Dave Windley

Dave Windley from Jefferies LLC requested a 'temperature check' on client demand and urgency, specifically asking how the strong Q4 2025 book-to-bill and month-to-month improvements have continued into early 2026, with comparisons to early 2025. He also sought perspective on why the requirement for a 1.0 book-to-bill to achieve the higher end of revenue guidance seemed conservative given the recent strong performance.

Answer

Chair, President, and CEO Jim Foster indicated that demand is improving due to significant biotech funding, completed pharma restructuring, and resolution of tariff/pricing issues. He noted a healthy 9-month backlog and a shift towards earlier-stage 'general talks,' suggesting clients are eager to start studies. EVP and COO Birgit Girshick added that the environment feels more stable, with global biopharma focused on increasing candidates and more positivity among small- and mid-sized biotech clients. Regarding the book-to-bill target, Ms. Girshick explained that while a book-to-bill above 1x is needed, it won't be linear, and factors like the 1-2 quarter lag for bookings to convert to revenue, backlog conversion, and study start timing influence the overall growth potential, making the guidance cautiously optimistic for a return to growth in the second half of 2026.

Dave Windley sought a 'temperature check' on client demand and urgency, comparing early 2026 trends to early 2025, and the continuation of demand out of Q4 2025. He also questioned the conservatism of the 1.0 book-to-bill target for the higher end of revenue guidance, given the strong Q4 book-to-bill.

Answer

James Foster, Chair, President, and Chief Executive Officer, noted improving demand driven by significant biotech funding, pharma companies completing portfolio adjustments, and a shift towards more general tox work, indicating clients' eagerness for earlier study starts. Birgit Girshick, Executive Vice President and Chief Operating Officer, added that the environment feels more stable, with global biopharma clients ready to increase candidates and positive sentiment from biotech. She explained that the 1.0 book-to-bill target for the high end of guidance accounts for non-linear business, start times, backlog conversion, and timing of study starts.

Dave Windley with Jefferies asked about the step back in Inotiv's DSA revenue conversion rate, its relation to seasonality, capacity, and the growth of discovery services versus safety assessment. He also inquired about the timing of incremental cost outs from RMS lease exits and when operating leverage benefits from these cost reductions would become visible, specifically asking about the order of magnitude for NHP volume decline year-over-year.

Answer

Bob Leasure, President and CEO of Inotiv, confirmed that discovery has more capacity and its conversion rate is quicker than safety assessment. He noted that the conversion rate was slightly higher year-over-year despite seasonality and increased backlog, mentioning some longer lead-time discovery revenue and blanket POs. Regarding RMS, Mr. Leasure stated that cost outs from lease exits would be seen next quarter, explaining that duplicate facility costs during the transition and significantly reduced NHP volume (down approximately 25% year-over-year) overshadowed operating leverage benefits. He expects NHP volume to recover later in the year.

Dave Windley requested an order of magnitude for the year-over-year decrease in NHP volume.

Answer

President and CEO Bob Leasure estimated the NHP volume was down approximately 25% year-over-year. He explained that NHP sales are not linear and that if the additional 25% had shipped, more efficiencies would have been visible, expressing hope for recovery in future quarters.

Dave Windley from Jefferies LLC inquired about the mix of new bookings, particularly in newer services like biotherapeutics and medical devices. He also asked about the company's ability to import non-human primates (NHPs) from Cambodia and the potential impact on market pricing following the conclusion of the DOJ investigation.

Answer

CEO Robert Leasure confirmed that bookings are overweighted towards new services, especially in the Discovery business, which significantly impacts margins. On the topic of NHPs, Leasure clarified that the DOJ has not prohibited imports from Cambodia, but Inotiv has not imported from there recently and has other reliable Asian suppliers. He stated that he does not anticipate significant changes in NHP pricing in the near future, viewing the market as stable.

Dave Windley asked about exchange bronze margins, specifically if utilization patterns of trade-down bronze members are meeting expectations and if gross medical costs are declining due to higher individual cost-sharing.

Answer

CEO Sarah London stated that trade-down is largely consistent with expectations and was contemplated in pricing, considering both recent and pre-EAPTC/pre-COVID bronze product performance. She noted it's very early (January not closed) but, based on an early look, there's "nothing alarming relative to utilization patterns."

Dave Windley inquired about the Marketplace exchange, specifically regarding bronze margins and MLRs, which have historically been volatile. He asked if Centene has sufficient data to assess if utilization patterns of members trading down to bronze plans are meeting expectations, particularly concerning gross medical cost declines.

Answer

CEO Sarah London stated that the trade-down observed is largely consistent with expectations and was factored into overall pricing. She noted that Centene considered how bronze products operated both pre-EAPTCs/pre-COVID and over the last five years in its calculus. While it's very early (January data not yet closed), initial observations show nothing alarming regarding utilization patterns.

Dave Windley of Jefferies LLC asked about the implications of the Wakely data on the total Marketplace size, seeking Centene's assumptions on further membership attrition and the corresponding morbidity shift for the remainder of 2025.

Answer

CEO Sarah London stated that the Wakely data indicated lower-than-expected market growth and that Centene believes the market contracted during open enrollment. She projected Centene's own Marketplace membership would decline from 5.9 million to 5.4 million by year-end, driven partly by 'Failure to Report' (FTR) impacts, and confirmed this attrition is factored into their morbidity assumptions.

Dave Windley of Jefferies LLC asked about the implications of the Wakely data on Marketplace membership trends, specifically inquiring about the current market size and Centene's assumptions for attrition and morbidity shifts for the remainder of the year.

Answer

CEO Sarah London stated that the Wakely data indicated lower market growth than previously estimated, suggesting the market contracted during open enrollment. For Centene, she projected membership would decline from 5.9 million to 5.4 million by year-end, driven partly by 'Failure to Report' (FTR) impacts. This expected attrition and any related morbidity shifts are factored into the company's updated forecast.

Dave Windley asked about the expected Medicaid membership decline, specifically if it's all same-store or includes state exits, and how the additional membership decline doesn't further disrupt the margin, given the consistent 125 basis points of margin pressure.

Answer

Felicia Norwood, President of Government Health Benefits, confirmed that the guided Medicaid membership decline of approximately 750,000 members for 2026 reflects 'same store' challenges from stringent eligibility reverification, not state exits. Pete Haytaian, President of Carelon, explained that the -1.75% Medicaid margin guidance is grounded in three assumptions: elevated cost trend (mid-single-digit percentage range), rates improving but still lagging trend, and the company's use of all controllable levers like utilization and medical/pharmacy cost management. Gail Boudreaux, President and CEO, added a brief closing remark.

Dave Windley asked if the expected Medicaid membership decline is entirely 'same store' or if it includes state exits or contract terminations (e.g., Georgia), and how the additional membership decline does not further disrupt the margin beyond the previously stated 125 basis points of pressure.

Answer

Felicia Norwood, President of Government Health Benefits, Elevance Health, confirmed that the guided Medicaid membership decline of around 750,000 members for 2026 reflects 'same store' challenges due to stringent eligibility reverification requirements. Mark Kaye, CFO, Elevance Health, explained that the Medicaid margin guidance of approximately -1.75% is grounded in three assumptions: elevated cost trend (mid-single-digit), rates improving but still lagging trends, and the use of all controllable levers like utilization and cost management.

Dave Windley asked about the progression of Medicaid margins, seeking to understand how ongoing re-verification activity and the anticipated OB3 acuity shift align with expectations for sequential improvement through 2027.

Answer

Mark Kaye (CFO and EVP, Elevance Health) explained that 2026 Medicaid drivers are evenly split between rates lagging acuity and elevated cost trends. He reiterated 2026 as the low point, with sequential improvement in 2027 driven by tightening medical cost management, phased and manageable budget reconciliation bill provisions (OBBBA), rates catching up to trend, and a prudent 2026 outlook. Gail Boudreaux (President and CEO, Elevance Health) clarified that the 2027 bill implementation impacts less than 20% of membership, making it manageable.

Dave Windley sought to understand the progression of Medicaid margins, specifically how ongoing re-verification activity and the anticipated OB3 acuity shift (late 2026) align with expectations for sequential improvement through 2027.

Answer

Mark Kaye, CFO, explained 2026 drivers as rates lagging higher acuity (compounded by re-verifications) and persistently elevated cost trends. He reiterated 2026 as the low point, with sequential improvement in 2027 driven by tightening medical cost management, phased and manageable budget reconciliation bill provisions (primarily 2027/2028), rates catching up to trend, and a prudent 2026 outlook. Gail Boudreaux, President and CEO, clarified that the 2027 bill implementation impacts less than 20% of membership, making it manageable.

Dave Windley sought to confirm that unchanged risk adjustment assumptions meant Elevance's ACA book was deteriorating in line with the market, and then asked about assumptions for further ACA membership attrition this year.

Answer

CFO Mark Kaye confirmed the risk adjustment understanding was 'spot on' and that ACA acuity has now largely stabilized. He stated that for the remainder of 2025, the company assumes membership stability but has embedded a 'measurable last chance uptick' in Q4 utilization into its guidance, anticipating members will seek care before potential subsidy expiration.

Dave Windley inquired about the demand and growth trajectory for Nelson Labs' core lab testing business, and asked for insights into the Q4 sequential progression, including revenue growth and margin pullback, particularly regarding Nordion's lumpiness.

Answer

Chairman and CEO Michael Petras noted core lab testing was doing well with routine volumes picking up, and growth in areas like extractable leachable testing. He explained that the Q4 revenue and margin dynamics were influenced by Nelson Labs' expert advisory services and Nordion's expected significant year-over-year decline due to timing, despite Nordion's full-year performance being above expectations.

Dave Windley asked for clarification on the mitigation of half of the V28 headwind for 2026 through re-contracting, specifically if it's across all payers or mostly from UnitedHealthcare, and if the expected 10% decline in VBC lives is interwoven.

Answer

Krista Nelson (COO of Optum Health) confirmed that the goal to overcome half of the V28 headwind through payer contracting efforts, which includes all payers, has been completed, with 90% of contracting finalized. This encompasses rates, product, benefits, and market exits, including over 40% of the PPO footprint across all payers. She stated that the approximately 10% reduction in VBC membership for next year is a direct result of actions to optimize the portfolio (products, market footprint, and appropriate risk), leaning towards products amenable to management.

Dave Windley sought clarification on the mitigation of half of the V28 headwind for 2026 through re-contracting, asking if this applies across all payers or primarily to the UnitedHealthcare portion. He also inquired about the expected 10% decline in VBC lives and its interrelation with these efforts.

Answer

Krista Nelson, COO of Optum Health, confirmed that half of the V28 headwind was offset through payer contracting efforts across all payers, with 90% completion. This included rate adjustments, product/benefit changes, and market exits, such as over 40% of their PPO footprint. She stated that the approximately 10% reduction in VBC membership for next year is a direct result of actions to optimize the portfolio, focusing on products, market footprint, and appropriate risk.

Dave Windley of Jefferies LLC inquired about hospital clients' views on the impact of potential healthcare policy changes on procedure volumes and asked for clarification on the company's foreign exchange (FX) hedging strategy.

Answer

Daniel Carestio, President & CEO, conveyed that potential policy changes are viewed by customers as a reimbursement challenge rather than a demand issue, noting that procedure volumes and capital orders remain strong. Michael Tokich, Senior VP & CFO, explained that the company is largely naturally hedged, with the bottom-line impact of favorable FX expected to be offset by higher tariff costs in the current forecast.

Dave Windley of Jefferies LLC asked about the signs that a client is on the cusp of a steeper adoption curve for biosimulation, particularly for NAMs, and whether clients are using Simcyp in a new way to replace animal models.

Answer

CEO William Feehery explained that adoption often begins with a services project before moving to software. Regarding NAMs, he noted that many customers were already modeling monoclonal antibodies in parallel with animal testing for other benefits, like dose optimization. The FDA's guidance is now allowing them to leverage this existing work to reduce animal use.

Dave Windley from Jefferies asked about the profile of new members gained in 2025 and how Oscar is getting comfortable that market morbidity won't continue to deteriorate as program integrity efforts remove certain members from the market.

Answer

CFO Scott Blackley responded that membership strength was driven by both strong retention and SEP growth, with new members showing MLR profiles consistent with historical patterns. He stated that since program integrity rules for 2025 are already in effect and they have not seen a significant shift in their low-utilizer population, they do not see signals of further market morbidity deterioration.

Dave Windley of Jefferies LLC asked for quantification of the growth contribution from GLP-1s and inquired about the drivers of margin improvement, specifically the balance between a richer product mix versus improved plant utilization.

Answer

CEO Franco Stevanato explained that while GLP-1s are a significant long-term tailwind, the company categorizes them under the broader Biologics umbrella, which grew to 39% of BDS revenue. CFO Marco Dal Lago attributed margin improvement to both higher volumes and a favorable mix shift towards high-performance products like Nexa syringes.

Dave Windley of Jefferies LLC asked for a reminder of Humana's medical and pharmacy cost trend assumptions for 2025 and its initial outlook for 2026.

Answer

CFO Celeste Mellet reiterated that the company expects low double-digit pharmacy trends and mid-to-high single-digit medical cost trends for 2025. She stated that the expectations for 2026 are consistent with these figures.

Dave Windley from Jefferies LLC asked for a breakdown of the increased revenue guidance between pass-through costs and direct revenue, questioned how Medpace is achieving higher productivity, and inquired about hiring plans and the biotech funding environment.

Answer

CFO Kevin Brady confirmed that accelerated reimbursable costs are a large driver of the revenue guidance increase, but noted the EBITDA guide was also raised due to greater productivity from factors like improved attrition. CEO August Troendle acknowledged the weak public funding data but expressed confidence for the year based on their internal pipeline, provided cancellations remain low.