ICON PLC (ICLR) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ICON quarter four and full-year 2015 results conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Simon Holmes. Please go ahead, sir.

Thank you, Alex. Good day, ladies and gentlemen. Thank you for joining us on this call covering the quarter and full year ended December 31, 2015. Also on the call today, we have our CEO, Mr. Ciaran Murray; our CFO, Mr. Brendan Brennan; and our COO, Dr. Steve Cutler. I would like to note that this call is webcast and 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. 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. Listeners are cautioned that forward-looking statements are not guarantees of future performance. The Company's filings with the Securities and Exchange Commission discuss the risks and uncertainties associated with the Company's business.

This presentation includes selected non-GAAP financial measures. For a presentation of the most directly comparable GAAP financial measures, please refer to the press release statement headed, Consolidated Income Statements Unaudited US GAAP. While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures, we believe certain non-GAAP information is more useful to investors for historical comparison purposes. We will be limiting the call today to one hour.

(Caller Instructions)

I would now like to hand over the call to our CFO, Mr. Brendan Brennan.

Thank you, Simon. Net revenues in quarter four 2015 were $403 million. This represents year-on-year growth of 3.4%, or 8% on a constant-currency basis. On a constant-dollar organic basis, year-on-year revenue growth was 3.7%. For the full-year 2015, net revenues grew by 4.8%, to $1.575 billion. This represented 10% constant-currency growth and 5.1% constant-dollar organic growth year on year.

For the full-year 2015, our top customer represented 31% of revenue, the same as last year. Our top five customers represented 49% of revenue compared to 53% last year. Our top 10 represented 63% compared to 64% last year, while our top 25 customers represented 78% compared to 79% last year. We added around 240 new staff in the quarter, which meant we ended the year with approximately 11,900 staff.

The gross margin expansion that we have consistently driven over the past number of years continued in quarter four. Group gross margin for the quarter was 43.1%, which compared to 42.6% in quarter three, and 41.1% in the comparable quarter last year. For the full-year 2015, Group gross margin was 42.3%, up 240 bps from the 39.9% achieved in the full-year 2014.

We continue to manage our cost base efficiency, and as a result, SG&A as reported was 20.7% of revenue in quarter four. This compared to 20.9% last quarter and 21.9% in the comparable period last year. For the full-year 2015, SG&A was 20.7% of revenue, 170 bps reduction from the 22.4% reported for the full-year 2014.

Operating income for the quarter was $75.3 million, with an operating margin of 18.7%. This compared to 18.1% last quarter and 15.5% in the comparable quarter last year. For the full-year 2015, operating margin was 17.9% compared to 14% for the full-year 2014. The net interest expense for the quarter was $2 million, and the effective tax rate was 13.5% for the quarter and 14% for the full year. Net income for the quarter was $63.4 million, a margin of 15.7%, equating to diluted earnings per share of $1.11. This compares to earnings per share of $1.02 in quarter three and $0.87 in the comparable quarter last year, an increase of 28%.

For the full year, net income was $239.5 million, a margin of 15.2%, equating to pro-forma earnings per share of $3.98. This represents an increase of 38.7% when compared to the $2.87 reported for the full-year 2014. DSOs in the quarter were 41 days, which compared to 46 days in quarter three and 40 days in the comparable quarter last year.

Cash generated from operating activities during the quarter was $116.1 million and $279.5 million for the full year. Capital expenditure for the quarter was $13.5 million and $49.7 million for the full year. During the quarter, we spent $171 million on share repurchases and this brought the value of total shares repurchased during 2015 to $459 million. In addition, $166 million was spent on acquisitions during 2015. As a result, at December 31, 2015, the Company had net debt of $160 million compared to net debt of $33 million at September 30, 2015, and net cash of $216 million at the end of December 2014.

With all of that said, I would now like to hand over to Ciaran.

Thank you, Brendan. 2015 was another year of progress for ICON. We booked $1.9 billion in new business, grew our backlog by 9% to $3.9 billion, and increased revenue on a constant-currency basis by 10% to $1.575 billion. By continuing to focus on operational excellence, we expanded our margins and increased our EPS by 39%, to $3.98. All of this has created significant value for our shareholders.

Looking at the overall market for CRO services, the key growth drivers remain in place. Pharma R&D spending continues to increase at an estimated 2% to 3% per annum, while outsourcing penetration is set to further increase as our customers look to improve the productivity and efficiency of their drug development programs. Market share continues to shift towards larger CROs that have the [mobile] footprint, breadth of services, and patient access necessary to run increasingly more complex global studies.

ICON is well positioned to capitalize on this growth, given our breadth of capabilities, scientific and therapeutic expertise, and global scale, operating as we do across 37 countries from 90 locations. We are also successfully evolving our strategy to address key market trends. As CRO and sponsor relationships broaden and deepen, ICON is leading the market in deploying innovative partnership models.

We continue to invest in our differentiated ICONIK, ADDPLAN, and Firecrest technology platforms. Through ICONIK, our project teams are analyzing operational and clinical study data and using this data to deliver innovative risk-based monitoring solutions. Our ADDPLAN software enables us to design, simulate, and analyze adaptive trials, an area which is gaining market traction and where ICON is the market leader.

Attracting and engaging sites and patients remains a significant industry challenge, and Firecrest is improving our engagement with both of these groups. The acquisition of PMG further enhances our ability to rapidly and cost-effectively recruit sites and patients into clinical research programs. All of our technology solutions enhance the quality of our trials, improve our customers' return on investment and R&D, and are helping us to win new business.

To further differentiate our services and enhance the development process, we are combining our long established clinical expertise and advanced analytical capabilities with some unique data assets. During 2015, we announced a partnership with IBM Watson to leverage its cognitive computing power to help identify patients for inclusion in selected oncology trials.

Our recently announced partnership with Genomics England demonstrates our commitment to partnering with industry and government to gain insights on data to improve the development of targeted medicines tackling complex diseases. During 2015, we have continued our strategy of targeted M&A that enhance our capabilities.

The acquisition of MediMedia Pharma Solutions brought us scientific and medical communications capabilities that, combined with the existing expertise of our commercialization and outcomes group, is helping us to build a leading position in the growing late-phase market segment. Towards the end of 2015, we acquired PMG Research. Through their US-based research sites, PMG is improving patient access to trials, facilitating faster patient recruitment times for our sponsors.

All of that being said, as we look forward to 2016, we believe we have a solid platform on which to build. The $1.9 billion of new business booked in 2015 has given us a healthy trailing 12-month net book to bill of 1.2 and our backlog now stands at $3.9 billion. As a result, we expect revenue for the full year of 2016 to be in the range of $1.67 billion to $1.73 billion, which represents growth of between 6% to 9.8%. In addition, we expect earnings per share to grow between 15.6% and 20.6% to a range of $4.60 to $4.80.

Before moving to Q&A, I'd like to thank the entire ICON team whose hard work and commitment have contributed to another successful year for ICON. Thank you, everyone, and we are now ready to take questions.

(Operator Instructions)

Steven Valiquette, UBS.

Thanks. Good morning and good afternoon. Congrats on these strong results. Just for me my question is, within the SG&A line, you mentioned that you added to the headcount but the raw SG&A dollars were still down year over year, which is obviously pretty positive, but just trying to get a little more color maybe on how much of that positive SG&A trend is driven by the FX reporting impact versus actual cost reductions? A part two to the question would be just thinking about 2016, categorically, maybe any chance you can give a little more color on where you can also still find cost reduction opportunities, as well? Thanks.

Hi, Steve. It's Brendan here. I might take the first part of the question about the SG&A. I did mention, of course, that we did add 240 new staff during the quarter, and of course, that included the acquisition of the staff from the PMG organization. So as always, and as has been the course of the last year, the vast majority of the staff that we have added to the Organization have been above the line in the direct costs and the billable elements of the Organization. So we've had and kept a very tight tabs on our headcount in our support organization during the course of 2015.

That's really helped us in terms of leveraging that SG&A base. As you can tell, yes, the dollar amount is down year over year, and while I would say that was probably -- that was certainly helped on the face of it by FX, we have been very specifically focused with our support department heads to ensure that we are keeping and reducing costs. So if I was going to break up that benefit year over year, I would say probably 60% or maybe even 70% was as a result of good cost efficient management and the remainder would be in relation to FX benefits. That covers that piece. Ciaran, if you want to speak to the margin profile index stream?

I think it was the SG&A cost reduction? Was that the question? For next year?

Yes. Categorically for 2016, additional opportunities, any more color on that would be great?

What we have done with SG&A over the year has been very much in evolution and we haven't done anything particularly radical. There's no rocket science here. The savings that we have seen accrue to us over the past four or five years have been driven really by four things, Steve. Just as the Company grows, we get some benefit to scale. We have deployed some good technology solutions and we saw a few years ago, in the early years, we rolled out a number of systems and built platforms that were very scalable and very efficient and increased productivity.

We are very rigorous about our Organization structure. In the locations that we have in the Company, our SG&A is pretty much shrunk down to a limited number of locations around the world where the bulk of the work is done, therefore it's very efficient and very scalable. Then the fourth thing that we have seen is just better management over the years and the investment we have made in our people who have responded well and has paid dividends.

So we're going to continue to do those things. As we continue to do that and the Company continues to grow, we will see further benefits accrue in our SG&A cost space. We will reduce it, but of course we made significant staff-change gains over the last few years. We have seen over the last year or two that the rate of improvement has slowed down, but I still see us continuing to improve our SG&A cost base, albeit at a slower rate than in the past.

Okay. All right. That's great color. Thanks.

Dave Windley, Jefferies.

Hi. Good afternoon, gentleman. Thanks for taking the questions. I was going to ask a two-parter, as well. Wondering about 2016, what major renewals are anticipated with your customer relationships and what assumptions around those renewals you've included in guidance? The mid-year 2015, Ciaran, you had given us a rough walk-up on margin for 2016 from 18% to 19%. Wondering, in light of where you finished 2015, where your views are for operating-margin goals for 2016? Thank you.

Thanks, Dave. How are you? 2016, the big renewal that we have coming up is the Pfizer account. That is due to renew at the end of May. We are in a good place with Pfizer. We continue to work on some of their biggest programs. We have the best part of $1 billion of backlog that we're working through and we'll continue to work through over the next number years.

We have started the renewal discussions. They are ongoing. They are going well. We are all in a good place so we expect those discussions, as they do, to continue over the next couple of months, and work towards renewing the MSA in May. From the point of view of the assumptions that we have in 2016 around that, if you remember most of our work from this point of year on is coming out of backlog, so the backlog is there and we have it burning at the rate that it burns and converting.

So there isn't a very significant level of assumptions of what new business wins although we will expect to win new business with Pfizer going through the course of the year. At this point of the year, it's maybe pretty modest assumptions in that business wins continue on or about the level they were for the second half of last year. But in any case, most of where the revenue is going to come from this year will come out of backlog.

On the margin assumptions, yes, last year I had set the target of 18% to 19% for a medium-term margin target. We got there a little bit quicker than expected, which has been a pattern over the last couple of years. At this stage, I am happy to say that we are going to continue to work on improving our margin performance in the future, but that it is early in the year to be making any statements about next year.

Given my poor forecasting record of always calling it too low and getting there too quickly, I should probably take some more time to consider it. But there will be a number of moving pieces. As we go through the year, and I've talked a little bit about the leverage we think we can continue to get in SG&A as the Company grows and we leverage the platforms, we hunt for efficiency, and then as the Business itself grows in gross margin.

That becomes a function of decisions that we may choose to make in the future, and what we want to do with growth, where we grow, the business mix that we have, and the different margin profiles of different parts of the business. For now, I am saying we have exited the year above 18%. I expect, if you look at our guidance, there is an implied 19% for the year in 2016. I am happy with that. I can see the path to that for 2016 and I'll talk a little bit about 2017 when we get closer to it.

Okay. Thank you very much.

Eric Coldwell, Robert W. Baird.

Thanks. I might do two, as well. On Pfizer, thanks for the comments on that. For me, the main one is at the big investor event last month, it sounded like there really wasn't a formal RFP in the marketplace at that point. I'm curious if you can comment on that? Have they gone to market with an RFP now?

We are negotiating with them on the basis of renewing the contract. I am not aware of any RFP that has gone to the market to anyone else. The negotiations are ongoing with ourselves and Parexel made their own comments on their call. So that's all we can say. I believe your assumption is correct.

Okay. Thank you for that. My follow-up is also on Pfizer. You talked about how you are not building in any substantial increase in bookings, a steady pace with the second half of 2015. I'm curious if you could talk about the fourth quarter more specifically. I'm sorry if I missed it, but what was the bookings profile like when you consider the large account and then all others? If you could give us some color on the split between bookings, say, for all other accounts versus Pfizer?

We do look at it outside of our top bookends, not just Pfizer, but I am happy to say that the trend that we saw through the first three quarters of the year continued in Q4 and that our bookings outside our top couple of accounts was about $1.4 billion, $1.5 billion, probably closer to $1.5 billion, which was a strong performance. So we have seen that happen over the course of 2015, which gives us a good deal of confidence about -- as we go forward and look at - and we renew, we believe we will renew the accounts we have.

We will continue to work with the customers we have, but the new accounts that we've added last year are growing quickly. They'll probably put us in a place where we would expect our top customer concentration to move to the mid-20%s, somewhere around 25% for 2016. That requires the new accounts to kick in and to convert, which they will do, but of course, it's fair to say that the profile of the new business is interesting.

We are working much earlier with some of our new customers in the biotech and mid-sized pharma sector. So we book the business and then it doesn't convert quite as quickly as our traditional base because there's a little bit more work to do on the development of the protocol and to get approvals and even before you get to site start-up, that whole start-up process of ethics boards and finalizing the work.

It's very good works. We are winning strongly in that sector. It will drive growth in the future. But we did see in quarter four, it was converting a little more slowly than our other work and it's just taking -- it's going to take a bit of a while just to get used to the fact that, that is the new conversion rate for us. It was 10.6% and that's a very fair rate, somewhere in the mid-10%s, that reflects the niche of the work now that we have in the backlog.

Okay. That's great. Congrats again on a really strong margin performance. Nice to see that momentum continuing. Thanks again.

John Kreger, William Blair.

Hi. Thanks very much. Ciaran, did you see any change in demand trends or spending trends from your smaller clients that might be dependant upon capital markets for funding?

I am happy to say we didn't. We are [in a situation] of dealing with pretty well-funded customers. We triage things very carefully. We haven't seen any impact, either on the work that's gone into our backlog. It's well-funded and it's continuing to pace. We haven't seen any significant change that I could point to in our pipeline of opportunities with biotech companies.

We are of the view that a lot of companies are well-funded and have the funds to go into develop there for the mid term and that good compounds tend to get funding one way or the other. We are in a position where we think we're dealing with good companies with good prospects. So the short answer is no, not as yet, we haven't seen any impact at all.

Great. Great. And then other one. You mentioned a couple of minutes ago three different technology platforms that you're starting to use more, the ADDPLAN, Firecrest, and ICONIK. If you think about your recent trial starts, are those being used broadly or are we still fairly early in the adoption of those types of tools?

John, it's Steve Cutler here to answer that one. It depends on the particular platform. Certainly, we're seeing a significant uptake in the patient-centered monitoring so the ICONIK platform on which we base our patient-centered monitoring is certainly on the up and up. Firecrest, we use across a number of our customers and our portfolios, so that's also getting good traction.

The ADDPLAN is more on the adaptive trial. That's a little bit further back in the cycle, as customers address and engage in a more adaptive approach, so that one's a little bit further back. But the other areas, we're seeing a quite significant uptake and a move toward particularly the more cost-effective approaches to patient-centered monitoring. Plenty of customers getting on board with that.

Great. Thank you.

Tim Evans, Wells Fargo Securities.

Thank you. Ciaran, this quarter saw you do a pretty decent size acquisition and a pretty decent size share repurchase program. Can you comment on your priorities for capital allocation now that those two things are done? Should we be thinking more share repurchase or should we be thinking more tuck-ins?

A bit of both, Tim, is probably the realistic answer. Our objective is always to deploy our capital in the best way to get shareholder return, so that is getting a balance between buyback opportunities when the market is right and then continuing to enhance our service offering with our traditional bolt-on or tuck-in acquisitions and drive top-line growth and make sure we stay relevant for the future.

In the last couple of years, we have spent about $600 million on share repurchases between 2014 and 2015. As you say, we've made a couple chunky acquisitions. When I look forward, there are a couple things that will guide what we do on this. We have a pipeline with a number of interesting opportunities in it from the M&A point of view, again around the same scale that we usually do that, that's somewhere between $50 million and $150 million range of price.

But again, you're never certain with M&A where it's going to end up. There are things you want to buy and sometimes you can't get the valuation right. And then we have purchased all the stock that we can purchase at the moment until our next AGM. We have certain legal constraints around a percentage of stock that we can purchase in a 12-month period between AGMs. Our AGM, as you know, is in July.

So when we announced the $400 million repurchase program last July, we expected that it would take longer than it did and we had actually got it finished probably a quarter earlier than we expected. So at the minute, we are [becalmed] on share purchase. At our AGM in July, we will put forward the usual motion to the shareholders to prove that we have the ability to repurchase -- I think it's up to 10% of our stock.

Then when we look forward at our cash position and where we are on the M&A pipeline for next year, we will make a decision as to how to deploy the capital. It's fair to say we have had a policy over the last few years of them generally buying back whatever shares have been issued in options and in stock plans to make sure that it's anti-dilutive, so we'll certainly be buying back that 50 million or 60 million of stock this year and then we will make the decision on the balance based on shareholder value, market conditions, and the M&A pipeline.

Got you. That's helpful. Just a very quick follow-up for Brendan. Would you be willing to tell us what tax rate and 2016 average share-count assumption you're using in your guidance?

For the tax rate, what we are modeling in the forecast and indeed in the guidance, is 14% of an effective rate in the P&L account. And then on the second part of your question, which was number of shares in issue, I think it's about 57 million in a quarter is probably around the right number to be using.

Thank you.

Ross Muken, Evercore ISI.

Hey, guys. It's Luke in for Ross today. I was just look at -- get your overall view on the next wave of pharma consolidation and whether you think it would be a net positive for the overall industry and how this wave of consolidation will be different than the past?

I'm not really sure, when you say about the next wave, if you have something specific in mind or just general?

With the Pfizer Allergan deal and if there's more to follow, following this deal?

The Pfizer Allergan deal will follow the same pattern that we generally see in CROs from the past. It's a good thing. Consolidation leads to change. Change generally leads to more outsourcing and so we are happy about that. Pfizer is a good customer of ours so we would expect at some point to see access to a larger budget.

But usually it takes a little bit of time for those things to settle down. Organizations have to integrate so we can often see a little bit of short-term disruption as certain decisions on new products are delayed until everyone gets their ducks in a row. But our experience in the past is pretty benign. Ongoing work goes on and is rarely touched and keeps chugging away.

In the medium term or beyond the short term, more outsourcing and more funds become available, so it generally drives demand for us. Beyond that deal in the market, there is probably nothing else I'd feel that it was appropriate for me to comment on at this point.

Okay. Thanks.

Donald Hooker, KeyBanc.

Sorry, guys. This is Jack in for Don. Question with the revenue guidance. What is the implied impact for ForEx, as well as the contribution from the PMG acquisition for 2016?

It's Brendan here, again. Jack, the ForEx we're assuming a fairly constant currency state from where we were. We had an average rate of $1.11 during 2015, so the implied constant currency of $1.11 for the guidance, as well. For the PMG acquisition, we said at the time of acquisition that was a deal that was annually circa $25 million so that's pretty much what we have in there for 2016.

Got you. Thanks. And if I can sneak a follow-up in here. View with the bookings in the last quarter. Was there any noticeable shift or any trend in programmatic versus functional outsourcing?

Jack, maybe I will take that one. We're certainly seen plenty of interest in the functional outsourcing market and we had a couple of strong wins in that area. It's early to call a trend in it. We are seeing strong interest in that area across the board in FSP and so we feel we are well-positioned with our DOCS group to be able to benefit from that and to take good notice of that trend, but it's early to call it a significant trend in the marketplace. Programmatic outsourcing remains very much a key part of our agenda and our backlog and we feel we're well-placed in both areas.

Got it. Thanks, guys.

Robert Jones, Goldman Sachs.

Hey, guys. This is Bob in for himself. Ciaran, wanted to go back to some of the comments that you had made around conversion. If you look at the guidance, it does seems like it is implying that the type of conversion rate we saw in the back half of 2015 is similar to what you guys are expecting in 2016. The question for us is can you maybe talk a little more about how much of this is really the new normal?

It sounds like some of it you are positioning as this is the way backlog will convert versus more situational dynamics that might be at play relative to some of the types of wins and types of customers that you might be adding to bookings recently. Just trying to get a little bit of a better understanding about new norm versus could this number reaccelerate back to historical levels in the future?

Our expectation, Rob, is that it's the new norm but that being said there is a transitional impact on our numbers in that we had a very good year over there, very good last five quarters, I would say, and our in new accounts, new customers. So you've got the new norm of working -- and a lot of those accounts I suppose were biotech customers and mid-sized pharma and specialty pharma and some interesting models that we are working on.

So it's the new norm, is probably the short answer, in that we are working much earlier in the process with that particular constituency of customers and we continue to win business I believe in those segments, but it will still follow that pattern. If you change the mix in your business and you are winning more heavily in certain large pharma accounts and the mix change, you might see conversion accelerate because the larger customers tend to be closer to the goal point of getting the trial started up by the time you get it into backlog.

But it would require a fair change in mix, so I would not expect conversion to increase certainly in the medium term, in the foreseeable period. But that doesn't worry me -- to be honest, the focus on conversion -- the thing about conversion, it's fine whether it goes fast or slow, as long as you're able to forecast it, as long as you're able to resource it appropriately and not -- the problem with conversion that's slow is if you don't forecast it slow and your resources are online too early, then you're pinged a little bit in cost.

But we've got relatively good at forecasting substantially when we need the resources for the conversion so if it converts a bit slower, it just means it lasts a bit longer, so that's not a bad thing in terms of long-term visibility. We are pretty sanguine about it but we are calling conversion at that -- it was 10.6% in Q4. It wouldn't surprise me if some quarter you see a 10.4% or something like that. There's something takes a while to go, but it will be in the mid 10%-point something for the next, I would say, four or eight quarters anyway.

Great. That's helpful. Thank you.

Tycho Peterson, JPMorgan.

Hey, guys. This is Tejas on for Tycho. Ciaran, can you comment a little bit on the recent commentary on the campaign trail given the election season here in the states? Have you heard anything from your clients around incremental caution on R&D spending going forward, given the possibility of price cuts?

No, we haven't heard anything at all in any discussions with our clients in relation to what's been happening in the campaign. Everybody watches election campaigns with interest but it's important not to over react, and particularly in the early stages where you get a lot of rhetoric. No, nothing concrete, nothing related to that, that merits any comment.

Got it. Then any comments on your exposure to the pound, and in light of the recent volatility, and how that might impact you?

We have no substantial exposure to the British pound, I am happy to say.

Got it. Okay. And then one final one on the Genomics England announcement, can you help us think through how exactly the revenue flows through to you guys, over what time frame? And are you actively seeking to use the Genomics England project as a template and be involved in other population sequencing efforts in Europe and eventually even beyond?

It is Steve Cutler. I will take that one. Certainly, from a revenue point of view, it is not material for us. It is a relatively small contract. What's more interesting to us is the strategic element of the contract and the opportunity to be involved in something as innovative as that. So yes, we are looking to establish ourselves in that area and to develop our expertise in the area and to use it in other areas.

We see these sorts of initiatives -- and it's not just Genomics England. The ICHOM initiative, you'll be aware of, as well. Too, I mentioned IBM Watson and some of things we're doing there. We're looking at a number of areas to evolve ourselves, to gain experience, to develop our approaches and then to apply those in probably larger areas, larger contract-related areas in the more medium-to-longer term. So it's our R&D effort in some ways in that area and we are looking to gain experience.

Got it. Thank you.

Greg Bolan, Avondale Partners.

Thanks, guys, for taking the question. I also wanted to reiterate my congrats on the strong margin performance this quarter. Ciaran, there's a couple schools of thought out there as it relates to biotech funding, and one is hey, very well funded sponsors here, probably will be a source of bookings for the next year or two, even if, as things obviously -- let's just assume things continued to be turned off for a little while. The other school of thought is the strong bookings or strong funding over the last say three years has, to some degree, or to a large degree has found its way into the [cero] backlogs.

The question is, is where will the incremental RFP activity come from if funding stays at or near zero for the non-revenue-generating biotechs. It sounds like you guys are feeling -- or gravitating towards the former school of thought. I just wanted to see if there's -- would you give any type of credence to the latter camp or is it just, at this point, everything seems to be steady as she goes and you guys aren't concerned really at all?

We really -- hi, Greg, how are you? (Inaudible) be complacent and dismiss any other point of views so the way we would look at it is, you're correct, we are tending toward the former there. We see well-funded sponsors with money that will flow to development over the next number of years, three, four, five, already in the backlog. We still see a lot of potential sponsors in the pipeline who have been funded that are only at the point now where their RFPs are cranking up, so it'll take some time over the next year for some of those projects to come into business wins so that's incremental in that portion of the future.

Beyond that, it's always hard to forecast, but our view is that generally good compounds get funding. We have seen very high levels of funding over the past few years from the markets. As you go forward, the way we would look at it is funding may be a bit tight at the moment but that could just as easily be temporary, and as they could (inaudible) turned on again at any point over the next few quarters when some of the uncertainty in the world around commodity prices in China and Brexit and the US election that all create this sense of fear and desperation and stuff like that, when that settles down.

So we don't see anything to suggest that, that's what has happened on funding is in any way permanent and our experience in the past was before the markets were so happy to fund these compounds. Funding came from other sources. It came from licensing arrangements or pharma M&A and ultimately that work incrementally ended up in our backlog. Where we would be drawing some optimism from it is that if you look at most of our CROs, we tend to fairly stable book-to-bill over the last long time. 1.2 is very much the historical norm and the forecast norm.

All that's really happened over the last couple of years is the mix of where that work -- as more money went directly to biotechs, the mix of it has changed a little bit. We have more biotech and mid-sized pharma there as a proportion of our business than we did in the past because in the past those compounds probably ended up being acquired by the customers we already had in large pharma. So we are rather [early] sanguine, certainly, for the medium term on this and it would require something radical to change before we would revise that view.

That's all fair. Thanks, Ciaran. Just a last question for Brendan. I don't imagine it's a whole lot, but is there any way you can maybe quantify what the contribution to 2015 bookings was in terms of just from the more non-revenue -- or maybe you want to call them capital-markets dependent biopharma innovators?

It you're getting down to the very, very small biotech companies, those who don't have revenue generation at the moment, you're probably looking at very, very small numbers in our backlog, or even our business wins, so I would say probably circa, certainly low single digits, maybe even 2% or less.

Perfect. Thanks guys.

Michael Baker, Raymond James.

Yes, thanks a lot. I was wondering if you could give some color for the backlog by therapeutic class and how has that changed over the course of last year?

Steve, do you want to talk about that?

Sure. I'll talk about that. Our backlog -- we are a strong oncology provider so that's the largest proportion of our backlog, Michael. We are big in that area, right across the solid tumor, the hematological tumors. Cardiovascular has developed for us over the last 12 months or so, some large programs. I'd put diabetes in there, as well, endocrinology. CNS, as well, gastroenterology, and then there's a whole bunch of others that's come in, but the big therapeutic areas for us are really oncology, cardiovascular, CNS, and then gastro, IR areas.

So with the others picking up a bit, has oncology fallen a bit in terms of percentage of the backlog over the past year?

No, not really. We continued to be strong in that area. It continues to be around about one-third to 40% of our backlog and our revenue and it hasn't fallen. So no, it's the biggest area of unmet medical need, as you guys all know, and it's an area that we work very well in.

That's helpful. Thank you, guys.

As we have no further questions queued, I would like to turn the call back to Ciaran for any additional or closing remarks.

Okay. Thank you, everyone. We are very pleased with the continued progress ICON has made in 2015. Once again, I would like to thank the entire ICON team for all of their hard work and commitments. We look forward to building on this progress during 2016 as we build on our position as our customers' trusted partner in drug development. Thank you everyone and good day.

Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.