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PPD Stock Price Takes A Hit

By Jason Frye, posted Aug 8, 2011

PPD's stock price is now below where it stood before a recent report that the company may be for sale.

Shares of the Wilmington-based company jumped more than 10 percent to $30.74 — and reached as high as $32.91 — on July 18 after the Wall Street Journal reported the company may be exploring a sale.

But the stock slid back in the past couple weeks, ending trading Monday at $24.70 — well below the $27.86 level where it stood before the Wall Street Journal report.

PPD shares dropped 6.9 percent on Monday. Competitors Covance and Charles River Laboratories weren’t faring any better, with Covance falling 7.65 percent and Charles River dropping 11.95 percent.

As a whole, the healthcare sector showed steep declines for most stocks today; the biotechnology and drugs industry fared worse, with meager gains earned by a dozen stocks in healthcare and only six in biotechnology and drugs.

According to Lauren Migliore, Equity Analyst at Morningstar, Inc., trading levels of PPD and competitors’ stocks “are reflecting the general volatility of the stock market over the past week and overall concern in the healthcare sector about the growth of spending following the debt deal.”

Following the Wall Street Journal story, PPD Executive Chairman Fred Eshelman issued a statement that the company was evaluating long-term plans and capital structure in order to see “if there are any actions which might create value at this time” drove stock prices to a 52-week high of $32.91. Some analysts interpreted Eshelman’s statement to mean the company was seeking a buyout from a private equity group, and would follow in the footsteps of Raleigh-based Quintiles and go private.

While its stock price has recently declined, PPD reported net revenue in the second quarter increased 10.2% over the same period last year, and operating margins have risen into the mid-teens, fueled by a rise in new contracts.

In a report on PPD, Morningstar, Inc., said: “We think these robust new bookings, coupled with an increase in both the volume and value of request for proposal activity, put PPD on track to meet our full-year expectations for double-digit top- and bottom-line growth.”

Morningstar and other analysts have estimated PPD’s fair value at $35 a share.


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