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PPD Reports Strong Q2 Earnings, But Nothing New On Potential Sale Talk

By Jason Frye, posted Jul 27, 2011

In a conference call today, PPD officials reported strong quarterly earnings, but remained tight-lipped on a recent announcement that the board of directors had requested a review of the company’s strategic plan with a focus on “unlocking value for shareholders.”

Company officials also briefly addressed the search for a new chief executive officer.

Before any questions were asked about the board’s recent decision to explore PPD’s strategic plan and capital structure, Executive Chairman Fred Eshelman said the board of directors – especially the three new members – requested the review, and that the company had enlisted the help of a financial advisor as it worked through the process. He again emphasized that PPD was not interested in combining with another contract research organization.

When asked directly about the motivation and timing of the announcement, which was made early last week, he emphasized the review was requested by the three new board members who “thought it was a good time to review as an exercise to new members and directors.” He went on to say, “As we got deeper into the process, it became obvious to see if there were other ways to unlock value.”

He declined further comment, referring all questions back to the company’s news release and his previous statements.

Some industry analysts have said the company’s actions could be the precursor to a possible sale, or a decision to take PPD private.

The company’s earnings announcement showed that for the second quarter of the year, PPD recorded net revenue of $407.7 million, a 10.2 percent increase over the same quarter last year. Income from operations was $57.1 million, compared to $40.1 million last year, due primarily to higher net revenue and reduced research and development and operating expenses stemming from the June 2010 spin-off of Furiex Pharmaceuticals, Inc.

The company’s recent investment in Celtic Therapeutics and a subsequent $10.6 million of income from the deal, and a $1.3 million loss on investments resulted in diluted earnings per share during the second quarter of 41 cents. In the second quarter of 2010, diluted earnings were 18 cents per share.

Eshelman also addressed the issue of the CEO search, saying, “We’ve identified some good candidates and we are moving forward with interviews.”

In order to identify candidates, Eshelman said the board and search committee developed a list of 10 qualities they felt the right leader would possess. Among them was financial acumen, which Eshelman called “top on my list,” as well as a knowledge of the healthcare/pharma/biotech industry, and a strong sense of leadership.

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