Looking back on drug development inputs & services stocks’ Q2 earnings, we examine this quarter’s best and worst performers, including Fortrea (NASDAQ: FTRE) and its peers.

Companies specializing in drug development inputs and services play a crucial role in the pharmaceutical and biotechnology value chain. Essential support for drug discovery, preclinical testing, and manufacturing means stable demand, as pharmaceutical companies often outsource non-core functions with medium to long-term contracts. However, the business model faces high capital requirements, customer concentration, and vulnerability to shifts in biopharma R&D budgets or regulatory frameworks. Looking ahead, the industry will likely enjoy tailwinds such as increasing investment in biologics, cell and gene therapies, and advancements in precision medicine, which drive demand for sophisticated tools and services. There is a growing trend of outsourcing in drug development for nimbleness and cost efficiency, which benefits the industry. On the flip side, potential headwinds include pricing pressures as efforts to contain healthcare costs are always top of mind. An evolving regulatory backdrop could also slow innovation or client activity.

The 8 drug development inputs & services stocks we track reported a very strong Q2. As a group, revenues beat analysts’ consensus estimates by 4.4%.

Thankfully, share prices of the companies have been resilient as they are up 7.8% on average since the latest earnings results.

Fortrea (NASDAQ: FTRE)

Spun off from Labcorp in 2023 to focus exclusively on clinical research services, Fortrea (NASDAQ: FTRE) is a contract research organization that helps pharmaceutical, biotech, and medical device companies develop and bring their products to market through clinical trials and support services.

Fortrea reported revenues of $710.3 million, up 7.2% year on year. This print exceeded analysts’ expectations by 12%. Overall, it was a stunning quarter for the company with a beat of analysts’ EPS estimates and full-year revenue guidance exceeding analysts’ expectations.

“As Fortrea marked two years of independence at the end of June, the last remaining demands of the spin-related transition are firmly in the rear-view mirror,” said Fortrea Chief Financial Officer, Jill McConnell.

Fortrea pulled off the biggest analyst estimates beat of the whole group. Unsurprisingly, the stock is up 17.9% since reporting and currently trades at $7.75.

Is now the time to buy Fortrea? Access our full analysis of the earnings results here, it’s free.

Best Q2: West Pharmaceutical Services (NYSE: WST)

Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE: WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.

West Pharmaceutical Services reported revenues of $766.5 million, up 9.2% year on year, outperforming analysts’ expectations by 5.6%. The business had a stunning quarter with an impressive beat of analysts’ full-year EPS guidance estimates and full-year revenue guidance exceeding analysts’ expectations.

The market seems happy with the results as the stock is up 6.7% since reporting. It currently trades at $242.63.

Is now the time to buy West Pharmaceutical Services? Access our full analysis of the earnings results here, it’s free.

Weakest Q2: Azenta (NASDAQ: AZTA)

Serving as the guardian of some of medicine's most valuable materials, Azenta (NASDAQ: AZTA) provides biological sample management, storage, and genomic services that help pharmaceutical and biotechnology companies preserve and analyze critical research materials.

Azenta reported revenues of $143.9 million, flat year on year, falling short of analysts’ expectations by 3.8%. It was a softer quarter, leaving some shareholders looking for more.

Azenta delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 7.9% since the results and currently trades at $29.84.

Read our full analysis of Azenta’s results here.

UFP Technologies (NASDAQ: UFPT)

With expertise dating back to 1963 in specialized materials and precision manufacturing, UFP Technologies (NASDAQ: UFPT) designs and manufactures custom solutions for medical devices, sterile packaging, and other highly engineered products for healthcare and industrial applications.

UFP Technologies reported revenues of $151.2 million, up 37.2% year on year. This print was in line with analysts’ expectations. Overall, it was a satisfactory quarter as it also recorded a beat of analysts’ EPS estimates.

UFP Technologies pulled off the fastest revenue growth among its peers. The stock is down 3.2% since reporting and currently trades at $219.

Read our full, actionable report on UFP Technologies here, it’s free.

IQVIA (NYSE: IQV)

Created from the 2016 merger of Quintiles (a clinical research organization) and IMS Health (a healthcare data specialist), IQVIA (NYSE: IQV) provides clinical research services, data analytics, and technology solutions to help pharmaceutical companies develop and market medications more effectively.

IQVIA reported revenues of $4.02 billion, up 5.3% year on year. This result topped analysts’ expectations by 1.2%. Zooming out, it was a satisfactory quarter as it also recorded full-year revenue guidance slightly topping analysts’ expectations but full-year EBITDA guidance meeting analysts’ expectations.

IQVIA had the weakest full-year guidance update among its peers. The stock is up 16.7% since reporting and currently trades at $185.51.

Read our full, actionable report on IQVIA here, it’s free.

Market Update

In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.

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