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PPD Expands Despite Drop In Q3 Earnings

By Alison Lee Satake, posted Oct 28, 2009

Wilmington-based contract research organization, PPD, Inc. recently announced its third quarter earnings. The company recorded a net revenue of $341.1 million for the third quarter, which ended on Sept. 30. Revenue is down from $394.1 million that was reported in last year’s third quarter. Year-to-date earnings are $1,061,169 compared to $1,189,735 in 2008. The company’s overall earnings are less than last year’s.

Due to the company’s reduction of its North American workforce, restructuring cost it $3.9 million in transition pay, benefits and outplacement services, said Sue Ann Pentecost, PPD spokeswoman. Operations income was down to $52.2 million, compared to $69.3 million in the 2008 third quarter.

A $5.3 million loss in the discovery sciences segment was the result of an increase in expenditure on research and development for the company’s dermatology business, which it acquired last quarter. As a comparison, the company recorded an income of $0.6 million in the third quarter last year in this segment.

By the end of this September, PPD had $682.9 million in cash and investments and had an effective tax rate of 21.8 percent.

“Although third quarter new business authorizations were below target, PPD was recently selected as a strategic outsourcing partner by five sponsors and request for proposal activity is improving,” said David Grange, CEO of PPD in a statement.

PPD plans to spin off its compound partnering business from the contract research organization (CRO) business. According to a press release, the spin-off would result in two well capitalized, highly focused, independent public companies. The CRO business will continue to operate under the PPD name. By separating from the CRO business, the compound partnering business can access external capital without any constraints, according to a press release from the company.

“We believe that by separating our compound partnering business from our core CRO business, we can unlock the intrinsic value of both businesses,” said Fred Eshelman, executive chairman of PPD in the press release.

The company also plans to acquire one of the largest CROs in China, Excel PharmaStudies, Inc., to expand its services to biopharmaceutical companies in Asia. PPD currently has central laboratory operations in Beijing and Singapore. “Through the acquisition of Excel PharmaStudies, we will strengthen our position in the Chinese drug development market, and create a solid foundation for future growth in Asia Pacific,” Eshelman said in a press release.

Additionally, PPD signed an agreement to invest $100 million in an investment fund containing 10 to 15 new therapeutic product candidates. PPD’s investment in Celtic Therapeutics Holdings L.P. sets the stage for a strategic partnership with the fund which is designed to identify, acquire and invest in mid-stage drug development targeted to address unmet medical needs.

 

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