By Josh Nathan-Kazis

The strong earnings report from Medpace Holdings, which runs clinical trials to test biotech companies' new drugs, offers more evidence that the biotech sector is on the rebound.

Medpace said late Wednesday that it had $789 million in new orders in the third quarter, up about 49% from the year-ago period. Its clinical trial backlog was up 2.5% from the 2024 third quarter, signaling an improving environment for the small- and midsize biotechs that make up most of its clients.

That all added up to an excellent earnings report for Medpace. The company posted quarterly revenue of $659.9 million, better than the $641 million FactSet consensus estimate, and earnings of $3.86 per diluted share, well above analysts' forecast for $3.53 per share. Medpace stock jumped 7.5% on Thursday morning, after climbing more than 17% in the premarket hours.

For biotech stocks, it's another sign that the downturn that started in early 2021 -- and led to cash crunches and shrinking valuations across the sector -- might be easing. As biotech's fortunes faded, Medpace's new order bookings fell from $611.5 million in the third quarter of 2023, to $533.7 million in the third quarter of 2024. Now orders are way up, as biotech stocks claw back from the abyss.

The SPDR S&P Biotech exchange-traded fund, which tracks the biotech sector, has climbed 20% since the start of September, compared with the S&P 500's 4% gain over the same span. President Donald Trump's drug pricing deal with Pfizer helped brush away some of the policy worries that have dogged biopharma all year. That added fuel to biotech stocks' slow improvement that had started in the spring, as M&A deals heated up and some of the sector's structural issues finally worked themselves out.

The Medpace results offer a peek under the hood at the biotech ecosystem, and suggest that things are humming along. Medpace, a so-called contract research organization, specializes in running clinical trials for small biotechs. In July, Medpace's second-quarter results offered a big clue that a sector rebound was on the way: The company reported new orders of $620.5 million for the period, well ahead of what had been the consensus estimate of $560.6 million. Shares skyrocketed 55% in a single day.

Medpace's latest earnings offer even more proof that smaller biotechs have worked out their cash problems, and are paying to move their programs forward again.

"We are still shocked by the significant inflection in bookings that we have seen over the past couple quarters, with net new business awards up nearly 30% sequentially and 60% relative to the first quarter of 2025," William Blair analyst Max Smock wrote late Wednesday.

On an investor call early Thursday, Medpace CEO August Troendle said the funding environment was generally improving for clients.

"There's still funding challenges for clients, some are delayed," Troendle said. "But I think overall, things are going on a pretty reasonable pace, and certainly it's somewhat normalized."

Another contract research organization, ICON plc, also reported results late Wednesday. ICON shares were down 8.3% on Thursday, though the company's earnings and results were roughly in-line with analyst expectations. The selloff doesn't appear to reflect a weak outlook for biotech overall.

In a note late Wednesday, Leerink Partners analyst Michael Cherny said that investors had been anticipating strong results, after a recent run-up in ICON shares that saw the stock jump 18% on Sept. 30 and Oct. 1.

"We believe both companies' reports illustrate how the challenging industry backdrop likely bottomed and trends are on the road to recovery, " Mizuho analyst Ann Hynes wrote late Wednesday.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

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October 23, 2025 11:15 ET (15:15 GMT)

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