Model Update: Continue To See Upside Through Improving Demand & Mix

Research evidence excerpt

Model Update: Continue To See Upside Through Improving Demand & Mix

TD Cowen ICON PLC

Global Research June 24, 2026

VALUATION METHODOLOGY AND RISKS

Valuation Methodology

CROs:

We use a five-year discounted cash flow analysis as our primary valuation method to derive our

12-month price target. We generally assume a 10% discount rate but may apply appropriate

adjustments depending on company and/or industry specific factors. We also assume a

terminal growth rate that is dependent on our long-term view of the specific sub-industries

under coverage. We note our discount rate assumption could be viewed as conservative

relative to the actual weighted average cost of capital, but we view our 10% assumption as

reasonable over the long run. Lowering our discount rate assumption or increasing our terminal

growth rate assumption would lead to a higher estimated value per share. As a secondary

measure, we look at the forward P/E multiple and EV/Sales ratio implied by our DCF analysis

and compare that to historical averages.

We make investment recommendations on certain early stage, pre-revenue companies based

upon an assessment of their business model, technology, probability of market success,

and the potential market opportunity, balanced by an assessment of applicable risks. Such

companies may not be assigned a price target.

Investment Risks

There are potential risks associated with the Contract Research Organization space: (1) the

biopharma research industry could be affected by changes in government regulations, such

as health care reform aiming to reign in the growing cost of drugs, which may decrease

the demand for contract research services, (2) challenging capital markets and general

macroeconomic weakness could have an impact on biopharma manufacturers' ability to