JPM HY HC: 2Q26 CRO, Pharma Services Earnings Observations: IQV, FTRE, and AVTR Earnings Review

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JPM HY HC: 2Q26 CRO, Pharma Services Earnings Observations: IQV, FTRE, and AVTR Earnings Review

ill not be significant. Risks to our UW include stronger new bookings,

market share wins, and aggressive debt paydowns. Risks to our rating include an early

refinancing, M&A and stronger improvement in results.

Summary. Overall, Fortrea posted a good quarter, beating both our estimates and the street’s

driven by new business wins and continued booking diversification efforts. The macro and

funding environment continues to improve and we believe expectations of positive FCF for

2H26 and FY26 are realistic based on 1H26 results. However, FTRE remains highly levered

at 7.5x 1L leverage and did not comment on any future debt redemptions.

Backlog and new wins. Backlog was $7.8bn and cancelations remained in line with

historical trends. Backlog burn of 8.6% in 2Q26 was higher sequentially driven by service

fee growth in the Clinical Pharmacology business and sequentially higher pass-through

revenue in Clinical Pharmacology and Clinical Development. Fortrea noted it is looking to

diversify its bookings and backlog, which is burning off into revenue, some of which are

higher-margin projects. In line with the market, the company has seen the most strength in

oncology compared to other therapeutic areas. Management noted that the mix of projects

coming into its pipeline will likely remain steady, and would only shift if the company took

on a very large vaccine or Phase III GLP-1 study earlier.

Improved biotech funding and its impact on pipeline. Similar to its peers, Fortrea noted

that biotech funding has improved meaningfully, and that has bled into increasing the speed