Good day, and thank you for standing by. Welcome to the ICON Plc Q2 2020 Earnings Conference Call [Operator Instructions] Please be advised today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Kate Haven. Please go ahead.

Good day, and thank you joining us on this call covering the quarter ended June 30, 2025. Also on the call today, we have our CEO, Dr. Steve Cutler...

Kate you're now live, please go ahead.

Can you hear me? Good day, and thank you for joining us on this call covering the quarter ended June 30, 2025. Also on the call today, we have our CEO, Dr. Steve Cutler; our CFO, Nigel Clerkin; and our COO, Barry Balfe. I would like to note that this call is webcast and that there are slides available to download on our website to accompany today's call. Certain statements in today's call will be forward-looking statements. These statements are based on management's current expectations and information currently available, including current economic and industry conditions. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, and listeners are cautioned that forward-looking statements are not guarantees of future performance. Forward-looking statements are only as of the date they are made, and we do not undertake any obligation to update publicly any forward-looking statements, either as a result of new information, future events or otherwise. More information about the risks and uncertainties relating to these forward-looking statements may be found in SEC reports filed by the company, including the Form 20-F filed on February 21, 2025. This presentation includes selected non-GAAP financial measures, which Steve and Nigel will be referencing in their prepared remarks. For a presentation of the most directly comparable GAAP financial measures, please refer to the press release section titled Condensed Consolidated Statements of Operations. While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures, we believe certain non-GAAP information is more useful to investors for historical comparison purposes. Included in the press release and the earnings slides, you will note a reconciliation of non-GAAP measures. Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share exclude stock compensation expense, restructuring costs, foreign currency gains and losses, amortization and transaction-related and integration-related costs and their respective tax benefits. We will be limiting the call today to 1 hour and would therefore ask participants to keep their questions to one each in the interest of time. I would now like to hand the call over to our CEO, Dr. Steve Cutler.

Thank you, Kate. ICON's second quarter results showed good progress across a number of key areas as we navigated ongoing volatility in the broader clinical development market. Gross business awards increased 11% on a sequential basis over quarter 1 with notable wins from several biotech customers as well as the continued ramp-up of several large pharma partnerships that have been added in the last 18 months. Our revenue performance was ahead of expectations, assisted by higher pass-through revenue in the quarter. This dynamic helped to increase our burn rate slightly to 8.2% in quarter 2 and was in line with our expectations of holding a stable burn rate as we progress through this year. While study delays and the elongation of time lines from contracting to start date have presented a headwind to this metric, there are a number of initiatives we are focused on to improve cycle times and ultimately increase burn rate, which are showing promising results on in-flight studies. Through execution of our cost management initiatives across the business as well as continued automation, we saw progression in adjusted EBITDA dollars sequentially. Gross margin improved over quarter 1 to 28.3% and SG&A costs reduced by $9 million year-over-year, demonstrating our ability to optimize our efficient global operations. Overall adjusted EBITDA margin increased over quarter 1 to 19.6% with solid cost control offsetting higher pass-through revenue. This translated to a 2% increase in earnings per share sequentially, resulting in adjusted earnings per share of $3.26. While we achieved solid conversion on the opportunities that went to decision in this quarter, our net book-to-bill result of 1.02x was negatively impacted by elevated cancellations as we anticipated. Overall cancellations increased sequentially and on a year-over-year basis in the quarter, driven by the cancellation of one of the large next-generation COVID…

Thanks, Steve. Revenue in quarter 2 was $2.017 billion, representing a year-on-year decrease of 4.8%. Revenue was up approximately 1% sequentially on quarter 1 2025. Overall, customer concentration in our top 25 customers was aligned with quarter 1 2025. Our top 5 customers represented 25% of revenue in the quarter. Our top 10 represented 39.7%, while our top 25 represented 65.6%. Adjusted gross margin for the quarter was 28.3% compared to 29.9% in quarter 2 2024 and up 10 basis points on quarter 1 2025. Adjusted SG&A expense was $174.8 million in quarter 2 or 8.7% of revenue. Relative to the comparative period last year, adjusted SG&A was down by $8.6 million in quarter 2. Adjusted EBITDA was $396 million for the quarter, an increase of $5.4 million sequentially. Adjusted EBITDA margin increased 10 basis points over quarter 1, 2025 to 19.6% of revenue. Adjusted operating income for quarter 2 was $357.4 million, while adjusted net interest expense was $46.6 million. The effective tax rate was 16.5% for the quarter. We continue to expect the full year 2025 adjusted effective tax rate to be approximately 16.5%. Adjusted net income for the quarter was $259.5 million, equating to adjusted earnings per share of $3.26 a decrease of 13.1% year-over-year or an increase of 2.2% on quarter 1, 2025. U.S. GAAP income from operations amounted to $209.2 million or 10.4% of quarter 2 revenue. U.S. GAAP net income in quarter 2 was $183 million or $2.30 per diluted share compared to $1.76 per share for the equivalent prior year period, an increase of 30.7%. From a cash perspective, quarter 2 had cash from operating activities coming in at $146.2 million and free cash flow of $113.9 million. While overall cash collections were solid in quarter 2, our free cash flow was lower than quarter 1, reflecting the timing of interest and tax payments as well as restructuring expenses. At June 30, 2025, cash totaled $390.4 million and debt totaled $3.4 billion, leaving a net debt position of $3.0 billion. This was broadly in line with net debt at March 31, 2025, of $2.9 billion. We ended the quarter with a leverage ratio of 1.9x net debt to adjusted trailing 12-month EBITDA. Our balance sheet position remains very strong, and we continue to execute our disciplined capital deployment strategy. We are focused on an approach to deployment that balances further investment in strengthening our business while also returning capital to shareholders. We made significant share repurchases in quarter 2, totaling $250 million at an average price of $146 per share. We plan to remain active in buying back shares in the near term with our total current authorization now expanded to $1 billion. With that, we'll now open it up for questions.

[Operator Instructions] We will take our first question, which is from the line of Elizabeth Anderson from Evercore ISI.

Congrats on the really nice quarter. I was wondering if you could give us a little bit more detail, Steve, maybe about what you're seeing in terms of different market segments, maybe sort of biotech versus pharma or if there's any sort of difference in terms of demand inflection that you're seeing by phase.

Sure, Elizabeth. Things haven't changed dramatically over the last few months since our first quarter call, the environment is pretty much the same. Certainly, from an RFP basis, we've seen a modest uptick sort of in the mid-single-digit range. That's probably been more in the Biotech segment than it has been in the large Pharma segment. We've certainly seen some positives in that respect in terms of our early phase business and our Phase III business. So those areas are looking positive. We're also pleased within the wins that we've won -- we've been able to start to really leverage the partnerships that we've been able to secure over the last 18 months or 2 years. So the team has done a nice job in bringing those partnerships on and not just winning initial projects, but expanding within those partnerships. So overall, we see a reasonably constructive development sort of environment, if you like, across the business, probably a little bit more in biotech than in large pharma. We tend to look at these things on a trailing 12-month basis rather than a quarter basis. Within the quarter, there's a -- still a fair bit of volatility. Things go up and down. But on a trailing 12-month basis, it looks positive.

Next question is from Michael Cherny, Leerink Partners.

Maybe if I can just dive, Steve, a little bit more into that biotech comment. You're not the only CRO that's talked about biotech improvements over the course of the quarter. This seems to fly somewhat in the face of the general biotech funding environment. I appreciate the cautious optimism here, but what do you think is getting more awards over the finish line in terms of what drove the better bookings performance? And how do you think that factors into the current funding environment in terms of bookings wins to bookings conversion?

Yes, Michael, we don't want to get too far ahead of ourselves on the biotech -- on the positive biotechs. And I said that's on a trailing 12-month basis. But within the quarters and across the quarters, it has been a little bit more volatile, and we still continue to see caution in terms of decision-making times, et cetera, et cetera. But we are seeing -- I mean, overall, it does seem to be moving in the right direction. 3 of the top 4 awards that we had during the quarter were in the biotech segment. So we were pleased with our performance in terms of winning some fairly substantial biotech projects, and I said 3 of the top 4. Notwithstanding that, as I said, the large pharma also starting to contribute with those expansions on the partnership side of things. So there is a little bit of perhaps a confluence, if you like, or it's not quite lining up, I suppose, where you see with the biotech funding. I suspect there's probably a bit of a lag here, and we're seeing that there's some positivity starting to come through that we're encouraged about, but we're certainly not declaring victory just at this point, and we wait to continue that biotech progress.

Next question is from Patrick Donnelly from Citi.

Steve, maybe another one on just the bookings side. Nice to see the results come through there. Did you see things change at all as the quarter progressed? Obviously, again, a few of your peers sounded better as well in the last few days. I think it caught people a little bit by surprise. Did things turn as the quarter went? Did you hear any changes from the pharma customers, just given all the noise on tariffs, MFN, et cetera? It sounds like, again, biotech maybe was a little bit better. But just curious in terms of breaking that down and how things progressed during the quarter and what that means for the go forward? Again, do you feel pretty confident that we have turned the corner a little bit here on the cancels and the book-to-bill should continue to trend in the right direction?

Pat, we feel constructive on the environment and moving forward on the environment. But as I say, we don't want to get too far ahead of ourselves. I think our pharma sponsors are probably -- they've at least heard all the bad news, and they're probably digesting that bad news and working through. And it's not all bad news. I mean there's some positives coming out in terms of opportunities for early review with FDA. We've seen the reduction in animal testing, which I think will help the tax -- some potentially even tax benefits for R&D that's done in the U.S. So it's not -- I think our customers are sort of looking at it, seeing that there's -- it's starting to settle down a little bit. And hence, their plans and their spending plans, notwithstanding the patent cliffs that they need to confront are also looming and they need to make those decisions. So I think things are starting to move forward. But it's still a sort of somewhat volatile and uncertain environment that we're working in. We were very encouraged by the gross bookings. That was that 10% improvement over the previous quarter was something I was really pleased about. The team was very pleased about. We did a good job on. But it remains to be seen as to whether those opportunities -- I mean, we certainly have opportunities in the pipeline. No question about that, some actionable -- good actionable opportunities. We need to continue that. Obviously, I've mentioned the cancellations will continue to be elevated, certainly in the very short term. So we've got to manage that through, but we see a constructive environment, albeit I don't think we're quite through everything just yet.

Next question is from the line of David Windley from Jefferies.

My question is focused on your partnerships and it's a multiparter, as you might imagine or anticipate. You talked about progress in those partnerships. I think in some meetings that we had with you, with Barry in particular, there was some discussion about one of those recent partnerships being somewhat expanded or restructured to give you access to more of that customer's wallet. And I wondered if you could maybe talk about that a little bit on what expanded opportunity and if you've already seen benefit from that? And then second point here was -- or the second part of the question is that I think your strategy has been to also replicate the success that you've had in kind of top 25 focused partnerships and pursue some of that same type of structure down market. And I wondered what progress or what opportunity you see there?

Sure. Maybe I'll let crake at the first part, Dave. And then Barry might jump in on -- specifically on when we made some progress in the top 25 or so. It is -- let's be honest, it remains and probably had intensified -- the competitive nature of the business has probably intensified a little bit over the last, I'd say, 3 to 6 months. And so as we get approached by customers to look at partnerships and even [indiscernible] partnerships and again, better sales, our approach of being the scale operation that we are is we look to do more of their work. And that's been -- we've been able to help them on efficiencies in exchange for getting a greater share of that wallet. And that's generally been a successful strategy for us. So it continues to be a strategy we're pursuing. And as I say, as one of the larger players, I believe we have an advantage in that space in that we cover all of the areas that they want to outsource and we cover all the areas that they develop. So that's been working well for us. We've also been pushing that down to the more into the midsized companies as well. And we've made -- I think some of our recent partnerships have really been in that area of the business. And again, we're seeing while they don't have quite the volume of spend the larger farmers have, they are customers and they are companies that do have a significant amount, and we can engage them right across the business. So I'll let Barry perhaps jump in on any sort of specifics on that front.

Yes, David, on the first part of your question, I guess I'm slow to comment too much on any 1 partnership. But I can certainly think of an example where we were brought into a partnership for the full service component of that relationship was significantly smaller. That being the component we had access to than the FSP component, which we were not at that stage partnered on -- and since coming in, the customer has decided to pivot much more heavily toward that blended full service model that we're party to, which gives us some cause for optimism as we continue to progress that relationship. I think your second point is also well made. We have had encouraging success in recent times about broadening the partnership base across the top 25 -- and really, we look at those partnerships between maybe 20 and 60 or those companies between 20 and 60 as a zone of some opportunity, and we continue not just to add customers in that domain, but also to broaden these out from more transactional relationships to deeper opportunities where you have more qualified RFP flow and perhaps a deeper engagement with that customer. So yes, that is the plan, not just to see a broader base of RFP flow outside the top 20, but to develop more, what I'll call portfolio relationships in that segment and continue to build on that. And that remains the strategy, and I'm encouraged by the progress.

Next question is from Justin Bowers of Deutsche Bank.

Steve and Barry, can you help us understand some of the new opportunities that are -- that you're seeing in your funnel and your pipeline. It seems like RFP growth has been pretty solid over the last few quarters. Is that across the board, large pharma-related biotech related? And what do we need to see in the industry for that to start to convert and monetize into bookings?

Yes, Justin, I mean there's a couple of aspects to that. Therapeutically, oncology continues to be the main sort of ballwalk, if you like, of our backlog and our new wins. We're an effective oncology shop, and we have a very good unit both in biotech and in the large pharma space. So I'd say that's an area. We've certainly seen an uptick in the metabolism, cardiovascular -- we call it cardiovascular and metabolism. That's really, I think, around the obesity, MASH, NASH, call it what you like, indication. That's an area that we've seen tick up as well. I think those are probably the 2 sort of main movers, if you like. The COVID vaccine work remains at about 1% to 2% of our backlog and about our revenue. We haven't seen much of an uptick in that one, although, of course, as we talked about that study moving ahead. In terms of phases, as I mentioned in my remarks, early phase has moved forward nicely. And we also see Phase III moving forward. So it's a little bit of customers focusing their attention, obviously, on their Phase III assets and moving them to market. That makes a lot of sense. But also they're not forgetting about moving some of their early assets through as well. So I'm encouraged by the long- term opportunity that, that presents as well. So overall, we're, as I say, constructive on the market or it hasn't changed dramatically, but we certainly see some nice progress over the last quarter or so.

Next question is from Jack Meehan from Nephron Research.

I think everybody is trying to take in the early results from some of the CROs and feel like we only have a piece of the aperture here with the bigger guys reporting. Steve, I was wondering if you could comment on what you think is happening in terms of share dynamics in the industry? Just any color on what you're seeing in terms of win rate would be helpful.

Yes, Jack, it's always hard to get too specific about share dynamics. I was very pleased with our gross wins. And as I said, we're fairly broad-based in those wins across the customer segments that we service. So that was a pleasing aspect of it. I sense that we are being successful in moving our market share forward, but it's hard to be too quantitative on that. It's something that we try to monitor as much as we can, but the market data that we have is variable and somewhat volatile, to be honest with you. We're certainly seeing progress in the Biotech segment. We -- our FSP business has -- continues to grow. We've made nice progress in our early phase business. Our lab business is growing in the teens. And so a lot of nice aspects of our businesses that are moving forward and reflecting -- I think in areas that do indicate that we are gaining share, not just in the functional business, but also in the full service business and in the preclinical sides of our business labs, early phase imaging, et cetera, et cetera. So overall, as I say, constructive, but we're not getting too far ahead of ourselves.

Next question is from Eric Coldwell from Baird.

I think I've rewritten my question list 8 times in a row now. So I'll ask a clarification and then maybe try to wing a bigger topic. On the clarification, Steve, you've talked a couple of times about the cancels remaining elevated short term. If we've done the math right, it looks like ex the BARDA cancel, you were probably around that 2.5% of backlog that has historically marked the higher end of a range for you. Are you saying more of that ZIP code? Or are you actually signaling something higher than that?

Well, I think what we're saying, Eric, is that the current level of cancellations, we would expect is likely to sort of continue in that sort of ballpark in the near term. That's the way we're looking at it. So I hope that clarifies your question. So we -- I think we were at $916 million. I think that was the sort of number from a cancellation number. And we would expect a broadly similar number in the next quarter in the near term before we would see or anticipate some attenuation of that Q4 and perhaps in Q4. But the market and the environment continues to be volatile and continues to be a little uncertain. And so we're not declaring victory on the cancellations back to what has been historical norms just at this point. As I say, in the near term, we're expecting to see some -- still some fairly significant cancellations.

There was a backup question, I think. We -- we're cutting a break, I think, because he was pushing stuff...

Sorry about that. Yes, just I guess more big picture here. We've had you and several of your peers have highlighted a trend towards higher pass-through in direct revenue in the moment. It seems like most are suggesting that it has to do with mix changes and at least in some cases, mix changes. But is there something more -- is there something broader coming in a different twist or dynamic that either clients are asking you to do more on the pass-throughs or somehow we're seeing study site inflation or some other form of inflation really kicking in again. Is it just some audit and the timing and the moment of when things are hitting and you're recognizing these pass-throughs? It just -- it does seem to be a bit of an industry-wide mantra right now, but some of the bookings and some of the revenue growth increases have been skewed much more to indirect revenue than perhaps we've seen here in recent quarters.

Yes. I mean, it's a question we ask ourselves a lot as well, Eric, to be honest. And there are various reasons for I'll let Barry have a crack at that one.

I think you nailed it in the question, Eric. I think this is overwhelmingly a business mix trend that you're seeing. Steve already talked about the uptick in cardiometabolic opportunity flow and indeed revenue flow over the course of the last year. I think that's a significant contributor. And I don't think there is anything below the line that we've seen that would speak to other trends. You get lots of calls. Yes, I'm sure rates are up at a period of time. But the #1 driver here, as I would see it, I think as we have observed it in our own numbers, is that this is driven by the therapeutic mix primarily of the studies that we're running.

Next question is from Jailendra Singh from Truist Securities.

If this makes Eric feel better, he just told my pass-through question. Anyway, I want to actually switch to my other question about getting your updated thoughts on the pricing environment a little bit more. What exactly are you seeing in large pharma and EBP? Some other of your peers have talked about getting a little bit more open to taking a little bit more pricing concession. Just curious if you can share your thoughts on the pricing environment in both EBP and large pharma.

Sure. So again, I'll have a crack at it and then Barry might jump in, Jailendra. I think as I said in my prepared remarks, we are seeing probably a more intense pricing environment going forward. Our customers, as we've talked about, going through that how they're dealing with the patent cliffs, and they're expecting more and more value. And so we are in a competitive -- very competitive environment. We talk about typically, it's a competitive environment. It's always competitive. It's probably intensified a little bit more, I think, more recently. And where we believe we have some good opportunities to gain market share. But I'll let Barry talk perhaps a little bit about how we're competing in that environment.

Yes. I think Steve is right. I think while it's always been competitive, it perhaps has notched up a little bit, as you might imagine. I guess the first thing to say is I don't know anybody who thinks that product development wouldn't benefit from greater cost efficiency. So we see it as our role to create value through reducing the cost of clinical development. And while all competitive advantage is time bound, where we identify competitive advantage to our technologies, through our strategies, through our superior execution and we're able to bring a competitive price point versus the competition. We're going to do that. We're very happy to do that. On the other side, we also see value and volume and where significant opportunities come across. We're happy to get started to make sure we win that incumbency in the large pharma as we've talked about and continue to build a broader base in the biotech community. So I think on both of those metrics, it's fair to say it's pretty competitive out there and maybe touch up on where it was before. But -- for us, the key remains, can we bring higher confidence in the time, the cost and the predictability of trial execution plans to our customers. We still see that as probably the #1 metric notwithstanding perhaps a slight uptick in the competitiveness [indiscernible].

Next question is from Luke Sergott from Barclays.

Awesome. Great. And at risk of just diarrhea of mouth, I just want to figure this out like -- so you have a big step-up in bookings, you have a big step-up in revenue. We've seen it across all the other ones. This kind of came out of nowhere and every company is talking about this coming from biotech despite lack of funding data and all the data and channel checks to the contrary. And then everybody is talking about metabolic and faster burning, higher pass-through trials. So like is there a risk here that there's just an air pocket that could be coming from -- you get some big bolus of like a couple of quarters of these big metabolic trials and then they're a lot faster burning, shorter duration, et cetera. That's like the first part. And then the second part is, I mean, just metabolic coming on or just from recent M&A doesn't really add up to the massive step-up we've seen across the board. And so just trying to like foot the bill with what's been going on in general because out of 1Q, nobody really sounded positive on the demand environment.

Yes, well, I hesitate to be your therapist, Luke, but -- let me have a crack. Yes, let's just drop down to the sort of therapeutic area. We do see the metabolic the obesity side of things being an ongoing in the long-term trend that is going to fuel us in our portfolio, our backlog for some time to come. I mean this is a huge -- it's a huge market. There are lots of opportunities for improving those drugs, whether it be how they're administered, or the side effect profile is -- and they are going to need to be large-scale trials that are in the scheme of things, relatively easy to recruit. And I don't think it's easy, but relatively compared to your difficult oncology trial, they should on faster, they should be larger. So we think there's a long and a significant opportunity there for us. And hence, our obesity center of excellence. So that I talked about. It's not just though in the metabolic area. You look at things like MASH, as they call it now rather than NASH. That's an area that we're seeing a lot of activity. A lot of companies doing a lot of work in a lot of progress being made in there. Oncology continues to be a driver. And even in the CVT space, cardiovascular space, we're seeing some significant opportunities as well. So therapeutically, there are, I think, a number of areas, the old medical science thing and then bringing new drugs to market hasn't gone away. There's still a huge area of unmet medical need and a lot of very important therapeutic areas that I think we can help to address. So I don't think it's an air pocket. But I think as I've said a number of times,…

No, I think you covered it. It might have been Patrick early on, who asked about whether there was a pivot point during the quarter. I don't think there was. And I suppose what's harder to convey than just the opportunity flow is a more qualitative assessment of what through. I think Steve, you just alluded to it. We were pretty satisfied as we moved through the quarter that there was some attractive opportunities that were transactable. And as we came out of Q2 into Q3, nobody is seeing a couple of swallows and declaring a permanent summer, but we do feel like qualitatively, there's some encouraging observations there. But this is not a straight-line industry. Things can move relatively quickly. So conservatively optimistic with the signs that we're seeing. I think it's a fair summation.

Next question is from Max Smock from William Blair.

Maybe just a quick one here for Nigel. On the burn rate, it seems like the midpoint of the guide implies about a 20 basis point step down in the second half of this year. Even though you've kicked off that faster burning COVID trial, is there just -- is that just conservatism? Or is there something else that we should kind of be thinking about that's driving that implied step down.

Yes, Max. No, look, I think our view on the burn rate fundamentally is it will be broadly stable through the course of the year. Look, that is what's built into the guide. It was what we had assumed back in April, and as Steve mentioned earlier, fundamentally, our underlying assumptions in terms of the backdrop remains the same. So we still expect book-to-bill at roughly the same level through the rest of the year. And within that as well, then the burn rate being broadly consistent as well. The step-up in the revenue guide, again, is fundamentally really driven by the increased pass-throughs that we're seeing. So look, let's see where we end up ultimately in terms of the end of the year. But at this point, we expect burn rate to be broadly stable over the balance of the year and somewhere around 8% for the full year.

Next question is from Charles Rhyee from TD Cowen.

Maybe if I could just add some clarifications just from some of the stuff earlier. Steve, I think you said that for next quarter, you're expecting sort of cancellations to be similar to this quarter around $900 million and something million, but this quarter included the $300 million cancellation of the COVID trial. So -- are we expecting more like something that sort -- or you're seeing a step-up in maybe what does that mean for book-to-bill expectations for next quarter? And then I think last quarter, you gave sort of a breakdown of FX impact, sort of the COVID trial impact. Maybe for Nigel, if you can give us a sense for this quarter as well as sort of those components in the rev guide?

Okay. So Charles, let me be clear on the cancels. We're expecting to see a -- in the same sort of post code as what we saw this quarter from a -- the fact that we did call out the BARDA cancel earlier on. And so you were aware of that. That doesn't make it exceptional. There are -- we have some cancels and we get -- we will be putting them into our numbers in the third quarter. So the number will be in the same sort of post code.What it will be only 1/3 of the way through the quarter. We're working on these things. These things some slow, some delays on -- so it's -- but don't think of it as a dot think of it as BARDA an exceptional item, I would say, at this stage. But I think certainly, but the very near term, that's the expectation. As we -- I think as we get into fourth quarter into next year, I think things will normalize, that's our expectation. But again, that remains to be seen and will depend upon the environment becoming a little less volatile, a little less uncertain. Mark, I'll leave you for the COVID.

Yes, Charles. So on the guide change from April to today, FX is really neutral. You'll remember, most of that dollar shift that we saw over the last few months had already happened actually by the end of April when we came out with the April guidance. So there's really no impact in terms of our revenue guidance change from FX. It's fundamentally driven from the uptick in pass-throughs. And maybe just circling back, Mark, on the burn rate point, while we do think it will be broadly 8% for the year as a whole, the pattern between Q3 and Q4 will depend a bit on the pass-through activity, in particular, that COVID study. So at this point, it's ramping well. So it may well be that we see that burn a bit faster in Q3 than in Q4. So you might see a slightly better burn rate in the nearer term, Q3 versus Q4, but let's see how that evolves. So hopefully, that's helpful, Charles.

And actually, Charles, just really -- I didn't answer your other question around book-to-bill. Our expectation on book-to-bill would be again in the same ballpark as what we did this quarter, notwithstanding the, as I say, continued elevation on cancellations. So we -- as I said, we have some strong opportunities in the pipeline. We feel very focused. We feel like those opportunities are actionable and real. And so we feel that a similar-ish book-to-bill is certainly possible.

And just to underlying that, Charles, yes, look, we've assumed roughly a 1x book-to-bill over the balance of the year, which does reflect elevated cancels continuing through that period as well. And that's reflected in the guide that we've put out.

Next question is from Casey Woodring from JPMorgan.

This is Sebastian Sandler on for Casey. So you called out licensing activity among large pharma in your prepared remarks. In terms of your operations in China, given some of the recent sizable pharma licensing deals with Chinese biotechs you've seen since last quarter, -- can you just walk us through ICON's role in these types of deals and how you see this dynamic playing out for ICON? Do you think Chinese biotechs will rely primarily on Chinese CROs. Or does pharma acquire these assets and run the remaining trials through ICON? And then lastly, what percentage of your revenue is coming from China now? I think in the past, you've called out China not being a large part of the business. So I was just wondering how this has trended in recent times.

Okay. You've got a couple of questions in there, Sebastian. So let me try to unpick some of that. First of all, let me do the easy ones. Revenue in China approximately 3%-ish. So low single digits. We have about 1,200 people in China. It's a good operation, one of our -- one of the best operations we have in the company, well staffed some really good, strong people. We have some good connections with the Chinese biotech industry. And this is -- I mean, there's a lot happening in China, as you all know. I mean, I think it's something like 1/3 of the new clinical trial starts globally are happening in China. And they're not all happening outside of China. But there's a lot of activity. And certainly, the Chinese government is giving a lot of focus on biotech. And we have a number of customers in the U.S. who are accessing portfolios and accessing new compounds and drugs and opportunities and licensing opportunities from Chinese companies. And we've been lucky enough to partner with them to develop some of those drugs. We see that as being a nice albeit more longer- term, medium- to longer-term fuel for our business. And we certainly see China as being a source of innovation and of new compounds in the next, again, realistically medium to long-term, 3 to 5 years. This doesn't happen overnight. But certainly, the Chinese are putting a huge amount of focus on their pharmaceutical and biotech industries, helping their companies. And those companies are not using local CROs to do international trials. They certainly use them in to -- to do trials within China. That's -- that's certainly an area that they have locked down. But in terms of doing global trials, trials in the west for registration in Europe and for registration in the U.S. they're turning to organizations like ICON to do those sort of trials. And we're very happy to see that. We have those connections. We have a strong business development team in China, which is going to allow us to absolutely make those connections and develop that business. So I'm optimistic about China, albeit, this is not a short-term thing. This is a more longer-term partnership like with a country as much as anything else, and we certainly see some benefits over the longer term.

Next question is from Michael Ryskin from Bank of America.

I'll do -- I got one big one and just a quick clarification. On the clarification, you talked about competitive environment and sort of how you see that evolving. If you could just expand on that a little bit in terms of where you're seeing the most competition in terms of who you're running into the most? Is it the big 3 where you're seeing a little bit more competition or maybe some of the more niche players are really the smaller CROs out there, just where you see that environment ramping up in the last 3 or 6 months? And then -- or if there's any other way for you to break it down in terms of therapeutic area or customer class? And then the other question I was going to have was on the cost controls you talked about earlier this year that you've implemented. Could you just -- obviously, you maintained your EPS numbers and some of your margin color on cost. But if you could update how that's going and how you think about leveraging the cost side of the business as you go through the rest of the year if you do see some of the improvements in bookings continue?

Okay, Michael. I'll take the second part of the question, and then Barry might talk about the competitive environment, what you're seeing in the large pharma and the biotech space. Certainly our cost controls, we've made good progress, and we continue to make good progress. I think we have a reputation industry as being pretty good cost managers and the team has done an excellent job in looking at that and in working that through, we've reduced our SG&A like $9 million year-on-year. We continue to focus on that. The AI that I talked about, the technology, the bots that we've been deploying in doing much -- the more routine sort of work has been very effective for us and continues to drive down our overall SG&A costs. And that ultimately improves our efficiency. As Barry alluded to that being a very important component of us being actively competitive on the pricing side of things with our larger customers and with the biotech customers for that matter. But certainly in the partnerships, that gives us an opportunity to compete actively and we're doing that very effectively. So I'm really pleased with the way we're managing our costs. We have more to do, and it's an ongoing challenge for us. But whether we do it through where we're optimizing our labor force, effectively supporting our labor force and our employees with new technology and AI, it's all grist for the mill, and it's something that we take very seriously. Barry, do you want to talk about the competitive environment?

Yes. And the 2 honestly are linked. I mean, the teams really have done an excellent efficiency over the course of the year, productivity and utilization of on a broad basis right across the company on a year-over-year basis. That doesn't just help us with cost controls. That also helps us to get these studies delivered for customers. So on the competitive environment, I guess we're still ICON. We're happy to compete with anybody. And by and large, we do. But particularly in the pharma space, I think you're probably in the right neighborhood. These are large, global, diverse partnerships across broad portfolios of different therapeutic modalities we do tend to run into the more established players more and more. I guess it's a harder market for others to compete in. That's somewhat more diversified in the biotech space, particularly at the earlier phase biotech end of the market. As I say, some of the larger biotechs pushing into the midsized space, they start to become more like portfolio accounts with multiple studies, governance and oversight layers, et cetera. So probably a slightly different dynamic across those 2 market segments, but with a bias towards larger, more global and more diversified competitors.

We have one more question, and this is from Rob Cottrell from Cleveland Research.

Just in terms of the medium-term revenue and booking outlook, can you talk about elevated near-term pass-throughs, but also increased price intensity -- are those offsetting factors? Or does 1 outweigh the other in terms of future bookings? And then can you remind us how these kind of posture are flowing through to the quarterly booking and backlog numbers for 2Q?

Sorry, Rob, we didn't -- noise from you, but I don't think we got the second part of that question, unfortunately. But do you want to take the first part in terms of the medium term pass-through.

Do you want to just repeat the questions, Rob, we kind of got a little bit distracted with the feedback.

Can you hear me now. Yes, can you hear me now?

Yes.

Yes.

Yes. So I guess first was just on the -- how we should pair the comments around higher near-term pass-throughs but increased price competition? And do those 2 offset each other? Or does one outweigh the other positive or negative? And then the second question was how to treat the near-term elevated pass-throughs in terms of bookings and backlog for the second quarter?

Maybe I'll do the first one, and maybe Nigel might jump in to Barry on the second one. Certainly, offsetting between higher pass-throughs and price competition, I don't really see it as an offset. I mean, price competition is what it is, and it tends to be around the direct fees. So our margin producing revenue, whereas pass-throughs don't have any margin in them and they tend to be what they are what they are. I mean customers don't necessarily ask us to reduce on those. The fact that they go up and we talked about that from a therapeutic point of view, whether they'd be around vaccine studies or metabolism study, obesity is -- it helps us on the top line, but certainly doesn't produce any margin for us. And so I don't really see them as offset in price competition tends to be around those direct fees. So I hope that gives you some sort of flavor for how we consider that price competition, as I say, is that will potentially hurt our margin. But as Barry talked about earlier in the call, we have some pretty creative and innovative ways of being able to deliver these studies in a way that doesn't impact our margins as much. And so we can be competitive on price without sacrificing too much on margin. That's the way we try to do it, and that's -- the team has been very successful in that so far. Do you want to talk about pass-through?

Yes, sure. And Rob, on bookings. So pass-throughs are just part of the gross wins basically, it's the Citi award is both direct fee and pass-through. So it's not a particular factor there other than, obviously, the comment around just pass-throughs generally being an increasing proportion of what we're seeing. But -- so that's all I'd say -- and then we obviously talked about elevated cancels in Q2 and the likelihood of those continuing as being the other factor in terms of the overall book-to-bill number. So I wouldn't call out anything particular on pass-throughs in terms of that pattern into the future. We were more commenting on it in relation to the change in the revenue guide from April to now being driven by the higher pass-through pattern we're seeing currently in revenue.

Thank you. There are no further questions. I will hand back to the speakers for any closing comments.

Thank you, operator. As we navigate current conditions, we're pleased with the progress we made in quarter 2 and remain focused on capitalizing on the opportunities we have in front of us. We thank you all for joining the call and for your support in ICON. Good afternoon.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.