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Virus Impacts Reflected In PPD’s Q2 Earnings Report

By Jenny Callison, posted Aug 5, 2020
PPD officials discussed the contract research organization's second quarter earnings on Wednesday. (File photo)
PPD’s revenue and virus-related expenses were up during its second quarter of 2020, as officials pointed to many bright spots in the company’s financial picture and operations.
 
PPD’s revenues for the quarter ended June 30 totaled about $1.01 billion, representing growth of 1.4% over revenues of $996.5 million in Q2 in 2019.

The company ended the quarter with a net loss attributable to common stockholders of $9.1 million – a loss of $.03 per diluted share – compared to net income of $25.7 million for the second quarter 2019.

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the three months ended June 30, 2020 was $194.4 million, higher than the $192.8 million for the three months ended June 30, 2019.

Despite the operational – and thus financial – difficulties experienced by the contract research organization because of COVID-19 limitations, PPD was able to exceed its predictions for the quarter, Chairman and CEO David Simmons said during an earnings call Wednesday morning. The company’s Q1 2020 earnings report predicted revenues of between $907 million and $946 million, and EBITDA of $170 million to $177 million.

Wednesday, Simmons said he was pleased with the company’s resilience in the face of virus-related headwinds and its ability to minimize the negative impacts of the virus on its operations.

In fact, PPD has picked up a substantial amount of business related to the novel coronavirus. And in late June, the company announced it has expanded its laboratory test portfolio by adding five new molecular, serology and functional assays (procedures) designed expressly for COVID-19 vaccine and therapy development programs.

“The addition of these five assays to our test portfolio will enable us to expand our support of many important COVID-19 trials. We’ve also incorporated innovative measures so trials can start more quickly, run more efficiently and conclude sooner,” Christopher Fikry, executive vice president of PPD Laboratories, said in a news release.

Those enhancements seem to be paying off, according to PPD’s CEO.
 
“As the life sciences industry and regulators come together to develop vaccines and therapies for COVID-19, PPD is proud to have won more than 85 awards related to the virus,” Simmons said during Tuesday’s Q2 earnings news release.
 
Coronavirus-related activity made up about 25% of the company’s bookings in the second quarter, Chief Operating Officer William Sharbaugh said during Wednesday’s call.

PPD announced Monday that it has signed a new three-year agreement with Pfizer Inc. to provide drug development services to advance Pfizer’s portfolio. Under the terms of the agreement, Pfizer has the right to extend the term for additional two-year periods.

The agreement builds on the companies’ existing relationship, in which PPD provides wide-ranging expertise in global clinical development and laboratory services to support Pfizer’s drug development initiatives across multiple therapeutic areas. Pfizer is one of the pharmaceutical companies racing to develop a vaccine to combat COVID-19. Tuesday, the company announced it has started clinical trials of one of its vaccine candidates.

PPD’s new authorizations of all kinds during Q2 totaled just over $1.05 billion, 12.4% higher than the number of studies landed in the same quarter in 2019. PPD’s resulting “book-to-bill” ratio was 1.34, indicating strong demand for services.
 
Officials also pointed out that PPD ended the quarter with total liquidity of $991.4 million, the strongest cash position it has held in more than a decade.
 
Simmons, Sharbaugh and Chief Financial Officer Christopher Scully mentioned a number of other bright spots as the CRO industry works to recover from limitations imposed in response to the coronavirus.
  • PPD’s backlog of contracts continues to be healthy, and the company is working to convert those orders into active projects.
  • The company has maintained its priorities of colleague and patient safety, business continuity, and being part of the solution for the pandemic.
  • New techniques and technology have allowed the company to increase the efficiency of online and virtual studies, with improvements that aim to streamline the industry’s methods for the future.
  • PPD now has full access to 55% of its sites globally and sites continue to reopen to allow in-person monitoring.
  • After using some flexible approaches to temporary workforce downsizing, PPD has returned employment to near-usual levels at 24,500 individuals, with openings for another 1,000 people, and is actively recruiting.
  • Patient enrollment is returning to pre-COVID levels and increasing numbers of people seem to be willing to participate in trials.  
These and other favorable indicators resulted in PPD’s issuing third-quarter 2020 guidance of revenues between $1.06 billion and $1.08 billion, and adjusted EBITDA of $211 million to $215 million.
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