Medpace - A CRO That Wins by Saying No
"Invert, always invert" - Charlie Munger
Background
Medpace (MEDP) is a US-based contract research organization (CRO) focused on helping small, often single-asset biotech firms bring their drugs to market. These firms typically have no revenue and rely entirely on the success of a single clinical program. Medpace offers a vertically integrated, full-service model that takes products from pre-clinical through approval. This integrated structure allows for streamlined project execution and cost control — making Medpace especially attractive to biotech companies seeking capital efficiency and execution certainty.
The Financial Outperformance
Despite its smaller scale, Medpace has significantly outperformed its larger CRO peers. As of the latest data (LTM):
EBIT margin: Medpace leads with 21.2%, compared to ICON’s 14.5% and Syneos Health’s 7.5%*.
Leverage: Medpace carries just 25.3% debt-to-equity, lower than ICON’s 37.8% and far below Syneos’s 74.8%*.
ROIC: Medpace reports a stellar 61.2%, handily beating ICON’s 8.6% and Syneos’s estimated 5.2%*.
This raises the question: Why is Medpace generating far better returns — while employing far less leverage — than peers nearly double its size?
*Based on Syneo Health's last known full-year financials of 2022
Focus
Medpace has built a culture centered on doing one thing extremely well: serving small biotech clients. The company doesn’t chase big pharma logos or diversify outside its core — all growth has been organic. Equally important is what Medpace chooses not to do: it is highly selective in the projects it takes on.
Scientific rigor is baked into its process. The Medical Directors Committee — made up of medical key opinion leaders (KOLs) — acts as the final gatekeeper on which programs the company accepts. Unlike the rest of the CRO industry, where landing large accounts is the only thing that matters, Medpace puts the science first. This brand of selectivity builds immense trust in a risk-averse industry where most clients only have one shot at success.
An added benefit: Medpace’s medical directors often become champions for their clients’ programs. As respected KOLs, their advocacy can help accelerate uptake and downstream commercial success.
Strategic Discipline
Medpace’s peers, notably ICON and Syneos, chased growth through M&A during the COVID-fueled CRO boom. They acquired smaller CROs in an effort to scale up — but many of these roll-ups destroyed value. When niche CROs focused on small biotech clients are absorbed into a larger platform, the cultural alignment erodes. These boutique teams are suddenly incentivized to prioritize large accounts like Pfizer or Amgen. The result? Service quality for smaller clients deteriorates. Many of these acquisitions ultimately turned into costly misfires.
In contrast, Medpace stuck to its knitting. No acquisitions. No flashy pivots. Just consistent, disciplined execution.
Culture: The Root of the Advantage
This all ties back to culture. Medpace remains founder-led — CEO August Troendle still owns 17% of the company. There’s no dual-class structure. The culture is lean, intensely focused, and customer-obsessed. Medpace often builds in-house tools rather than rely on vendors, simply because they believe they can do it better themselves.
This alignment is rare — and powerful. It creates a moat that isn’t easily copied.
Two Moats: Brand Equity and Process Power
Medpace’s culture manifests in two durable competitive advantages:
Brand equity: Trust built through clinical discipline and selective execution. Clients know Medpace will treat their product like it’s their own.
Process power: A well-honed internal process — from opportunity screening to execution — that keeps trial timelines tight and quality high.
These moats compound over time. Medpace isn’t winning because it’s the cheapest — it wins because it delivers.
The AI Wildcard
The most pressing question for CROs today: how will AI reshape clinical trials?
There are two dimensions to consider.
1. Market Dynamics: One risk is that AI enables pharma companies to bring trials in-house. But this seems unlikely at scale. Running trials is operationally complex and not core to pharma’s identity. Most would rather partner with a trusted CRO than build clinical ops themselves.
2. Nature of AI: The vast majority of AI tools — from recruitment software to trial simulations — are commoditized. They’re useful but interchangeable. In this world, it’s the operators — not the toolmakers — who win. Medpace is exactly the kind of operator that will benefit: disciplined, streamlined, and execution-focused.
There is, however, a second category: AI applications built on proprietary insight. These are harder to copy and can scale a company’s unique “secret sauce.” This is where Medpace could shine. It already has a deep and unique understanding of how to run trials for biotech clients. Layer AI onto that, and you could see powerful leverage.
Final Thoughts
Medpace is not your typical CRO. It chose NOT to grow through debt-driven roll-ups, NOT to participate in FOMO-driven acquisitions, NOT to take on lucrative but low-quality projects. The result? A company with best-in-class margins & ROIC and a brand that biotechs trust with their most important asset.
In an industry full of sprinters trying to grow at all costs, Medpace is a marathon runner — built to reach the finish line.