That’s the sort of the number that we sort of expect to be basing our budget on and our targets on, going into next year at least at least from an R&D. We obviously want to take market share and the potential to do better than that. But I think that’s what I’d say around the customer budget season. They don’t come to us and give us a huge amount of insight into what their budgets are going to be. We get a fairly general sort of qualitative feel for particularly with our partners as to what they’re going to spend or how they’re going to spend it or if they’re going to, adjust their models or do that sort of thing. But it’s all fairly qualitative.
Tim Dale: Got it. Great. And then just a quick follow on here. So, Steve, higher level questions but — was not trying to have you make a call on rates where they’re going, but just hypothetically, if funding costs or discount rates are higher hypothetically to keep the NPV IRR models unchanged, you’d have to tweak some other assumptions whether that’s increasing probability of success. Is that a recipe where we get some, like, cannibalization or demand disruption in the industry and with higher hurdle rates in terms of success that might result in lower number of trials that are going through and a higher rate scenario. Could you kind of just pose like that concept for us? It’s something that I’ve been speaking to investors on recently. We’d love to be getting your take on it.
Brendan Brennan: Tim, I might give this a crack. It’s Brendan here. I mean, I don’t know if our, I mean, at a macro level as a finance guy, even in a pharma company, obviously they’re looking at, yes, you’re right, hurdle rates and interest rates and all those pieces, but that’s from a holistic perspective. When it gets to drug development, it’s really about the candidate drug and how that moves forward and the potential that they have in their pipeline. No one’s going to underspend in terms of return on investment if they think they have quality drugs and they have the opportunity to do that. And you can see that in the overall environment. So, it does come down to the specific company, I would say, more so and the actual drug pipeline that they have.
We’ve seen, I think, probably more promise in the drug pipelines in the last six months than people moving forward and getting on with their, getting their funding in place and moving in the right direction than we have in the first half of this year. So, I think that the trend is positive, albeit I’m sure someone’s doing that math at a very senior level, but I don’t know if it pragmatically impacts on trial by trial decisions.
Tim Dale: Great. Appreciate the feedback. Thanks.
Operator: Thank you. We will take our next question. Your next question comes from the line of Jack Wallace from Guggenheim Partners. Please go ahead. Your line is open.
Jack Wallace: Yes. Thanks for taking my questions. Just a follow-up to the last one and maybe to get a little more color here. But as the [indiscernible] it sounds like you’re in a position to help yourself. It sounds like you’re in a position to help your customers, your reduced cost, improve efficiency. It isn’t, you may be the say, you have higher hurdle rates with funding and opportunity for more outsourcing to improve efficiency, which can help the self-support portfolio NPV via question so that the right candidates are getting funded, but they’re being funded and brought to market more efficiently because of incremental outsourcing.
Steven Cutler: That would certainly be our contention Jack. We believe we offer a very effective and a very efficient method of getting drugs to market, compounds to market, and devices to market that complies and fits in nicely with cost of capital. Obviously, the different segments of the markets have different views on that. Large pharma have opportunity and obviously have their own capabilities, mid-sized to some extent, and biotechs very limited. We see the various models that we offer as an efficient way, and we have to continually drive ourselves to be more efficient, to be more cost-effective because we recognize it’s a very competitive business. Companies do have choices, not just within the CRO industry, but of course to do the work themselves internally.
We, to some extent, compete against not just the IQVs and the PPDs, but against the internal groups as well. We constantly remind ourselves that we need to be 20% better than our customers. It’s a goal that we have as an organization in terms of the operational metrics that we monitor and the way we do our work. We recognize that there’s always competition in this industry, and it’s important to keep moving forward.
Jack Wallace: I appreciate that. Last one is the housekeeping. Is Pfizer still your largest customer?
Steven Cutler: We don’t comment on specific customers, Jack, but the fact that you’re asking the question might indicate that there are others in the mix at the moment.
Jack Wallace: Thank you so much.
Operator: Thank you. We will take our next question. Your next question comes from the line of Ann Hynes from Mizuho Securities. Please go ahead. Your line is open.
Ann Hynes: Hi, good morning. So margins obviously improve to your 21% with gross margin continuing to be a driver of that. Can you just describe what’s happening in the labor market and is it running? If it’s running ahead of your expectations, what do you think is driving that? Secondly, just to get back to the book to bill and barter, because I am getting more questions. I’m sorry if you already said this, but just to confirm, ex-BARDA, would book to bill, would it have improved sequentially or at least been above that 1.2 mark for the quarter? That’d be great. Thanks.
Steven Cutler: Okay. Let me tell you first one, and around the labor market, we’re certainly seeing some, I think, attenuation, I suppose, of wage or labor pressures in that market. Our retention has been increasingly positive. We’ve gone up on a month-by-month quarter-by-quarter basis over the last, well, probably six or eight quarters now. So we’re well above pre-COVID levels. And while expectations with inflation and all that will mean that the merit increases will need to be considering those carefully as we go into early next year, we feel we’re in a good place. And we feel we’ve been adequately coping and compensating our employees. And that’s reflected in the very strong retention that we have as an organization. In terms of the book to bill, we reported the 1.26.
