Medpace Holdings Inc

Medpace Holdings is a global clinical contract research organization (CRO) with a highly differentiated strategy. The company focuses on small and mid-sized biopharma companies with a full-service offering, while its public CRO peers mainly focus on Big Pharma with lower margin, functional service work. Medpace partners with the biotech company, guiding them through the complexities of human trials and ultimate commercialization. Their approach to capital allocation is also special – they are very opportunistic in their share repurchases. Last year, they repurchased just under 10% of their outstanding shares.

Medpace reported strong results in the second quarter, with revenue growing at a mid-teens rate and operating earnings up 20% year over year. The management team repurchased nearly 6% of the outstanding shares, taking advantage of the company's share price weakness. Importantly, Medpace significantly increased its outlook for revenue and earnings for the full year, driven by a better biotech funding environment, fewer cancellations, and faster client decision-making. This positions the company for accelerated growth, a notable change from prior expectations for 2025. Higher operating earnings and a lower share count have led to a large increase in our value per share estimate, and we continue to be impressed with the company’s performance and excited about its prospects.

We initiated a position in Medpace in April. We view it as a market-leading business led by an ambitious, founder/CEO, with substantial long-term growth potential that remains underappreciated by the market. At the time of our purchase, we believed the company was on the verge of a meaningful revenue and profit inflection — creating a highly compelling risk-reward opportunity. In Q2 2025, Medpace experienced meaningfully accelerating revenue and profits which had been slowing for the last 6 quarters. Revenue grew 14.2% year over year to $603.3 million, easily topping consensus. Net income was $90.3 million, or $3.10 per diluted share, reflecting solid earnings power alongside scale.

Medpace had a phenomenal quarter highlighted by strong bookings in a difficult biotech funding environment. The strong bookings growth was enhanced by aggressive share repurchases as the company has taken advantage of stock price weakness to repurchase 10% of shares outstanding over the last year. The end markets for Medpace are inherently cyclical due to biotech funding, but the company’s disciplined capital allocation and steady market share gains make this a core long-term holding in the HCM portfolio.

Medpace Holdings (MEDP) was the top contributor to Fund performance during the quarter. The contract research organization provides drug development, clinical trial management, and regulatory services to biotech, pharmaceutical, and medical device companies. Medpace’s shares jumped after management reported strong revenue and earnings growth and raised its full-year guidance. We believe those results are particularly impressive in light of the fact there’s been a slowdown in the biotech funding cycle.

Medpace Holdings, Inc. outperformed due to an improvement in clinical trial cancellation trends within its pipeline. This positive performance indicates a strengthening operational capacity and potential for future growth, aligning with the overall favorable conditions for small cap stocks. The Fund's focus on valuation discipline allows it to capitalize on such opportunities, particularly in the health care sector where Medpace operates.

Medpace has shown rebounding performance during a period where the biotech industry gained approximately 22%, driven by positive trial results and improving investor sentiment. The company is highlighted as a previously beaten-down provider that is now benefiting from positive data and commercial catalysts. This positions Medpace well for future growth as the health care sector continues to perform positively.

We had solid performance from one of our contact resource organization (CRO) investments, Medpace Holdings, driven by low expectations and a surprise earnings beat. At current levels, we think this company is quite attractive. Despite the underperformance of our healthcare investments overall, Medpace stands out as a strong performer, indicating its potential for growth in an underpenetrated asset class.

The health care sector had good stock selection; our best actor here was Medpace. We are finding companies and stocks now that fit our process and adding them to portfolios. Looking ahead, our team seeks companies with strong market positions and management, prioritizing long-term earnings and cash flow growth while remaining cautious about short-term market trends.

Shares in Medpace jumped following much better-than-expected 2Q results. Investors were expecting growth to continue to slow for the contract research industry, but instead, Medpace posted accelerating 2Q revenue and bookings growth, and expressed confidence in the trends continuing for the rest of the year.