statements.

These statements are based on management's current expectations and information currently available, including current economic and industry conditions. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business and listeners are cautioned that forward-looking statements are not guarantees of future performance. Forward-looking statements are only as of the date they are made, and we do not undertake any obligation to update publicly any forward-looking statements either as a result of new information, future events, or otherwise. More information about the risks and uncertainties relating to these forward-looking statements may be found in SEC reports filed by the company, including the

Form 20-F filed on March 1st, 2022. This presentation includes selected non-GAAP financial measures which Steve and Brendan will be referencing in their prepared remarks. For a presentation of the most directly comparable GAAP financial measures please refer to the press release section titled Condensed Consolidated Statements of Operations. While non-GAAP financial measures are not superior to. For a substitute for the comparable GAAP measures, we believe certain non-GAAP to GAAP information is more useful to investors for historical comparison purposes.

Included in the press release and the earnings slides, you will note a reconciliation of non-GAAP measures, adjusted EBITDA excludes stock compensation expense, restructuring costs, foreign currency gains and losses, amortization and transaction-related costs and their respective tax benefits. We will be limiting the call today to one hour, and we therefore ask participants to keep their questions to one each with an opportunity to ask one related follow-up question. I would now like to hand over the call to our CFO, Mr. Brendan Brennan,

[Brendan Brennan, Chief Financial Officer]

Thank you Kate. In Quarter 1, ICON achieved gross business wins of $2.78 billion and recorded $357 million worth of cancellations. Consequently, net awards in the quarter were $2.43 billion, resulting in a net book-to-bill of 1.28 times. With the addition of the new awards in Quarter 1, our backlog grew to a record $19.6 billion, representing an increase of 2.7% on Quarter 4 of 2021, or an increase of 9.8% year-over-year on a combined company basis. Our backlog burn was 10% in the quarter consistent with Quarter 4. Revenue in Quarter 1 was $1.902 billion this represented a year-on-year increase of a 121.6% or a 125% on a constant currency basis. On a combined company basis, revenue increased 6% to 6.1% or 7.8% on a constant currency basis from the comparable period last year.

The revenue impact from year-over-year changes in foreign currency exchange rates resulting in a headwind of approximately $20 million in quarter one. Our top 25 customer concentration increased slightly from Quarter 4 as our top customer represented 8.9% of revenue, and our top five customers represented 28.6% of revenue. Our top 10 represented 43.8%, what our top 25 represented 62.8%. Adjusted gross margin for the quarter was 27.8% compared to 28.1% in quarter four. Gross margin was negatively impacted in the quarter by the slowdown in Russia and Ukraine, as well as supply challenges in our laboratory services business.

Adjusted EBITDA was $340.6 million for the quarter, or 17.9% of revenue. In the comparable period last year adjusted EBITDA was $285.9 million on a combined company basis, or 16% of revenue, representing an impressive year-on-year increase of 19%. Adjusted operating income for quarter one was $314 million, a margin of 16.5%. The adjusted net interest expense was $38.5 million for quarter one, the reduced interest expense was attributable to the 25 basis points decrease in the race on our term loan be facility, which took effect at the end of quarter four when our leverage ratio declined below four times adjusted EBITDA.

This resulted in a $0.06 benefit to earnings per share over quarter four. We do not expect this level of expense to continue in subsequent quarters as we anticipate, a rising interest rate environment over the course of this year. The adjusted effective tax rate was 17% for the quarter. Overall we continue to expect the full-year 2022 adjusted effective tax rate to be approximately 16.5%.Adjusted net income attributable to the group for the quarter was $228 million, a margin of 12%, equating to diluted earnings per share of $2.76, an increase of 27% year-over-year. In the first quarter, the company recorded $12.1 million of transaction and integration related costs. U.S. GAAP income from operations amounted to $170.3 million, or 9% of revenue during Quarter 1. U.S. GAAP net income attributable to the group in Quarter 1 was $112 million, or a $1.36 per diluted share compared to a $1.82 per share for the equivalent period last year. Net accounts receivable was $745 million at 31 March, 2022.

This compares with a net accounts receivable balance of $642 million at 31 December, 2021. Cash collection efforts continued to be strong with DSO of 35 days in the quarter, down from the 49 days in the comparable basis from March 31st, 2021, and up from 31 days on comparable basis at December 21, 2021. The sequential increase in DSO is a consequence of ongoing finance integration activities and alignment billing processes. As this work is completed, we would look to maintain and decrease our DSO. Cash generated from operating activities in the quarter was $227 million. At March 21st 2022, the company had a cash balance of $560.8 million and a debt $5.142 billion leaving a net debt position of $4.581 billion.

This compared to net debt $4.682 billion at December 21, 2021 and net cash of $595.6 million at March 21, 2021. Capital expenditure during the quarter was $19.6 million. We ended the quarter with our performance net debt to trailing 12-month adjusted EBITDA ratio of 3.3 times. The priority for capital deployment remains on debt pay down in the near term, and as such in quarter one, we made a payment of $300 million on our term loan B facility. Given our continued strong cash flow generation, we reiterate our target of exiting 2022 below 3 times adjusted EBITDA.

As announced on our last call, our Board of Directors authorized a share repurchase programmable to a $100 million. I'm pleased to report we were successful in deploying the full authorization of a $100 million within Quarter 1, resulting in the purchase of 421,000 shares at an average price of $227.76. With all of that said, I'd now like to hand over the call to Steve.

[Steve Cutler, Chief Executive Officer]

Thank you, Brendan, and good day everyone. I had a strong start to the year in Quarter 1, reflecting continued operational strength and business momentum, despite macroeconomic headwinds impacting our business. Throughout the year, ICON employees continue to exhibit their ongoing resilience and dedication to delivering customers programs as effects from the pandemic continued with the emergence of new COVID variants, and the war in Ukraine presented a new set of challenges. Ensuring the safety of our employees in the region is our first and foremost priority.

We've been able to provide support to many Ukrainian families and employees that have crossed the border to neighboring regions, and assisted in relocation to other ICON offices where circumstances allow. We are working closely with our customers to ensure studies continue and patient safety is my intent to the full extent possible, deploying remote technologies for monitoring and assisting dislocated patients in finding new trial sites.

Patient recruitment activity in the region has been halted and no new studies or sites are being started at this time in Russia or the Ukraine. Earlier this month, I was in our office in Poland, which has been at the forefront, hoping to provide the on-the-ground support to many of our employees leaving Ukraine. I'm incredibly proud of the extraordinary efforts exhibited by our employees in Poland and nearby countries. Our staff in the region not only have gone above and beyond for their colleagues and for our customers, [Indiscernible], and patients as well. Ensuring trial continuity and mitigating risk to the best of our abilities.

They are an excellent representation of the ICON culture and we are grateful for their dedication and tireless efforts. In the quarter, the financial impact from the war in Ukraine was approximately $5 million. We anticipate a continued impact in subsequent quarters, up to an estimated 1% of revenue for the full year, assuming no further change in our ability to operate in the region for the foreseeable future. Despite challenges from the war in Ukraine and emergence of additional COVID variants, the broader environment to clinical development remains strong.

Total RFP volume was solid in Quarter 1 increasing by low double-digits on a year-over-year basis. While the biotech funding market declined further in the quarter, we have seen Pharma R&D spend continue to grow, and we have not witnessed the slowdown in RFP activity in the small and mid-sized Biopharma segment, which was consistent with the strong levels we saw in Quarter 4, 2021. Additionally, I would note that we haven't seen an uptick in the level of cancellations or project delays in this segment of our business, we have continued to see private and venture capital funding supporting companies with strong signs and novel therapies in areas such as oncology, rare disease, infectious diseases, and neurology.

In the last few years, Icon has worked with over 1,000 emerging biopharma companies. And our consultative partnership model strongly appeals to this customer segment. We have confident with Icon's ability to continue winning market share across the Biotech and small farmer segment giving our leading expertise and purpose-built Biotech unit, consisting of 8,000 dedicated employees. Our backlog exposure to capital market dependent companies remains low, and our strong position across all other key market segments should ensure our business wins remained robust, in the foreseeable future.

Our business development performance was excellent in the quarter, resulting in another record quarter of net business wins of $2.43 billion representing a net book-to-bill of 1.2% for the quarter, and 1.27 on a trailing 12-month basis. Backlog grew 10% year-over-year to $19.6 billion on a combined company basis, an increase of 2.7% sequentially from quarter four 2021. Sales performance was particularly strong in our large farming unit that was broad-based across all business units, reflecting continued demand for our innovative and integrated solutions.

Strategic discussions across several key partnerships are continuing to advance presenting opportunities for growth and expansion across our business segments. Our clinically focused, but diversified business mix and customer - centric offering, has played a key role in winning new customers and renewing existing partnerships as customers seek flexible development models along with a broad set of services and expertise. One of our key success factors in building and maintaining strong customer partnerships is our commitment to collaboration and operational excellence.

In the quarter, we held our first partner of choice meeting as new ICON, bringing together several of our partners in the Strategic Solutions segment of our business to share insights and why the further is innovate in this area. ICON is leading the way with its approach to customer engagement, and events like this clearly demonstrate our commitment to our focus on creating enduring customer partnerships. Financial performance was strong in the first quarter, resulting in combined company revenue of 6%, or 8% on a constant currency basis, year-over-year.

These results exceeded our initial expectations given difficult comparisons on a year-over-year basis from high pass-through revenue related to COVID studies and further headwinds due to foreign currency fluctuations, and the war in Ukraine, which will continue to challenge us in Quarter 2. Despite these macro headwinds, operational performance was impressive with adjusted EBITDA growth of 19% year-over-year on a combined accompanied basis in quarter one, as SG&A cost management was particularly strong due to achievement of initial cost synergies. I was also very pleased with our adjusted earnings per share of $2.76, which grew 27% from quarter one 2021.

At a high level, our overall customer mix has stayed consistent and well-balanced in quarter one with approximately 50% of total revenue in large Biopharma and approximately 45% of total revenue in mid and small Biopharma. Within the small Biopharma segment, companies that have less than a $100 million in annual R&D spend, again represented a mid-teens percentage of our overall revenue and backlog for quarter one. Given our cash collection efforts in the quarter, we were able to make a $300 million payment on our term loan b facility, further reducing our leverage to 3.3 times adjusted EBITDA at the end of the quarter down from 3.4 times at the end of Quarter 4. We believe we are on track to hit our aspirational target of exiting 2022 with a leverage ratio of approximately 2.5 times adjusted EBITDA.

Our integration progress continued throughout Quarter 1 as we passed the one year mark since we announced the transformative union with PRA Health Sciences that now completed 9 months operating as a combined organization. Our focus on enabling a unified employee experience has continued to advance, bringing more of our stuff together physically through facility integration of which we have now completed 50 across the globe. Even more importantly, our efforts to connect the organization through the implementation of common platforms and enterprise-wide technology systems are reaching critical milestones.

A few of our first system implementations, including our human capital management system, will go live this quarter. And we are advancing deployment, several other Tier 1 enterprise-wide systems, which will come online in the next few months. Our successful integration efforts to-date have enabled continued progress on our synergy targets. And as we reaffirmed in March at our Analyst Day, we expect to realize approximately 50% of our cost synergy target, or $75 million in 2022. From our revenue synergy perspective, our cross-sell activity was again strong in Quarter 1, with approximately $30 million in new awards, consistent with the activity in the fourth quarter of 2021. Cross-sell awards in the first quarter were led by the laboratory services, early phase, and by our [Indiscernible].

Turning to COVID related trends, it was several notable factors impacting our business in Quarter 1. Revenue related to COVID studies was consistent with Quarter 4, representing a mid-single-digit percentage of overall revenues. Backlog related to COVID programs was approximately 5% total ending backlog, as we were successful in winning new business for additional vaccine work related to boost studies in the quarter. These additional study wins our evidence that COVID related work will be part of our business for some time and an excellent testament to ICON’s leadership in vaccine development and strong trial execution in this area.

With the new awards won in Quarter 1, we expected COVID -related revenues will represent approximately 5% of our total revenue for the full year 2022. From aside excess perspective, we saw continued resilience from site and staff throughout the quarter, despite the emergence of addition COVID variant and the lockdown in China causing restricted access to site that had previously reopened. This dynamic coupled with site access impacts from the war in Ukraine holds a slight increase in the number of sites restricted in some capacity. Now totaling approximately 17%. While we have seen volatility in levels of site access across different regions, either due to COVID or more recently from the war in Ukraine. Our teams are now able to pivot faster and more seamlessly, by deploying remote based solutions, lessening trial impacts that would have been more substantial two years ago.

We have seen continued adoption across customer segments of decentralized trial components, particularly hard good models of development. While we have noted that fully decentralized trials are few in number currently, we were pleased to have started a recruitment on a full phase two decentralized Clinical Trial study in Women's Health in Quarter 1, this study is a great example of the power of our broad set of integrated services with the trial is being executed utilizing multiple decentralized components.

Digital patient recruitment services, our Accellacare site network, and concierge services center, with the study managed by our decentralized clinical trials operational team. We remain focused on our commitment to further invest in key technologies, tools, and platforms that will improve efficiency and delivery in our industry. One Search, our innovative site selection tool, is continuing to deliver insights to our customers on optimal site selection reducing site start-up times, decreasing the number of normal recruiting sites, and improving overall patient recruitment rates.

During the quarter we invested further in the tool with interface updates to enable better user experience and data enhancements to add valuable data sources, as well as back-end mapping. We've continued to look for opportunities to integrate broader sources of data, not only to One Search but across our entire set of solutions. Our focus is on increasing our access to not necessarily ownership of unique data sources, as well as the evaluating partnerships and other opportunities that advance our health care intelligence strategy while further enhancing our analytics capability, producing more targeted results and outcomes for our customers.

Another area of strong focus for our organization is automation. Through the additional capacity provided by robotic process automation, we have continued to enable our new capabilities and offerings customers with the outputs of clinical trials can be delivered in a more timely way and at a higher level of consistency and quality. A great example of this in the completion of our ETMS, which has been one of the strongest areas for RPA productivity in 2022 so far, with over 2,800 FTD business days saved in Quarter 1. In addition, we continue to leverage advancements in technology, enabling us to employ remote monitoring across a range of workflows in our clinical trials.

We are unifying our sights towards a single way of working, enabling remote review of ECG's and lab reports, and combining patient recruitment and scheduling into an overall integrated capability. As clinical development continues to evolve and bio - pharma customers increasingly look to their partners to provide innovative solutions, we see an excellent opportunity to lead the market with our focus on health care intelligence. We believe our investments in talent, technologies, data, and analytics are leading to improvements in long-held industry challenges: basic recruitment, site identification, and study startup, just to name a few. We remain excited by the opportunity to create a new paradigm for bringing clinical research to patients, and the enhanced outcomes it will deliver for all of our stakeholders.

With the strong performance in the first quarter, we continued positive customer demand environment, we are reiterating our 2022 financial guidance revenue in the range of $7.77 to $8.05 billion and adjusted earnings per share in the range of $11.55 to $11.95. As indicated at our Analyst Day in March, we expect an adjusted EBITDA margin of approximately 18% in the full-year 2022. Finally, earlier this month, I was honored to accept the award of Island's Company of the year 2021 business and finance awards, on behalf of ICON.

This award recognizes companies based on their market position, operational and financial achievements, and is attributed to the dedication and engagement of our 39,000 employees around the world. Before moving to our Q&A session, I would like to take an opportunity to recognize our employees for their commitment and efforts in Quarter 1. We look forward to the continued success of our organization throughout the year as we remain focused on delivery for customers, sites, and patients around the world. Operator, we're now ready for questions.

[Operator]

Thank you. Dear participants, we will now begin the question-and-answer session. [Operators Instruction]. The first question comes from the line of Elizabeth Anderson from Evercore, ISI. Please ask your question.

[Elizabeth Anderson, Evercore, ISI]

Hi, guys. Good morning. Thanks so much for the question today. I think your comments on the Biotech funding environment, I think we're very helpful in the impacted your business. I guess one question I would just have given some of the reports that was seen from competitors. Are you just seeing -- how are you thinking about the RFP flow across the various stages of your business? Would you point out any notable distinctions between earlier phase things and later phase things, any head details there you could provide would be helpful.

[Steve Cutler, Chief Executive Officer]

Sure in terms of RFP flows being consistent and strong, those are referenced low double-digits across the business. That was particularly good this quarter in large pharma, it was particularly strong in Quarter 4 in the Biotech area and it's been consistent nearly across all the segments of the business. We're pleased with the access we are getting to new opportunities from customers and it continues to find a very positive picture.

[Elizabeth Anderson, Evercore, ISI]

Got it. And then just follow-up, have you heard of any customer restructurings or anything like that on the Biotech side for a financial or non-safety efficacy visa, and does that any distinction in versus prior quarters.

[Steve Cutler, Chief Executive Officer]

No, we haven't. We have to be very direct on that one. No, that hasn't come across my radar screen. I think Brendan is shaking his head as well.

[Brendan Brennan, Chief Financial Officer]

No. At this stage, certainly in the customer set that we have, we're very happy. We do a lot of work with those folks as we onboard them to make sure that they are really good customers and our -- have good funding access. Yes, we've been very happy with the customer base from my perspective. And you will see that there's no increases in our -- by debt provisions or anything about nature. So we're very happy with that.

[Elizabeth Anderson, Evercore, ISI]

That's okay. Thank you very much.

[Operator]

Thank you. The next question comes from the line of Eric Coldwell from Baird. Please, ask your question.

[Eric Coldwell, Baird]

Thank you. Good afternoon, overseas. I would say 2 questions here. First, following on Elizabeth's question, if you could provide just a recent update specifics on, and I'm sorry if I missed this, the percent of backlog, percent of revenue of these pre -commercial biotech's or I think you called them capital markets for Alliant clients. And then my follow-up would be -- or additional question would be, you mentioned supply chain impacts on the labs here in the quarter.

I was curious if you could give us some additional detail. Are these specific components, is it more around transportation and freight, just anything you could share with the supply chain impacts on the lab-based business would be helpful. Thank you very much.

[Steve Cutler, Chief Executive Officer]

Sure. Hi, Eric. So in terms of backlog and revenue for the capital markets have been, the way we've defined that is, companies would spend less than $100 million annually in R&D. That's the group we've been focusing on. We've been public before in saying that's around mid-teens, like you're at 15% of our revenue, and our backlog is in that space, in that category. Whether they are entirely capital market dependent, I think we can all debate, the definitions probably vary a little bit.

But we've been -- Eric -- and we think of our exposure in particular, in probably a little less than that going forward, and as we continue to be very careful in who we work with in this thing we do, we have a very careful screening process as we get these opportunities come through the door, and we checked the financial viability of these customers. So it is an area that our finance group look up very hard. But it remains around that, as I say, the mid-teens for us. In terms of supply chain challenges, unless it was really particularly around kit supply at the moment, we've had some challenges.

The components of various components of kits, particularly for the more complex studies we're doing in the oncology space, they have -- it has been something of a challenge to obtain those components and it has led to some delays in the -- We believe it's a relatively short-term problem that we're able to address, though I do expect in the next couple of months, we'll be able to move forward and to move those out of our -- move those challenges away, so to speak. But it has been really around keep suppliers opposed to transportation, or anything like that.

[Eric Coldwell, Baird]

Thank you very much.

[Operator]

Thank you, the next question comes from the line of Patrick Donnelly from Citi, please ask your question.

[Patrick Donnelly, Citi]

Thanks for taking the questions guys. Steve, you kind of touched on SG&A being a focus during the prepared remarks, talking about it coming in ahead of your expectations. Can you just talk about what you're seeing there? Again, is it some of the cost being pulled forward on the synergy side, obviously inflation and wage inflation have been a big focus for investors. Can you just talk about the moving pieces? I thought it was interesting you called that out as a nice lever for the margin side.

[Steve Cutler, Chief Executive Officer]

Yeah, Patrick. We think we've got a really good model in that scheme -- in that area. We are -- it's a relatively centralized, the costs of scrutinizing control. I think we've got a pretty good track record really over the last dozen or so years in that space. And a group right across the global business services group, whether it be IT, HR, facilities, administration, etc. What is that -- what does those costs very carefully? And we've been able, I think, to gain some of the synergies we've been after as we bring together PRA Health Sciences and bring them into that model.

Now that's a process that continues and as we said, we've been able to identify about $75 million for this year. We believe we can continue doing that. We've identified 150 going forward and that's a target we feel very comfortable with it at the moment. To get down to specifics, I mentioned, I think I referenced the 50 integrations or clauses on the office that's been a substantial saving. We've made some progress in the IT fund around the number of applications we're working with. That's been substantial, some of the -- on the IT and in the HR areas as well. It's fairly broad range, but it really comes down to the model we have in place and that the scrutiny that all of the leaders in this area put on those costs.

[Patrick Donnelly, Citi]

That's helpful. And then maybe one for Brendan more on the modeling side. Can you just talk about the FX impact, again, encouraging to see you guys reiterate the overall number. I assume FX increases headwind implied in the organic and maybe a little bit better, so can you just touch on that? And then on the back of that, just the linearity of the year as we look ahead the cadence from the quarters. 2Q, anything to call out there? Just given the COVID roll-off, FX, Russia, Ukraine, it seems like things are hitting the first half maybe a little harder. So just curious in terms of how we should think about the cadence as we model revenue and earning values.

[Brendan Brennan, Chief Financial Officer]

Yes. Thanks, Patrick. As we mentioned on I called it out. It actually was a $20 million dollars headwind in Q1 on the FX and obviously we came into the year thinking about a year of a $1.15 so the euro, a dollar, which is our primary currency payer. Obviously you can see where the dollar is at the moment. Certainly as we talked about the guidance, we were more in the ballpark of a $1.08 and obviously it's like right now and I was 31 March right now, obviously it's even weaker does not again, so it's something is of concern and we will keep a continued eye on it, which are quite right in the face of that headwind we're still obviously confident enough in the revenue position to reaffirm our revenue guidance for the full year.

I think your point on the sequential nature of revenue and how we will come through the course of the year is good one, and we had said that we were lapping these big COVID trials and Q1, Q2, probably the biggest quarter that we had in 2021 was whatever doubt Q2. And so that will represent the toughest comp that we have. And we did say first half of the year would be more like mid-singles on second half would be high singles.

So you've seen a decent performance we feel in the 6 and 7.8% on a constant currency basis in Quarter 1, Quarter 2, is a tough quarter from a comparative perspective given that big bolus of work we saw coming through from the COVID work in Q2 next year, I'll just say once we get through Q2 into Q3 and Q4, we are obviously back to that high single-digit profile and that is how we're thinking about the remainder of the year.

[Patrick Donnelly, Citi]

Very helpful. Thank you.

[Operator]

The next question comes from the line of Casey Woodring from JPMorgan. Please ask your question.

[Casey Woodring, JPMorgan]

Thanks for taking my questions. Just wanted to talk about pricing. How should we think about what's embedded in the guide for the year? And given all the different macro factors, supply chain, Biotech funding environment, how is pricing trending?

[Steve Cutler, Chief Executive Officer]

I would say Casey, pricing is trending well. It's not -- this is an ever -- anything other than a very competitive business pricing wise, but customers do understand that inflation is moving up, that there are some challenges in the labor markets that we are all aware of, and certain terms of our negotiations, whether it be renewals of MSAs or contracts, I would say it's probably as favorable as it's ever been.

And I don't mean to say it's easy, but customers are smart, they have many times the same sort of challenges we have in terms of retaining this stuff and understanding that we need to pay at market salaries and bringing in new stuff can be expensive as well. So I would say the pricing environment as I say is relatively positive. Although as I've alluded to, the cost side of things is also a little more challenging than normal, so it's balancing off pretty well from our perspective, and hence I think we're optimistic in terms of how we can progress our gross margins in the more medium-term.

[Casey Woodring, JPMorgan]

Got you. And then just one on the Biotech funding piece, we're hearing anecdotally about large Pharma looking for license and partner more with some of these smaller Biotech s, given the current market environment. Would you call this out as a trend in the industry that you're seeing? And would there be any impact there for you guys, maybe perhaps a source of competitive advantage given your relationships with some of these large Pharma customers? Thank you.

[Steve Cutler, Chief Executive Officer]

We have seen a few examples of customers that we're partnered with on a large scale basis, and our large Pharma partners acquiring companies, and us being able to then move our relationship, or move our partnership to that smaller company, that's certainly happened. And even it's gone the other way, occasionally, where we've had a good relationship with a smaller company and been doing a project and we've been able to move into a relationship with a larger company. So it works both ways, and we have some examples of doing that.

It's generally a positive for us. I would just say on the Biotech side of things, we had about 10 biggest wins in the quarter, five of them were from small Biotech companies, and led to substantial wins. I think I've said it before, these companies are ambitious. They continue to want to move through their drugs to market, and then potentially partner once they go into more commercial space. But in the sense of the clinical development we have, a number of very ambitious, small Biotech customers, and I have been allocating us a very substantial wins.

All their Top 10 in terms of backlog, and our Top 10 wins this quarter, half of them are being the Biotech spikes, so it's more companies. To really to make all this well, these companies have the money and are willing to spend it in the clinical space.

Excuse me Kate. Have you finished with your questions?

[Casey Woodring, JPMorgan]

Yes. Thank you.

[Operator]

Thank you very much. The next question comes from the line of David Windley from Jefferies, please ask your question.

[David Windley, Jefferies]

Hi, good morning. Good afternoon for you guys. Thanks for taking my question. Steve, I was hoping you could maybe add some additional color to the traction that you're seeing post-merger. You have some cross-selling that you highlighted. You have DCT capabilities that are coming together nicely as you integrate the 2 businesses. And you, in that vein, talked about at the Investor Day -- Analyst Day, some Big Pharma relationships that you've been able to wedge your way into of late that you hadn't worked with for quite a long time. So just hoping you could kind of drill in a little bit on maybe what areas are resonating the best with the client audience.

[Steve Cutler, Chief Executive Officer]

Well, let me start with the DCT, in the new release of our platform this quarter that we're getting a lot of engagement, not just from large Pharma, but right across the spectrum of customers on our DCT platform. But not just the platform itself, but the approach that we're taking in terms of integrating our services around our home-health, our nursing group, at site network of course, the wearables expertise, Mapi the acquisition we made a few years ago is being integrated into the platform, so there's a number of components that are coming together very nicely.

And lot of it is sort of relatively early days in terms of discussions around the platform and our approach, but we are engaging a number of customers on the large side, but also in the Biotech space as well, around that platform and around our offering on that. In terms of cross-selling I referenced about $30 million again, we want to continue to move that forth, inevitably when you bring two large organizations together there's an element of learning what we have, learning what options the organization has to sell. We're doing well in the lab space around our imaging space. The home health care, the site network are all contributing revenue if you like, or sales that wouldn't otherwise that being the case if we've remained as independent entity. So we see good progress there, albeit, we expect to see further progress going forward, but I think our $100 million in revenue synergies is a target that is very achievable over the more medium to longer-term.

Of course, these awards always take some time to come online in terms of the Big Pharma. We think we mentioned in the last quarter call, that we actually saw end up very significant customer on the partnership environment. We've made some further progress with another one where we believe we're going to move towards a partnership agreement. We haven't we there yet, but we made some good progress partly on our DCT approach, partly on and you scale and functional expertise in an abilities. The fact that we were a client now that our customers and large Pharma particularly want to talk to.

I believe they're both customers and both partners that we weren't really in a strategic relationship with as an independent Icon all or independent PRA Health Sciences, so I feel one of the, one of the key rationale for coming together is really being played out with these partnerships. And then there are a couple of others that are probably a little bit further back in the process. These things take a while, but I do feel that wearing the conversation now, with every large partner when they are looking to renew their policy for their strategic alliances with the CRO. We are part of that conversation and that's exactly where we want to be.

[David Windley, Jefferies]

Excellent. I appreciate that. My follow-up question is around the capital related to this. So I know your primary goal and target with your cash-generation is to pay down the debt in the near term. Do you see -- do you imagine yourself moving back to a tuck-in acquisition type strategy once that is complete? And what would those -- if that's the case, what would those tuck-ins be? For example, would you look to continue to expand the site network and things like that? I'm just wondering what your capital strategy is related to building all these capabilities?

[Steve Cutler, Chief Executive Officer]

Sure. Well, as you quite correctly said, our focus certainly in the short term and the next couple of quarters is on that debt repayment, we see obviously interest rates going into the middle 4% to 5% in the relatively short term, and we think that's the best use of our capital, is to pay that debt. However, we're making excellent progress on that and we're well ahead of schedule as to where I thought we'd be when we closed the acquisition. And so we are starting to think about how we would deploy our capital either on an M&A front, or even potentially on a share repurchase.

Although we probably wouldn't look at that until towards the end of this year, but we remain open for those sorts of discussions or those sorts and that sort of thinking as we make progress on that debt repayment. In terms of the M&A side of things, there's a number of areas I think we would look at. We are keen on the data side of things. We do believe there's investment required in that space, and opportunity in that space to be that health care intelligence organization we want to be, and we want to improve our data capabilities and particularly our data analytics capabilities, that is areas in that space.

The site network is a core part of our strategy, we don't rule out certain development of opportunities, and then we have a JV with on-peak care that is moving forward and that's a potential further investment going forward, so the sites are certainly very much a part of it. And then there are things like bio simulation or home health, are areas that we want to continue to look at. I don't think we're going well as outside of our core clinical area, but there's certainly a number of areas that we think we can strengthen and continue to develop to sell those key customer challenges that we're all trying to crack.

[David Windley, Jefferies]

Very much appreciate it. Thank you very much.

[Operator]

Thank you. The next question comes from the line of Luke Sergott from Barclays. Please ask your question.

[Salem Salem, Barclays]

Good afternoon. This is Salem calling in for Luke. We had a question on burn rate and how that's stabilized at the low tend. Should we expect that to step down to pre -pandemic level has after this year as we see work normalize to traditional [Indiscernible]?

[Brendan Brennan, Chief Financial Officer]

Yes. I'll take that one. We're -- obviously, we very focused on 10% and we outlined in our call, in our Analyst Day as well that that's where we're thinking about as we go through the course of the year. You see that has been stable in Q4 and into Q1 and we're looking to maintain that level as we go through the back end of this year. As we go out into 2023, I think it's something we're going to be looking hurried on trying to maintain, certainly clipping those double-digits as we go out through time. There's a mix of our business, of course, that plays into that.

And if you take any 3-year project and just work the math, you're going to be at 8%, right. So that's just the math of how that works out. But of course we have other businesses like our strategic solutions business that has a different cadence to it's burn rate. I think it is certainly possible to stay at least in the high single-digit, in the 9-10 ballpark, as we move out beyond 2023. And certainty as an organization, we want to make sure we're realizing our revenue and pulling our backlog through as quickly as we can. We are going to stay as focused as we can on trying to keep that in the double-digits.

[Salem Salem, Barclays]

Thanks, that's helpful. And as a follow-up, can you talk about the work coming online to replace the vaccine worth that gives you confidence in the longer-term guide. The trial size is definitely not going to be as large. So could you help us think about the differences in the economics there? And is that more Phase 3 work than usual? Given how some of those trials were paused during pandemic.

[Steve Cutler, Chief Executive Officer]

Thank you. To get your question. I think to follow-on work in terms of vaccine work, I mean, we certainly believe we have a strong franchise in the vaccine space and so [Indiscernible] we believe we are a very strong player in that spice out. I think it's because it's actually work is probably pretty much at an annual though we as it's going alluded to in my comments, we won some fourth dose and some follow-on work there that will probably continue for war. But there's a lot of vaccine work going on that, particularly with the mRNA technology becoming more ubiquitous, and sponsors on Pharma companies showing what they can do in terms of in the middle of New York [Indiscernible].

[Kate Haven, Vice President Investor Relations]

[Indiscernible]

[Salem Salem, Barclays]

That day, yeah.

[Steve Cutler, Chief Executive Officer]

So we see plenty of opportunity for vaccines, particularly with the mRNA technology. And not just around infectious disease, around oncology, and those sorts of areas. The network does blow on fast, no question about that and that's some of the slow ramp down in our burn rate. It is related to the change in our portfolio with less vaccine work and perhaps more moving back towards the oncology work which is 30% to 35% of our revenue and of our backlog. That's where the bulk of the clinical development is being done and that's where we're operating. I hope that it helps you in terms of the question.

[Salem Salem, Barclays]

It does. Appreciate it.

[Steve Cutler, Chief Executive Officer]

Okay. Good.

[Operator]

Thank you. [Operator Instructions]. The next question comes from the line of Justin Bowers from DB. Please ask the question.

[Justin Bowers, DB]

Hi, good afternoon. I was wondering if you could talk about the backlog mix. I know that you highlighted a lot of large Pharma wins in the quarter, but is there anything to call out in terms of FSP versus full study and maybe going a little further downstream with the strategic solutions, more color there would be appreciated.

[Steve Cutler, Chief Executive Officer]

All let me correct. Then Brendan, mine MOD add in terms of our backlog that we haven't seen any sort of substantial change over the last quarter or so in terms of large Pharma versus Biotech. It tends to be, as I said, that ran off and have about 50ish percent, maybe a touch more about backlog if 50% to 60% is large, Pharma, about 45% is the Biotech so to spice and mid-sized and then other government work and those things that are little bit out of the ordinary.

And that mix really hasn't changed much. We see as I said, continued success in winning Biotech and small Pharma work of a large Pharma business was particularly strong in Quarter 1 and it had a very good quarter as did our Biotech business, so I really there's not much to call out in terms of FSP. We continue to get significant opportunities with the market leader in that space. We have a very innovative, creative group in that area, those opportunities tend to come a little bit along, a little bit like process.

Large opportunities they are relatively in frankly, so that RFP from an hour can be a little volatile. But we have very good relationships with several significant customers in large Pharma customers, typically the ones that do the FSP space, and we're being creative and innovative in the way that we're prosecuting those partnerships and bringing value to that FSP model.

So it's not just the provision of resources, but it's new ways of contracting, new functions that we're doing from -- working wise that we integrate with their operations and work seamlessly with their operations. To the extent -- and that's also allowing us to develop relationships with those customers which can lead to other work. Sometimes that leads more into full-service work.

Most organizations or very few organizations are purely FSP or purely full-service, they tend to have a mix and we've positioned ourselves well, both through our strategic solutions and through our full-service group to be the beneficiaries of whatever opportunities are coming out of those customers, and to talk to them about the sorts of things that they should be doing and how they should be structuring their outsourcing business. So it's led to opportunities right across the business, and continues to be a very important part of our business mix.

[John Kim, Bank of America]

All right, I appreciate all the color. And then just real quickly, the COVID mix, can you remind us what the proportion revenue was in 2Q 2021? In terms of COVID if I recall, it was the mid-teens, low-to-mid teens?

[Brendan Brennan, Chief Financial Officer]

Yes, that's correct. Just there was mid-teens in Q2 '21. Yeah.

[Justin Bowers, DB]

Okay. Alright, thank you. I'll hop back in queue.

[Operator]

Thank you. The next question comes from the line of Q - John Kim from Bank of America. Please ask your question.

[John Kim, Bank of America]

Good afternoon. Thanks for the color on the strategic discussions. And I think you've mentioned it in the past as well, that the two organizations have relationships with the Top 13 Pharma s, and you guys have been moving forward with one or the other seven in the Top 20. Is -- has that -- have you guys begun your discussions with the 15th or the 16th even? Or is that -- are we just censoring? Are we still moving forward with the 14th one here?

[Steve Cutler, Chief Executive Officer]

I'm not sure [Indiscernible] that specific, John. But yeah, we are focusing obviously on the seven with which are up until the time of the union. We didn't have strategic -- we were doing -- we're doing work with those customers. But in terms of a strategic partnerships, so we've advanced that. I think we mentioned that in the last call, we've advanced that by another one.

And there are several more of those seven that we've made substantial progress with to the point where I'd like to think in the next quarter or two, we'll have some positive news on at least one more of those. So I'm really pleased with the progress we're making as we aim to be the partner of all 20, that's certainly our long-term [Indiscernible]. That's aspirational, of course. But we have that in place and we're making good progress towards that.

[John Kim, Bank of America]

Got you. Thank you for that. That's all for me.

[Steve Cutler, Chief Executive Officer]

Great. Thanks for that John.

[Operator]

Thank you. There are no further questions. I would now like to hand the conference over to your speaker today for closing remarks, and it will be Steve Cutler. Please go ahead.

[Steve Cutler, Chief Executive Officer]

Thanks, Operator. Thank you, everyone for listening today, we're pleased to have delivered another strong quarter of results and applaud the contributions of our employees as we progress to become the world's leading health care intelligence, organization. Thanks all, have a good day.

[Operator]

That does conclude our conference for today. Thank you for participating, you may all disconnect. Have a nice day.