I want to get started and make sure we don't shortchange anybody. I'm Tom Pike. I'm CEO of Fortrea. We are the spin-out of Labcorp's Clinical Services division. We are spun out for about eight months now, and so we've been an independent company, but our heritage is in a company called Covance, which is one of the real innovators in the CRO industry and one of the leaders since the 1990s. So we have a interesting company, interesting story. I'm told that everybody here understands the CRO industry pretty well, and what I love about this industry, and the reason that I came back after running Quintiles to run one of these companies, is because the backdrop for this type of company is so great, and these companies can be very successful in that backdrop.
The general backdrop is that we are clinical services firms that grow because the R&D associated with pharmaceutical firms has been growing for, you know, basically forever. And the growth of pharmaceutical R&D continues to be probably on the order of 3%-5% this year, and historically, it has grown in the high single digits for years in terms of what we do. That growth in our industry really has two components to it. It's innate growth associated with R&D, but it's also been an increase in outsourcing. So you've seen the combination of those two result in 3%-5% or high single digits growth through many of the last 30 years. And we expect this trend to continue. We don't see large pharmaceutical firms taking on a huge amount of staff to do more clinical research.
They're relying on companies like us to do that with them around the world, and then the biotechs very much rely on us in terms of clinical services. Now turning to Fortrea, of course, there may be forward-looking statements here. You know, we are, a company that spun out of Labcorp. Covance used to have two arms. They had a clinical services arm. With that services piece, they had what we call a central lab in this business, that stayed with Labcorp. We have about, 18,000 people in this company. We're global. We operate in 100 countries. We have 700 medical docs. We have 1,500 PhDs. This company is a real player in this industry. In terms of the spin, it was completed in record time. Actually, my colleague, Jill McConnell, led it from a Labcorp side.
She had been CFO of this group before that. They pulled her out to lead it. I'm proud to say that she did that on time, and it's great that she's with us, because one of the big activities now is getting the rest of the way out of Labcorp. And since she knows the internals of all this from looking at it for the last year, she's the best person to help us get fully out of Labcorp. We immediately created an investment and differentiation strategy. So coming to this business, felt like it wasn't differentiated enough, and it was an interesting mix. It was actually a mix of some skills that were on the bench and hadn't really been in the game.
You know, we had these 700 medical docs, many of who have been in this industry for 25-30 years, did hundreds of trials, but they weren't out at customers enough. You know, so what we did is we brought some of those talents from the organization, and then at the same time created an investment thesis that many of you have seen in terms of our investments that range from things like more magnet talent. So this is talent that's so good that the pharmaceutical industry notices that we have this talent and wants to bring us in. Also, areas like site differentiation. How can we differentiate when we work with investigator sites? Now, you've seen some progress on that with our site advisory board and some of the augmented services. We have strategies associated with technology.
We knew with people like Veeva here, spending $250 million or more on technology, that a CRO can't be a technology leader in this business. It's really going to fall to those high-quality vendors. So we complement. We don't compete with those vendors, and then we develop intellectual property where we want, where it adds value on top of it. Same thing in data. You know, years ago, when we created IQVIA, there was. They were the only game in town. They and Optum were the only two games in town associated with data. Now, there are probably hundreds, certainly tens of data providers. You have people like ConcertAI, who focus on oncology data. So our goal there is also to complement, not compete with data. We don't need to own data.
We need to be really good at using it and making sure that we mine it effectively and use tools against it to help our customers. So we complement, don't compete with technology and data providers. So we've got this whole differentiation strategy. You may have seen it in our Investor Day, but it is paying dividends in terms of the relationships we have with customers, the focus of the business, and you'll hear more about that. We had to commercially transform, too. As you can imagine, being a division of a division with a huge lab, the focus was not on clinical services. One of the first things that Jill and I did when we took over in July is we changed the incentive strategy.
So we changed to focus more on the most attractive parts of our business from a growth and margin standpoint, which is largely full service outsourcing. But we did other things, too. Some of you in the audience know this industry very well, and we weren't engaging early enough with customers. We weren't using all that medical expertise with biotechs. And so all of this part of our commercial transformation that I'd say we're in probably the third or fourth inning of, but it's already producing results. A 1.3 book to bill in the last quarter, and 1.27 since we've been an independent company. We developed a roadmap. I think any of you who are interested in us understand the same thing we do, and that's that we're really a margin appreciation story. Now, this company traditionally has been sub-industry peers.
The spin has made it even more difficult in terms of margins, so we have a very clear roadmap, both in operating and SG&A transformation. We picked some partners to help us through that. So we picked Cognizant and Accenture. Cognizant is helping us with the more technology-oriented aspects of getting out of Labcorp, and then Accenture is helping us with some other technology, mainly our ERP, and they're also helping us with security. And then finally, we put together an experienced management team. We took some folks from the parent company, like Jill, and then added other really experienced, great players. I think we have a world-class management team, and we also have a great board. With respect to 2024, so what are we doing this year? So last year, we were really setting up, getting things started, starting the commercial transformation.
Now we're really focused, refocusing the business on phase 1-4 clinical development, including real-world evidence in some of the consulting. Now, those of you who saw our earnings announcement yesterday, show that we just announced that we are divesting the two key businesses in the Enabling Services segment. We can talk about this a little bit more in our Q&A, but we're divesting those two. They are good businesses, very good businesses, but they do need a lot of attention and a fair amount of capital. We think the real value creation here is concentrating on our clinical businesses. So we're starting on that journey this year. It also gives us a little bit of extra capital to deal with our debt situation, but, I think we're excited about that, and we think those two businesses have a great home with Arsenal.
In terms of the commercial transformation, it's still going on. Before coming down here last night after our earnings call, Jill and I met for an hour and a half with a customer, and that is a big part of what we're doing. We should see more progress in terms of building our pipeline, how we engage, and I hope continue to drive these book to bills that you've seen. We're continuing these investments, so they're not done yet. We've started on the investments, as I described, but we're adding to it more specificity around AI. So that same customer that we were talking about, one of the things they're gonna do today is they're gonna see our AI experts talking about how AI can potentially help transform the clinical services industry.
And so I may not talk about all of that here, just because of competitive issues, but we have a terrific AI leader, groups of people in that. We have tremendous. I think for our industry, we have some of the best thinkers associated with technology, artificial intelligence, et cetera. That's gonna be a key part of our drive going forward. Capital structure and SG&A improvement, you know, clearly something that we're focused on. And again, I think we'll talk about that a little bit more in the Q question and answer, but Jill can take you through how we're looking to drive improvements in those areas.
Then finally, one of the most important things this year is that we will be exiting the transition service agreements from our former parent company, and this is really what unlocks the opportunity to improve the margins in the SG&A here. Again, we'll talk about that a little more. Finally, 2025. What do we wanna be? We wanna be the CRO of choice for our customers. That's biotechs and selected large pharma. Now, I say selected only in that at our size, we can't do everyone, but we do serve about 50% large pharma, about 50% biotech. We wanna keep that ratio. So as we grow, we wanna continue to work with large pharma and also biotech, and we just think we've got the perfect combination. What large pharma does for you is it gives you that consistent backlog.
You know that you have a lot of projects coming because you're preferred with them. And what biotech does for you, probably gives you a little bit better margins. You do a little more innovation there, and then you can bring that back to the larger pharmaceutical firms. So we wanna keep that mix. If we have any TSAs left, we should be exiting them, and then importantly, we remove kind of an overhang on the business. When you do a spin, essentially, you know, you indemnify your parent associated with tax issues and other issues. It's just part of what they do. They put the liabilities on you, part of that. So we would essentially extinguish all of those indemnities and that kind of overhang that we would have on the business when we exit all the TSAs.
We're gonna keep investing in differentiation, keep focusing on the commercial organization. This is 2025, we'll really start driving the post TSA operating and SG&A efficiencies. And as it says on the bottom, we expect to start getting to more and more target leverage ratios closer to 3 toward the end of 2025. Something that Jill and I have been explicit on, though, is that we are trying to exit 2024 at about a 13% EBITDA margin. This is where this company was in 2022 before the spin, and we believe if we exit those TSAs, we keep working on these levers, and we bring revenue back to this business, we can do that so that we're at that level as we go into 2025.
And then Jill can describe a little bit how w e've given some modeling information to people on our earnings call. We could talk a little bit more about 2025 as well. So, given that Barclays helped us with the transaction, we actually don't have Luke as our interviewer today as we normally would, so we're in that unusual situation. So our Head of Investor Relations, Hema, is going to ask us questions and start us off, and then she'll take some questions from the audience. So Hema, I'll leave it to you.
Thanks, Tom. So Tom, maybe we'll start off with the Enabling services distribution that you announced yesterday. Maybe if you could talk about, give us some color on the strategic rationale behind the deal and what led you to this point.
Yeah. Yeah. Essentially, last fall, we did a strategic review, and we really looked, as we looked across the investments and what the different businesses needed, we decided that our investment and our management focus, to be honest with you, is really best placed in these clinical businesses, phase one to phase four. Now, if you look at these businesses, the trading multiples in the private markets are high. It's very attractive, the most attractive part of our business. When you look at when we speak of book bills, that is really on the clinical segment of our business. And then the other two businesses are great businesses, but something like patient access is really targeted toward that 10% of commercial pharmaceuticals that goes to patients who need access to those products. It's a very different business, not really aligned with us.
And then the Endpoint business is what we call; it's a randomization tool, and they can be very good businesses, but they're going through a transition, too, introducing new technology generation and, you know, just given the investment and attention that they need and the nature of randomization business, we thought if we had the right partner, those two could flourish better with that partner. I think in Arsenal, we found that partner. Yeah, probably everyone here knows Arsenal. They've certainly got a good history of really being able to develop businesses in this sector, and so we're excited about them taking those two businesses forward. But ultimately, what it lets us do is we focus on the business, we put our investments where we want. We think it's attractive, both to our customers and to investors.
And then finally, it does let us deal with our leverage with a little bit of flexibility. So.
Thanks, Tom. Next question I'm going to ask you, the one that is on everyone's mind. So if you can maybe talk about your margin trajectory for 2024 and 2025. You've exited 40% of TSAs at the end of 2023. So how do you see the incremental margin expansion opportunity in 2024 from exiting the remaining?
Sure. So in the call yesterday, I talked about two halves for 2024, and that is still the same. The first half, we still have kind of the headwinds from the spin year with the soft sales that we had, the soft commitment with business awards. That was in that period of July of 2022 through June of 2023. That's going to really manifest most strongly, particularly in Q1. And then we're going to see that in the second half, we get back more to market growth, which we're saying roughly in that 3%-5%, based on the book to bill that we've delivered over the last two quarters and the solid pipeline that we see in front of us for 2024.
You know, and I guided around the fact that, you know, of a midpoint, about $300 million, you just see about a third of that in the first half, more so in the second quarter, and then the majority of that in the second half. So that improvement in the second half is largely driven by that revenue. We have been transparent about the fact that we've held on to some, you know, cost of sales resource, essentially, or people that generate revenue in anticipation of the growth. Because if we would, you know, let them go and then have to hire them back a couple of months later, you're going to pay 20% more. And so we've held on to those people. So that growth in the second half largely doesn't need additional resource to support it, so it will drop through pretty strongly.
The TSAs are really more so coming very much at the end of the year, and they really unlock the SG&A margin expansion into 2025. So we've shared that in the first quarter, we're going to start to report our cost of sales and our SG&A more in line with our peers. It was done a bit differently as part of Labcorp. You're going to see that there's a lot of opportunity in SG&A, and exiting those TSAs at, you know, at the tail end of this year, give us that opportunity for 2025. And as Tom mentioned, you know, we said we expect to exit this year on that 13% trajectory, and we would expect to continue that through 2025.
Great. And when you think about longer term, your CFO, so we think about longer term, right? How do you see margins evolving? Is there anything structurally different versus peers?
No, we don't think so at all. In fact, I think the focus on the clinical services businesses allows us to more closely match some of our peers. You know, probably when you get to the really, really high teens and low twenties, there is a little bit of scale, mostly around your corporate costs, just being spread over a larger volume of revenue. But other than that, you know, which I would say is relatively small, we still believe high teens is an absolutely appropriate margin for us over time.
Great. Switching over to Tom. Tom, maybe if you could talk about a little bit about your recent conversations with customers and any feedback you've received for spin, any feedback you've received at the end of the year.
Yeah. Thank you. I think, you know, those of you who followed us know that as we spun, we were getting a lot of comments about the spin, and there was concern, and one of the reasons the sales were soft in the July 2022 to June 2023 period is because of concerns about the spin. Within about six weeks of the spin, we stopped hearing that. And I have to say now, you know, it feels very much that we're at the table, and we're at the table with the largest CROs in terms of opportunities with big pharma. In terms of biotech, we have a solid pipeline. We have disclosed, we disclosed in the earnings call that our pipeline is solid for Q1. We're obviously late in the quarter.
We still have to execute because the way the CRO business works, and some of you know it well. You have a lot coming at the very end of the quarter. But if we execute well, you know, we can be at our target book-to-bill. But the exciting thing, honestly, is our whole team is energized by the access we're getting to leading pharmaceutical firms and great biotech firms. So I'm really pleased with our progress on that since becoming an independent company. If you think about it, nobody knew Fortrea a year ago, right? It was an idea, and now our name is around and well understood.
Okay, thank you. The last few minutes we'll take any audience questions. All right.
Hima has a few more prepared in case.
Yes. Tom, maybe, if you could talk about differentiation between FSP and full service, given all the distinction that's going on in the industry today.
Yeah, it's interesting. Those of you who follow this industry know that we have these two primary service models on the clinical side. One is full service outsourcing, where really the CRO takes over pretty much control of a project and drives the project independently with the support of the sponsor. And then the other model is FSP, which is much more resource-focused, where it's a bit more of a staffing business, where project managers or CRAs or other elements that data management people will essentially be staffed to that sponsor. What we've seen over the last decade is quite a bit of growth in this latter model, that FSP model. Interestingly, as we look at it today, for a company of our size, and I wanna emphasize that, for a company of our size, we are seeing sponsors still move in both directions.
The meeting we had yesterday was a sponsor who traditionally has done virtually all FSP, who's now looking at adding full service outsourcing. And so we're seeing that move. We're seeing some of the largest, most successful companies that have been sourcing start looking at outsourcing because some of them have had such successful products in the last couple of years, they're moving into new therapeutic areas, and they realize it's more efficient to do full service. That being said, you're still seeing some of the largest companies being very focused on FSP and a few people moving more toward it. So it's a really interesting thing in our business. It's, it's probably, it's this push-pull. Some are moving towards full service outsourcing, some are FSP.
I think what we wanna do as a company, though, if you think about what we're trying to do at our size, trying to improve our margins, it's to continue to focus on that full service outsourcing piece. And then where we think it makes sense, we will definitely do FSP, too. Like, we just want a really interesting FSP with a very large and successful leading pharmaceutical firm that gives us a foot in the door there. But then on the other hand, we heard this opportunity last night, where we're working on full service. So our goal is to kinda keep our mix and use FSP where it's appropriate, do it effectively, but then also continue to focus on the full service outsourcing.
Thank you. We have one minute if you have any closing remarks.
Well, I guess that's a, it's a long time for closing remarks, but it is good to end early. You know, at Fortrea, we get a lot of stuff done, so we often, you know, end things early. I do think, we remain super excited. We've put together a great leadership team. Considering where we are, and if you listened to our earnings call yesterday, I tried to tick off some of the things we've accomplished in the past year. You know, Jill, with the spin team, up to the spin, and then since we've done it, I mean, we're moving at an incredible pace. We're really establishing this brand. We're at the table with leading pharmaceutical firms and their executive teams. We're really interesting to biotech. We've got the plans and already have started to work on the cost structure elements.
We've put in place the partners to do it. We're working closely with our former partner, or our former parent, to get out of these TSAs. So, you know, given where we are today and where our margins are, I feel like the growth we're putting through us and then the plans and actual activities we have for improved margins are gonna make this one of the most interesting investment stories over the next couple of years. So we do appreciate your interest, and you can always contact Hema to get more information to get access to us. So with that, thank you.
Thank you very much. Thanks, everyone.