Jefferies Reshuffles CRO Ratings: IQVIA Soars, ICON Slumps

In a significant move, investment firm Jefferies has reshuffled its ratings on major contract research organizations (CROs) in the pharmaceutical industry. The firm has upgraded IQVIA Holdings and Charles River Laboratories to Buy, while downgrading ICON to Hold.

CROs play a crucial role in providing outsourced clinical trial and drug development services to pharmaceutical and biotech companies. Jefferies' analysts have highlighted several key factors behind their rating changes.

Regarding IQVIA, the firm has now become Jefferies' top pick in the CRO space. Analysts point to IQVIA's stronger client wins and steadier business trends, as well as its lower reliance on any single customer, making it more resilient to ongoing pharmaceutical restructurings. Jefferies has raised its price target on IQVIA's stock to $225.

In contrast, ICON faces "too many headwinds to recommend buying," according to the Jefferies note. The analysts have flagged customer losses, project cancellations that could approach $1 billion in the third quarter, and continued weakness in biotech-related work. As a result, Jefferies has trimmed its price target on ICON to $175, suggesting another potential cut may be coming.

On Charles River Laboratories, Jefferies has pointed to improving bookings in its discovery and safety assessment business, along with potential value from a sale of its manufacturing services segment. The analysts believe "value extraction seems likely and downside limited," giving the company a price target of $195.

The brokerage has also maintained a cautious stance on Medpace Holdings, calling its valuation "too rich," and on Fortrea Holdings, citing execution concerns and looming pharma restructurings.

Jefferies has noted that biotech funding trends have been mixed, with cardiometabolic and autoimmune trial activity holding up but overall cash levels at biotech firms thinning. A recent surge in pharma layoffs adds further pressure to the CRO industry.