As PPD celebrates its 25th anniversary this year, Fred Eshelman – founder and executive chairman – and David Grange – CEO – took time to meet with the Business Journal and talk about the company’s past, its present and its future.
Today PPD has a $3 billion market cap, operates in 41 countries and employs more than 10,000.
Why did Eshelman initially make the move to Wilmington?
“I started the business outside of D.C., and I hated that area,” he said. “I knew the business was going to have to grow and (that was) the time to put it where it should be.”
Eshelman said he is a lover of the coast, which factored into his location matrix. Wilmington was his choice after looking at other towns in the Southeast that were coastal with a reasonable cost basis.
A High Point native and UNC graduate, Eshelman said he knew that workers in this area would give a full day’s work for a full day’s pay. “Plus, at the time I had a very small child and this was a reasonable place to raise her,” he said.
From its first home in the Murchison Building, PPD moved to several locations each time after outgrowing its space. It is now in its own glass and steel headquarters adjacent to the Cape Fear River.
As the business grew Eshelman developed another campus in Research Triangle Park.
Demographically the Wilmington area was not viable for Phase I clinical trials, and a talent pool to work on biological statistics did not exist in this area, he said.
After the business had been up and running for six or so years, Eshelman recalled that when a colleague said he believed that one day PPD could be a $100 million business, Eshelman questioned the man’s sobriety.
“I had no earthly idea that this business could grow to this size,” he said. Today the company has far surpassed the $100 million mark. In 1996 PPD went public, trading on Nasdaq under the stock symbol PPDI. “It was a lucky window,” Eshelman said. “You could have taken a dog public. The IPO market was so red hot, the stock took off.”
Last year, Eshelman stepped down as CEO and appointed a successor, David Grange, a retired U.S. Army general who also had served on PPD’s board of directors.
Was it difficult to turn over the reins after so many years?
“Yes, it was hard,” Eshelman said, “I didn’t view it as giving up, but bringing in more high-level help.”
Over the years attracting high-level help was not as difficult as it was in PPD’s start-up years when the “trailing spouse” problem plagued more than one local business.
What was once “a big problem, is not so much today,” Eshelman said.
For one thing, Wilmington has more to offer a two-career family. For another, Grange said that trying to find suitable jobs for a new hire’s spouse has gotten easier because more people work from home. “They’re more flexible arranging their workplace. People have learned to move,” he said.
Demographics have also changed. Eshelman said that in the past when a candidate was offered a position “it used to be ‘I’ll have to check with my wife.’ Now that’s changed. The wife is the principle bread winner – here and nationally.”
The PPD workforce is predominately female. That began when nurses were hired at a time when more women than men were nurses. Today, more and more senior-level jobs are filled by women – doctors, scientists and managers.
This year, the company spun off Furiex, its compound partnering business. The stock, began ‘regular-way’ trading on Nasdaq (FURX) in mid June. The decision to separate the two entities was made when spending on that line was about to escalate and possibly dilute earnings. The shareholders were not happy, Eshelman said. “We were at a crossroads. It made sense to get it out on its own to flourish.”
Businesses have had a difficult time nationally keeping shareholders happy – following last year’s disastrous slide in the financial markets.
“We had hit a crater in ’09 along with many others,” Eshelman said. Indeed the stock, which had been trading near $45 per share in mid-September 2008, plunged to $22.47 a year later – feeling the same pressures that affected the rest of the market.
Listening to shareholders who were told projections for Furiex projects would be costly, Eshelman said, “the time was right now for shareholders to either embrace the (Furiex) stock or dump it – but that wouldn’t have an effect on PPD stock.” PPD shareholders received one share of Furiex for every 12 shares of PPD. Eshelman said he believes that the earnings for the spin off “could be huge.”
In 2009 when many companies were pulling inward and were more concerned about the present rather than the future, PPD thought it was the right time to plan ahead. It was a good time Eshelman said, to “get their ducks in a row.” That resulted in Grange coming on board.
Grange said the company will continue to expand its business in Europe – because their clients demand it. Getting the troops on the ground where they belong with what they need is the hard part of the equation.
An article in an April issue of Smart Money noted that CROs tend to escape investors’ notice, but as Big Pharma tries to lower costs, CROs may be a good investment. The article praised PPD’s 2.3 percent dividend yield which offers “investors steady payouts until they wait for (Furiex) to kick in.”
As for what’s ahead, Eshelman said, “We want to be in the right place at the right time with the right mix. That takes time. To be the best, be number one. And if you’re not the lead dog, you know what your view is."
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