Jefferies has upgraded Medpace to a Buy rating, arguing that several industry and company-specific factors set the clinical research organization up for a recovery in contract wins and earnings. The firm highlighted a marked rebound in biotech funding, the company's conservative balance sheet posture, and what it views as limited near-term disruption from artificial intelligence.
According to Jefferies, biotech funding rose 56% in the second half of 2025, with the fourth quarter registering a record period for funding. Because Medpace typically experiences a four- to six-quarter lag between the timing of biotech funding and when new contracts are booked, Jefferies projects acceleration in new bookings in the second half of 2026 and extending into 2027.
Near-term order trends, the broker warned, could remain muted as Medpace laps a weaker funding environment in late 2024 and early 2025. Nonetheless, Jefferies said market expectations have been reset; it cited improving request-for-proposal activity and stabilizing cancellation trends as signs that demand should pick up later this year. On that trajectory, the firm sees the book-to-bill ratio approaching roughly 1.20x by the fourth quarter of 2026.
On the topic of artificial intelligence, Jefferies argued that full-service contract research organizations like Medpace face less immediate disruption than providers more exposed to functional service models. The brokerage added that adoption of AI in clinical development is likely to require years to validate and scale, and that many smaller biotech customers remain focused on execution rather than pursuing technology-driven shifts.
Jefferies also pointed to a valuation adjustment for Medpace, noting the stock trades at about 24x expected 2026 earnings and that its valuation relative to the S&P 500 is near historical trough levels. The firm observed that the company reports under GAAP and converts more than 100% of net income to free cash flow.
Management's guidance for 2026, Jefferies noted, assumes cancellation rates remain elevated at levels similar to 2024 and 2025. If cancellations ease as funding improves, the brokerage said revenue and earnings guidance could be revised upward, and additional share repurchases could provide further support to the equity.
Sector implications
- Clinical research and biotech services - demand and booking cycles tied to funding flows.
- Biotechnology - funding pace affects outsourcing activity and development cadence.
- Equity markets - valuation re-rating and free cash flow conversion influence investor returns.