IQVIA - Q3 2024

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Third Quarter 2024 Earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Kerri Joseph, Senior Vice President, Investor Relations and Treasury. Mr. Joseph, please begin your conference.

Kerri Joseph (SVP, Investor Relations and Treasury)

Thank you, Operator. Good morning, everyone. Thank you for joining our Third Quarter 2024 Earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer, Ron Bruehlman, Executive Vice President and Chief Financial Officer, Eric Sherbet, Executive Vice President and General Counsel, Mike Fedock, Senior Vice President, Financial Planning and Analysis, and Gustavo Perrone, Senior Director, Investor Relations. Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call in the Events and Presentations section of our IQVIA Investor Relations website at ir.iqvia.com. Before we begin, I'd like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements.

Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our Chairman and CEO, Ari Bousbib.

Ari Bousbib (Chairman and CEO)

Thank you, Kerri, and good morning, everyone. Thank you for joining us today to discuss our third quarter results. IQVIA delivered another quarter of strong operational results. Revenue came in above the high end of our guidance range, representing about 6.5% growth, excluding the impact of foreign exchange and COVID-related work, and we also delivered 14% growth in Adjusted Diluted EPS. As we expected, the environment for our short-cycle businesses continues to improve as our clients are launching new drugs and executing on critical commercial programs. In fact, TAS revenue growth accelerated in Q3 to over 8% year-over-year, with growth in all subsegments. This reaffirms the second-half growth trajectory that we had anticipated for TAS since the beginning of the year, and we now expect TAS growth for the year at the high end of our mid-single-digit range.

On the clinical side, the near-term market environment continues to be choppy, as we've been discussing in prior earnings calls. None of this is new, but as you know, we've been facing aggressive competitive pricing and tougher negotiations. Additionally, the trend that started over a year and a half ago, with large pharma reprioritizing their program portfolios as a result of the IRA, has been continuing. And this has been leading to a higher-than-normal level of cancellations. And we expect this to be the case again in the fourth quarter. On the EBP side, funding levels this year have improved, but as you know, it does take time for this funding to translate into actual RFP flows and even more time to translate into awards.

Our bookings in the quarter included a substantial cancellation due to drug futility that impacted our quarterly net new business by approximately $350 million for that one trial. The reported net book-to-bill was 1.06, but excluding this specific cancellation, the book-to-bill would be 1.22. Lastly, in late September, two clients notified us of their need to delay two mega studies that were already in startup phase due to client-related logistics issues. This affects our short-term guidance, and Ron will share more about that later. While we navigate through these short-term challenges, it's important to remember that our CRO business is a long-cycle business. The demand metrics give us confidence in the strength and resilience of our business. I'd like to share some details of what we are seeing. Firstly, as you may know, many large pharma companies have been running processes this year to reevaluate and consolidate their strategic partnerships.

To date, we have successfully renewed every single large pharma strategic partnership. In fact, we've added new relationships, displaced incumbents, and expanded the scope in over half a dozen of our strategic partnerships with large pharma clients. There are two aspects to this successful performance by the R&DS team. One is that our existing large pharma customers have reaffirmed their trust in IQVIA, and two, it opens up opportunities for us to gain greater share of wallet in future programs because these clients have consolidated their strategic partnerships. In the EBP world, biotech funding reached about $16 billion in the quarter, according to BioWorld, and that means that year to date, biotech funding was over $80 billion, which represents more than 50% growth in funding year-over-year.

Now, again, as I remarked earlier, it does take time, and it could take a year to a year and a half before that funding translates in actual awards. Three, our backlog reached a new record of $31.1 billion at the end of the quarter, and that represents growth of 8% compared to the prior year. Four, our trailing 12-month book-to-bill remains healthy at 1.22. Fifth observation, our next 12-month revenue from backlog is up 5.5% year-over-year. Our quarterly RFP flow continued the same trend we saw in the first half, increasing mid-single digits year-over-year. And finally, our qualified pipeline in the quarter is up across all customer segments, and it grew low double digits overall compared to the prior year. And that is good.

Now, just to be balanced, I should point out that in stronger market environments, that qualified pipeline has sometimes been up in high double digits. Now, let's turn to the results for the quarter. Revenue for the quarter grew 4.3% on a reported basis and 4.2% at constant currency. Compared to last year, and excluding COVID-related work from both periods, we grew the top line about 6.5% at constant currency, of which just under 5% is organic growth. Third quarter adjusted EBITDA increased 5.7%, driven by revenue growth and ongoing cost management discipline, and that resulted in 30 basis points of margin expansion. Third quarter adjusted diluted EPS of $2.84 increased 14.1% year-over-year. I'd like to share a few highlights, as is our practice, of business activity. Let me start with R&DS, where we continue to differentiate with our therapeutic expertise, clinical technology, and public health offerings.

IQVIA won a top 10 pharma partnership as a new preferred provider for central lab, as well as secured extension for several existing FSP engagements in clinical monitoring, data management, and clinical technology. We were awarded a strategic partnership to provide DCT solutions for a metabolic and cardiovascular program at the top 15 pharma clients. We're the only company that can offer these DCT services and technology without having to partner with third parties.

Within oncology, which is, as you know, a key therapeutic area for our industry, we were selected by several leading sponsors in the quarter, including a U.S. biotech client to manage a large global phase three study for renal cell carcinoma for patients who have progressed after first-line immunotherapy combinations. A large pharma customer to conduct an early phase trial in prostate cancer, leveraging our expertise in dose escalation and dose expansion study designs. A biotech client to run a global phase three study for a biosimilar targeting multiple myeloma. This project aims to bring the first biosimilar for multiple myeloma to market. A biotech client, leader in cell and gene therapies, to conduct a groundbreaking phase three trial for reoccurring cancer in the lymphatic system. Across these awards, we differentiate with our ability to run global studies with dedicated teams, as well as our AI-enabled site selection solutions.

Within clinical technology, in fact, we continue to expand our recently launched OneHome for Sites offering. A biotech client selected IQVIA to increase clinical trial capacity by streamlining access to multiple vendor sites via our single sign-on platform. In the quarter, a large biotech client selected IQVIA to expedite the setup of a trial to deliver vaccines for Mpox in sub-Saharan Africa, addressing a critical outbreak in the region and significant unmet medical needs. Finally, IQVIA, in partnership with the Coalition for Epidemic Preparedness and Innovations, CEPI, the Rwandan government, and the Sabin Vaccine Institute, responded to an outbreak of the Marburg virus, a hemorrhagic fever with greater than 50% fatality in Rwanda at the end of September. Our organizations collaborated to mobilize and dose the first patients with an investigational vaccination within nine days of the outbreak.

Moving to TAS, as you saw from our results, the business is recovering even better than we had forecasted. One area we continue to make great strides in is in building differentiating AI capabilities across our offerings. You will have seen we recently launched the IQVIA AI Assistant, which is a new generative AI tool designed to provide life science customers with quick and powerful insights through a user-friendly conversational interface. This allows users to ask complex business questions and receive comprehensive and reliable answers in real time. IQVIA AI Assistant is built on IQVIA's trademark healthcare-grade AI, which enables extensive privacy safeguards and provides expert validation of accurate, reliable output, as is demanded by the healthcare industry. IQVIA was awarded a multi-year contract by a large pharma client to deliver our Next Best Action offering for sales reps across nine countries.

This AI-enabled solution optimizes sales rep engagement activities and enhances their interactions with HCPs. IQVIA secured a multi-year contract with a North American biotech client to improve workflow efficiency through an integrated, fully connected intelligence solution that includes OCE, Orchestrated Analytics, and OneKey offerings. The top 10 client chose IQVIA to improve HCP engagement for a new schizophrenia treatment. And in this case, we displaced the incumbent by offering a solution that will enable daily alerts based on near real-time inputs versus the incumbent's weekly frequency. The top five pharma clients awarded IQVIA a multi-year contract to provide copay support for oncology and women's health franchises. This deal enhances patient access to medications and drives better health outcomes.

A couple of examples in the real-world segment: a top five pharma client selected IQVIA to support the launch of a new GLP-1 asset targeting weight loss based on European payer reimbursement models. The top five pharma client engaged IQVIA to provide an evidence-based approach for clients' medical affairs team to optimize funding decisions and pre-launch activities in the North American market. A top 20 large pharma client awarded IQVIA a contract to support engagement with HCPs and KOLs based on detailed share of voice analysis of scientific and clinical experts in nine countries across all core therapeutic areas for the client. Finally, and before I turn it over to Ron for more details on our financial performance, I'd like to invite you to our IQVIA Investor Day, which has been scheduled for December 10th on the campus of our headquarters in Durham, North Carolina.

Our investor relations team will be available to provide additional logistical details. Event information is already available on our investor portal. Ron?

Ron Bruehlman (CFO)

Thanks, Ari, and good morning, everyone. Let's start by revealing revenue. Third quarter revenue of $3,896 million grew 4.3% on a reported basis and 4.2% at constant currency. In the quarter, COVID-related revenues were approximately $20 million, down from about $100 million in the third quarter of 2023. Now, excluding all COVID-related work from both this year and last, constant currency growth was about 6.5%, of which just under 5% was organic. The majority of the acquisition contribution was in the TAS segment, as is typical. Technology and Analytic Solutions revenue was $1,554 million, up 8.6% reported and 8.2% at constant currency. R&D Solutions revenue of $2,162 million was up 1.9% reported and an even 2% at constant currency.

Excluding all COVID-related work, growth at constant currency in R&DS was about 6%. Lastly, contract sales and medical solutions, or CSMS, revenue of $180 million declined 1.6% reported and 1.1% at constant currency. Year-to-date revenue was $11,447 million, up 3% on a reported basis and 3.5% at constant currency. Excluding all COVID-related work, growth at constant currency was 6% year-to-date. Technology and analytic solutions revenue was $4,502 million year-to-date, up 3.9% reported and 4.3% at constant currency. Excluding all COVID-related work, growth at constant currency in TAS was 5%. Now, as a reminder, Q1 2023 was the last quarter where TAS revenue had a meaningful contribution from COVID-related work. R&D solutions year-to-date revenue of $6,404 million was up 2.6% at actual FX rate and 3% at constant currency. Excluding all COVID-related work, growth at constant currency in R&DS was 7%.

Lastly, Contract Sales and Medical Solutions year-to-date revenue of $541 million was flat on a reported basis, and up 3% at constant currency. Let's move down to P&L. Adjusted EBITDA was $939 million for the third quarter, which was growth of 5.7%, while year-to-date Adjusted EBITDA was $2,688 million, up 3.3% year-over-year. Third quarter GAAP net income was $285 million, and GAAP diluted earnings per share was $1.55. Year-to-date GAAP net income was $936 million, which represented $5.08 of diluted earnings per share. Adjusted net income was $523 million for the third quarter, and adjusted diluted earnings per share was $2.84, up 13.2% and 14.1% respectively versus prior year. Year-to-date adjusted net income was $1,478 million, or $8.02 per share. Our backlog at September 30th was $31.1 billion. That's up 8% year-over-year and 6.7% at constant currency. Next 12 months' revenue from backlog was $7.8 billion, growing 5.5% year-over-year.

Reviewing the balance sheet now, as of September 30th, cash and cash equivalents totaled $1,572 million, and gross debt was $13,512 million, and that resulted in a net debt of $11,940 million. Our net leverage ratio at the end of the quarter was 3.27 times trailing 12-month adjusted EBITDA. Third quarter cash flow from operations was $721 million, and capital expenditures were $150 million, resulting in very strong free cash flow of $571 million. You saw in the quarter that we repurchased $200 million of our shares. That leaves us with just under $2.2 billion of share repurchase authorization remaining under the current program. Okay, let's turn to guidance now. Now, while our views on industry fundamentals remain positive, we are updating our full-year guidance due to the delay in the two separate fast-burning mega trials, which clients communicated to us at the end of the quarter.

These delays resulted from client-related logistical issues. Our team is working closely with these customers to ensure timely resumption of the trials in 2025. For the year, we now expect revenue to be between $15,350 million and $15,400 million, Adjusted EBITDA to be between $3,675 million and $3,700 million, and adjusted diluted earnings per share to be between $11.10 and $11.20. There is no material change from our prior guidance to our assumptions around COVID-related step-down in foreign exchange. The revenue growth contribution from acquisitions is expected to be about a point and a half for the year. Now, at the second, excuse me, at the segment level, we currently expect TAS to grow approximately 6% for the full year and R&DS approximately 5%. Both growth rates are at constant currency, excluding the impact of the COVID revenue step-down.

For the fourth quarter, we expect revenue to be between $3,903 million and $3,953 million. This includes TAS revenue of growth of approximately 8% and R&DS revenue growth of about 1%, both at constant currency and in the case of R&DS, excluding COVID-related impacts. Adjusted EBITDA is expected to be between $987 million and $1,012 million, and adjusted diluted EPS for the quarter is expected to be between $3.08 and $3.18, and this guidance assumes that foreign currency rates, as of October 30th, continue for the balance of the year, so to summarize, we delivered another quarter of strong operational results. Revenue came in above the high end of our guidance at about 6.5% year-over-year, excluding the impact of foreign exchange and COVID-related work. Adjusted EBITDA margin expanded to 24.1%. Adjusted diluted EPS grew by 14% as interest expense is no longer a headwind.

Free cash flow was again strong, growing 31% year-over-year, representing 109% cash conversion of adjusted net income. R&DS bookings were affected by the cancellation of one large program due to futility. We updated our Q4 guidance to reflect the delayed start of two fast-burning mega trials that are now expected to resume again in 2025, and while we are experiencing some near-term bumpiness in R&DS, forward-looking indicators continue to signal a healthy demand environment, confirming the strength and resilience of this business into 2025 and beyond, and with that, let me hand it back over to the operator to open the Q&A session.

Operator (participant)

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one in your telephone keypad. We request that you please limit yourself to just one question so that others in the queue may participate as well.

We'll pause for a moment to compile the Q&A roster. Your first question comes from the line of Anne with Mizuho. Your line is open.

Good morning. Thank you so much. Any thoughts on preliminary 2025? I know the industry is going through a tough time now, but do you think you could still grow in that kind of high single-digit range given the backdrop? Thanks.

Ari Bousbib (Chairman and CEO)

Well, thank you, Anne. We don't usually give guidance for the following year at the time of the third quarter earnings release, but we do plan to at least give some indication of what 2025 will look like at our investor meeting on December 10, and as always, to give you more precise guidance for the year concurrent with the full-year earnings release.

Now, having said that, look, I'm going to depart from what everybody else is in the room is telling me to do, and I'm going to tell you that what, and I'll do that because the environment is so shaky, and obviously, you're wondering what's going to happen in 2025, so look, if you look at 2024, we will have grown the company about mid-single digits, okay, after all the short-term challenges that we signaled are absorbed, and my expectation is that it'll be similar in 2025. That's really a high-level expectation. We haven't finished our planning process, as you can imagine, but if you look at the segment, TAS, as predicted, rebounded in the second half, and TAS is a short-cycle business, so I think things are coming back as expected, and we anticipate this will continue.

If TAS grows this year at constant currency again around 6% or so, then I think I'm expecting that the same will be true at least in 2025. And then for R&DS, which will continue to deal with these short-term cancellations in Q4 and probably the early part of 2025, we are projecting a 5-ish % growth, 5% plus growth for R&DS for this year. I'm going to assume at this early stage that it'll be similar, and that's what's guiding my observation that I think company-wide will be around those levels as well in 2025. Again, that's just as a placeholder. I invite you to join us on December 10, where our planning will be more advanced, and we'll share more about that and certainly full-year detailed guidance when we release full-year earnings. Thank you, Anne.

Thank you.

Operator (participant)

Your next question comes from the line of Shlomo with Stifel. Your line is open.

Hi. Thank you very much. Ari, I know it's one question, but I just want to get a lot more detail, if you can, on the trial delays because ICON talked about two trial issues also. They were talking about financial reprioritization and stuff like that with some of their clients. You're talking about some kind of logistical issues. Can you give us a little bit more detail? Are these logistics, physical logistics? What else could be involved in that? Does it have anything to do with the financials? And what kind of confidence do you have that the projects will really ramp into the second half of 2025? And if you can kind of flesh that out as much as possible, I'd appreciate it. Yeah.

Ari Bousbib (Chairman and CEO)

So, look, I mean, what other competitors are experiencing is absolutely coincidental that it's two trials and we have two trials. I understand why you're asking the question. Just again, to step back and look at what's happening, we've got a general environment where, as I stated in my introductory remarks, large pharma has been reprioritizing their programs. That is nothing new here, and that has led to an elevated number of cancellations. That's a direct consequence of the IRA. That affects the industry. That's the market environment. And frankly, even in that environment, we normally should be expected, given our scale and performance and momentum, to continue to deliver. And that's what we did for the first three quarters of the year.

Separately, and unfortunately, at the same time, we have had to deal with a very large cancellation that has nothing to do with reprioritization. It has to do with futility. And that obviously is affecting our short-term impact. Now, in a normal environment, we would have been able to absorb that and move on. But because it's such a tough environment and we're dealing with a general heightened level of cancellations, we've not been able to absorb that. Again, separately and unfortunately concurrently, two clients, this is totally independent of anyone else, of any reprioritization, of any financial considerations, of anything else, have had, for their own reasons. We know what the reasons are. I cannot share them with you. We are subject to very strict NDAs for obvious reasons. It has absolutely nothing to do with the drug, with us, with financials.

We just can't tell you what the reasons are, and I regret that. But those trials will resume. They happen to be fast-burning, and they happen to be very large. We're confident that they will resume in 2025. Now, I know it's a lot to absorb, and when you look at the whole picture, that's a lot of different things. And I regret it as much as you, but that's the reality we're facing with. A choppy environment. We'll navigate that under normal circumstances, but we've had to deal with two discrete events unrelated, really, to the environment.

All right. Thank you. I hope that helps.

Yep.

Operator (participant)

Thank you. Your next question comes from the line of Anne with J.P. Morgan. Your line is open.

Hi, guys. Thanks so much for the question.

I was hoping perhaps you could help us understand just maybe the timing of some of these dynamics of the cancellations. How much notice do you get in advance? And when we think about the delays for kind of pushing to the back half of next year, do they impact any other projects for 2025, or does that become incremental to 2025?

Thanks very much. Okay.

Ari Bousbib (Chairman and CEO)

On cancellations, typically, look, it depends. Okay? There's two types of cancellations, and I'm going to roughly say that in this past year, what we're seeing is that about half is due to the reprioritization and about half is the normal drug futility based on results. How does it happen? Well, the reprioritization, it's a process that our clients are going through, and they've been going through this for a year and a half. And I believe we are peaking at this point.

It has an end. This process has an end. I see this ending at the end of this year. That's my prediction. It's one man's prediction. But I think that we're going to still see elevated cancellations in the fourth quarter. Now, IQVIA does not give quarterly numbers for cancellations, but I've said before, normally, it's about $500 million, and it can vary plus or minus $200 million either side. By definition, it's not a constant number. It cannot be the same number every quarter. Okay? So there are quarters where it's 300. There are quarters where it's 250. There are quarters where it's 600, 700. The average is around 500. And I think that we're seeing. I'm not surprised to see quarters where we have doubled that number because of these reprioritizations. Okay? So that's what we're dealing with.

The traditional cancellations, other than reprioritizations, the traditional cancellations that are due to data, it usually takes time because you've got a piece of data that's not favorable. As you know, there are independent panels, investigative panels that review that data. There's discussions with the FDA. It's a long process, and even in order to reach the decision to cancel, it takes time. When that happens, it also takes time to unwind the trial. If the trial is ongoing, as opposed to the trials that are canceled because of reprioritization, which are things that are simply taken out of the backlog, programs that are canceled because they are in the middle, in flight because of results, it takes time to unwind. It could take two or three quarters because we have to deal with patients that have been dosed, that are under treatment, etc., so there are serious reasons.

And often, it leads to additional bookings of extra work in order to facilitate that disengagement. So again, it's a complex unwinding process. But I hope that helps answer your question.

Yeah, Ron? And Anne, you had also, I think, asked about delays and whether the delays at incremental work in 2025. Yes. Don't forget, these are multi-year trials. So if 2024 work gets pushed into 2025, sure, we pick it up there, but 2025 work gets pushed into 2026. So I wouldn't think of these as being incremental to 2025. Right.

That's correct. However, the sequential growth will be affected, right? So just because of the comparison and the fact. Exactly. And we'll give you more information on the sequential growth that we expect as we go forward during our normal guidance process.

Great. Thank you very much.

Operator (participant)

Your next question comes from the line of Luke at Barclays.Your line is open.

Hey, guys. Thanks. A couple of cleanups here to start. On the M&A, you guys did $428 million, I think, in the quarter. Any update there on the financial profile? And is all this in TAS and kind of how we think about that business growing for modeling perspective in the next year?

Ari Bousbib (Chairman and CEO)

Yeah. Thank you. Well, yeah, you're correct. As has been typically the case, the majority of our acquisition contribution is in TAS. But I would point out that in the quarter, TAS had very strong step-up in organic growth, in fact, more than three times sequentially. The company-wide organic growth was just under 5%, excluding acquisitions. And so acquisition contributed to just over one and a half points to our about six and a half points of growth at constant currency, excluding COVID.

Now, if you do the math, you'll see that the organic growth in TAS was also mid-single digits, which, again, is over three times what it was in the prior quarter. So strong in TAS across the board organically. Since you asked about acquisitions, I just want to step back and reiterate what I've said many times before, and that is that acquisitions are an important part of our growth algorithm. Always has been the case, and hopefully, will continue to be the case. In fact, we always aimed at least two points of incremental growth from acquisitions, but if you look at our numbers, you'll see that historically, we've never been able to do two points plus of growth. It's been more between one and one and a half points and this year, hopefully, one and a half of contribution from acquisitions.

Now, bear in mind, we do a very large number of tiny, tiny deals. Okay? You have the list here in front of you. Yeah. Just to give an example, a couple of examples this year in the TAS area, we did an acquisition of a commercial engagement company, H3O, that has $1 million of annual revenue. We did a real-world platform, B2i, that had slightly over $1 million of revenue. So when you look at the total number of acquisitions we do, it looks like a really big number, but there are any number of very small acquisitions. I mean, that's typical. If you look at our list of actual acquisitions with all these little fancy names, and they are important. Okay? These are little deals that we do this because we believe we are pretty good at buying good companies with potential growth.

Typically, after we integrate them within a year or two of ownership, they do very well. So again, the vast majority of these deals have very little revenue. Now, sometimes we have to pay up a lot. I mean, there's a handful of acquisitions we've done in the recent past that we've paid 10 times revenue for. I'm thinking of DMD, for example, a couple of years, which facilitated our entry into the digital space. We paid almost 10 times revenue for that company. So if you will, the acquisition number, the dollar paid for the acquisitions and the revenue contributions are not connected. For example, year to date, what's the spend on acquisitions year to date as of Q3? $649 million. Okay. We spent $649 million year to date on acquisitions as of the end of the third quarter.

Almost half of that was one acquisition, a company called MCRA, which is a small specialized CRO in med devices. It's actually an RDS acquisition. We bought that in the third quarter, sometime in August, if I remember. That was almost half of the spend. We paid almost five times revenue for that. So obviously, it's a big number in terms of the spend. But the revenue contribution this year of that acquisition is minimal. Okay? Because again, we paid almost five times. We bought that in. It has maybe one month of revenue in the quarter. That's what it was. So again, very important acquisition as part of our strategy. Thanks for asking the question.

By the way, I would remind you, the best deal we ever did was the acquisition of the 40% minority we didn't yet own from our joint venture with Quest in our central lab. That was the largest deal that we did. And we paid $760 million for that. It came with exactly zero revenue because we already consolidated revenue. Right? But it was a great deal nonetheless. So again, I hope that helps give context to our acquisition strategy. Thank you.

It does.

Operator (participant)

Your next question comes from the line of Justin Bowers with Deutsche Bank. Your line is open.

Justin Bowers (Analyst)

Thank you. And good morning, everyone. Looking forward to seeing the lab at the Innovation Center in December. Ari, just sticking with the M&A, I think in capital deployment, at the beginning of the year, you guys talked about $2 billion in deployment.

I think when we put together the M&A and the buyback, you're still tracking below $1 billion, so assume nothing gets done in the fourth quarter. Would it be fair to assume sort of like $3 billion of dry powder for 2025, and then just lastly, related to the comments around pricing pressure, I think earlier you've said it's been mostly concentrated to FSP. Are you seeing that spill over at all into FSO?

Ari Bousbib (Chairman and CEO)

Okay, well, thank you, Justin. These are great questions. On the capital deployment, as you know, we signaled between $2 and $3 billion as a long-term goal annually spread between acquisitions and share repurchase. And as you correctly pointed out, so far this year, we've summed the numbers, so far, we spent $649 million on acquisitions and just $200 million on share repurchase.

And frankly, that's because we were looking at bigger acquisitions that we were unable to do either for pricing or other reasons. Acquisitions, as you know, are binary. You do them or you don't do them. Now, based on what I know today, I don't think that we're going to spend a lot more on acquisitions before the end of the year. Maybe, again, I'm speculating between another $50-$100 million at the most. And therefore, as you correctly point out, that leaves us with a lot of dry powder. My intention before the earnings release was to massively buy shares in the fourth quarter. And today, my intention is even to more massively buy shares by the end of the quarter. My general counsel is putting his head on his head here.

But I am telling you that we are very excited, and we are going to buy a lot of shares. We have $2.2 billion plus share buyback authorization. And the share price is screaming buy. And that's where we're going to spend our capital. Then you have the question on pricing. Pricing is tough across the board, has been commercial and RDS. Obviously, it's not that it's more on FSP than in FSO. It's just that FSP was stronger this year. Remember, FSP is perhaps, correct me if I'm wrong, over here, it's about 15% of revenue.

Ron Bruehlman (CFO)

Yep. Correct.

Ari Bousbib (Chairman and CEO)

Roughly.

Ron Bruehlman (CFO)

Yep.

Ari Bousbib (Chairman and CEO)

But it's been increasing in terms of our bookings, and it's inching towards 20%. Right? So eventually, it'll be about 20%. But again, we might win against other FSOs. So I think it'll be always between 15% and 20%. And FSP has, as you know, lower margins.

So that depresses our. It's a headwind to our margins because of mix every time we do more FSP. Pricing is tough across the board. Okay? One, because, as I mentioned before, this year, clients, most large pharma companies, put us through a sort of a rebate process, invited every CRO under the sun. And as I mentioned in my introductory remarks, we did very well there. Essentially, in every single one of these bid processes, we were reselected for our existing strategic partnerships. And we expanded with half a dozen strategic partners and expanded the scope of what we are going to be preferred suppliers for, including especially for central lab. So we think that the future is very bright on R&DS. And again, pricing very tough. That's one reason.

The other reason is that we have, as you know, the industry has kind of sort of split between three large CROs and then another set of second-tier CROs who have had, let's say, more trouble in the recent past and who are desperate to win business. And when you're desperate, the place you go to is price. And so all of that, even though they never selected, they end up creating somewhat of a more pricing pressure. And clients, of course, are going to be delighted to use them for that purpose. So these are the reasons. It doesn't look like it's improving. It's going to continue to be tough. But again, we are confident that we will continue to win and do well in the long term. Thank you, Justin.

Justin Bowers (Analyst)

Thank you, Ari.

Operator (participant)

Your next question comes from the line of David with Jefferies. Your line is open.

Hi. Thank you for taking my question. Good morning. I wanted to start with just a clarification. I think based on the book-to-bill that you're reporting this morning, you added about $140 million of new wins, bookings above revenue. Your backlog's growing about $500 million. Is the difference there just FX? So that's clarification. And then, Ari, thinking about taking the timing issues, the cancellations, etc., the pricing pressure that you just commented on, how should we think about your ability to manage cost structure and continue to kind of hold margin or deliver margin as you have in the past in this environment? Thank you.

Ari Bousbib (Chairman and CEO)

Dave, first of all, the first observation, your math, I think, is correct. I don't have the numbers in front of me.

But based on what I heard, I think you're absolutely on the mark with the math on the bookings and the backlog. Your question on the cost management is an excellent one. And you probably are inferring from what we said correctly that we have to deal with significant cost headwinds for the following reason. These delays, as you can imagine, we had already started up those two mega trials. Okay? They were in startup phase. And therefore, we stood up the resources and the infrastructure, the teams, and everything that's required to perform and deliver on those trials. Now, they are interrupted. So it's almost like. But they are going to resume in 2025. I think one of them second quarter and then the rest basically second half and ramp up in second half.

Now, we are not going to let these resources go and do what we just did to ramp up the resources. So that already is a cost that we have to bear. Now, obviously, we're going to redeploy some of that against some of the other opportunities, FSP, and so on. But nevertheless, there is no question that we are going to be living here over the next two, three quarters with an extra bucket of costs associated with these. And these are huge trials. Okay? And that is going to affect our margins. Now, again, we haven't finished our planning process. We have a lot of other levers. We are working constantly on cost. And I mean, you saw, obviously, we hadn't yet been affected by this issue so far. But you saw that so far this year we've done pretty well.

And we've actually, in the fourth quarter, achieved record margins. I think 24.1% is the highest operating margins that we have achieved since the company was created in 2016. Correct? So we've done well, 30 basis points of expansion this quarter. But again, in the next two, three quarters, we'll have to see. And we'll share more details on December 10 and certainly concurrent with the full-year earnings release. But Dave, you're exactly on the mark. Thank you.

Great. Thanks.

Operator (participant)

Your next question comes from the line of Elizabeth Anderson with Evercore ISI. Your line is open.

Elizabeth Anderson (Analyst)

Hi, guys. Thanks so much for the question. Maybe one high-level question and one numbers question. Can you tell me where we are in this sort of strategic partnership? Obviously, that's been an area of strength for you guys. But sort of are we sort of through this round? Are we sort of still beginning?

Is that not the right way to think about it? And then on the numbers side, what do you think the interest expense is going to be for 2024 in your updated guidance? Thank you.

Ari Bousbib (Chairman and CEO)

Thank you, Elizabeth. Yes. I mean, the strategic partnerships, we did very well this year. Listen, we've been working with these clients for a long time. As you know, we expanded the number of logos that we have preferred partnerships with. And so this year, and I think it's part of the overall reaction to the IRA and the overall focus on cost management. You know that most large pharma companies announce massive cost reduction programs. And so they opened up. They reopened all of their vendor relationships. I believe that we are largely through all of that. And I think that we are ready to move forward.

Most of the large ones essentially have been completed. So that's for your first question. And second question, guys, you've got the answer? Interest expense. Talking about this year, Elizabeth? Yes. Round number 625 or so, give or take around that number, which is not terribly different than what we were telling you before. Got it. And do you want to comment on 25 right now or not on that? 25 interest? I mean, obviously, it depends to an extent on what the Fed and the ECB do with interest rates. But flattish for next year is what we're anticipating. But we'll update as we go along.

Elizabeth Anderson (Analyst)

Great. Thank you very much.

Ari Bousbib (Chairman and CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Michael with Leerink Partners. Your line is open.

Morning. And thank you for taking the question.

I know we don't have formal 2025 guidance, so I might be treading a little lightly here. But relative to R&DS and the 5% growth, give or take expectation at this point in time, what do the conditions have to look like relative to a macro basis, cancellation rates, etc., to make sure that number is still feasible? Is that predicated on those two mega trials reramping in the second half? And what are the most important puts and takes you're focused on that could change versus what the current trend is of general market choppiness?

Ari Bousbib (Chairman and CEO)

Yeah. I mean, look. I wish I had a crystal ball. But I can only tell you what we see now. I believe that by the end of the year, these program reprioritizations will come to an end. We know that because we are in close conversations with our clients.

And look, that's the business our clients are in, is to do research and innovate. They've been at this for a year and a half. Started, I think, just in the kind of middle of last year. I think we basically know what's been reprioritized and canceled. We know what will be canceled by the end of the year, basically. Now, there could be other trials that have drug futility issues. That can always happen. But that's kind of in the normal range of things. And we anticipate that. In that mid-single-digit type of high-level expectations that we have as of now for 2025 for R&DS, that's based on what we know today that has been canceled. The large that we had is $350 million program canceled in the quarter that we took in. We also had in the first quarter a large $250 million program cancellation.

We know that these two programs, mega trials, have been delayed. Then we factored in everything else. Again, most of the trials are much smaller than that. We work on hundreds and on over 2,000 of them. So it's going to be the normal course of things. These big ones move the needle. If you look at R&DS growth this year, we had 7% in the first quarter. What did we have? First quarter was ex-COVID constant currency. First quarter? 8%. Right. 8% first quarter. Then we had 6% and 6% in, again, a constant currency ex-COVID basis. Then we're going to have 1% in the fourth quarter.

So similar to what I said last year about TAS, it might be like a mirror image in 2025, okay, with things going the other way just because of the cancellations, the short-term impact of that, and the delays, the short-term impact of that. So that's how best I can describe what we expect for 2025 at this point based on what we know.

Thank you.

Thank you, Michael.

Operator (participant)

There are no further questions at this time. Mr. Joseph, I turn the call back over to you.

Kerri Joseph (SVP, Investor Relations and Treasury)

Thank you, Ari. Thank you all for taking the time to join us today. And we look forward to speaking with you again in our fourth quarter 2024 earnings call. The team will be available the rest of the day to take any follow-up questions you might have. Thank you. This concludes today's conference call. You may now disconnect.