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PPD Discusses COVID-19 Response During Earnings Call

By Jenny Callison, posted Mar 5, 2020
PPD Chairman and CEO David Simmons said Thursday that the Wilmington-based contract research organization is actively monitoring the spread of COVID-19 and taking a three-pronged approach to addressing it.
 
First, he said, the company is establishing a pandemic committee that will set policies to ensure the safety of its colleagues and to work to contain it. Second, PPD is assessing the continuity of its operations and increasing its use of remote trial monitoring. And third, the company has put together a task force to ensure that customers can get “fast and complete” assessments, Simmons continued.
 
“We are actively engaged with nine customers who are actively working with COVID-19,” he said about the disease caused by the coronavirus. “There is no greater example of PPD’s mission in action.”

PPD officials said that nine of its customers are working on anti-COVID-19 initiatives: six are pursuing vaccines, while the other three are exploring anti-viral treatments. The expenses of these customers’ research and development efforts are underwritten with new investment, not pulling from the funding for other programs, officials said.
 
Simmons discussed the impacts during a conference call Thursday morning to discuss the company’s first quarterly earnings report since it once again became public earlier this year. During the call, several analysts asked PPD officials if they expected global outbreaks of COVID-19 to affect the company’s operations worldwide and its earnings.
 
PPD has offices in 46 countries and about 23,000 employees worldwide, with about 1,500 people in Wilmington.

Simmons said that possible financial impacts of the virus have been factored into the company’s 2020 financial guidance.
 
In response to an analyst’s question about long- and short-term implications of the viral epidemic on PPD’s operations in China, officials replied that they anticipate PPD will see some opportunities to catch up with delayed activities, but that there will also be lost opportunities that will be reflected in PPD’s revenues during the current quarter.
 
A major impact is the inability to do on-site monitoring in China, officials explained, adding that about 30 percent of sites have switched to remote monitoring, and other monitoring activity will relocate to other sites as they reopen.

The Wilmington-based contract research organization returned to public ownership in February and is listed on Nasdaq.

Fourth-quarter 2019 highlights from PPD’s earnings information, which was released late Wednesday afternoon, included:
  • Quarterly revenue of about $1.05 billion, an increase of 7% over Q4 2018 revenue;
  • Net income attributable to common stockholders of $6.8 million;
  • Adjusted EBITDA of $213.6 million. That figure was slightly higher than the $212.9 reported at the end of 2018. 
For 2019 as a whole, PPD reported:
  • Full-year revenue of more than $4 billion, representing 7.5% growth over the prior year;
  • Full-year segment revenues of more than $3.1 billion, a 10.8% increase over those of 2018;
  • An end-of-year backlog of $7.1 billion, an increase of 11.9% over the prior year's end;
  • Net income attributable to common stockholders of $54.7 million, or $0.19 per diluted share;
  • Adjusted EBITDA of $776.9 million.
The company’s full-year 2020 guidance for revenue is between about $4.35 billion and $4.47 billion, while its projected adjusted EBITDA range is between $855 million and $870 million.
 
The earnings release also looked specifically at revenues for PPD’s clinical services and laboratory services.
 
“For the three months ended December 31, 2019, Clinical Development Services segment revenue of $657.7 million grew 4.4% and Laboratory Services segment revenue of $161.0 million grew 22.2%, resulting in segment revenues of $818.7 million and growth of 7.5% over the same period of the prior year,” the release stated. “Other revenue not allocated to segments, which includes third-party pass-through and out-of-pocket revenue, was $228.2 million for the three months ended December 31, 2019, compared to $216.7 million for the same period of the prior year.”
 
Officials see promise in the year-over-year results, even though Q4 net income attributable to common stockholders fell substantially from 2018 to 2019. That Q4 2019 figure was $6.8 million, or $0.02 per diluted share, compared to $36.6 million, or $0.13 per diluted share, for the same quarter in 2018.
 
“Our financial performance in 2019, ending backlog and healthy net authorizations to close out the year give us confidence in our ability to continue delivering solid results,” Chris Scully, PPD’s executive vice president and CFO, said in the release. “As a result, based on the current outlook, we expect to land in the top half of our full-year 2020 guidance range for revenue and adjusted EBITDA.”
 
PPD officials noted that both Moody’s and Standard & Poor’s have upgraded the company’s credit rating, which will make it easier for the company to tackle its debt.
  
Wilmington-based PPD was founded by Fred Eshelman in the mid-1980s. Initially a private company, it held its first initial public offering in 1996. After 15 years as a public company, it was acquired by Hellman & Friedman and The Carlyle Group for $3.9 billion in 2011, becoming private again. This past November PPD announced it was exploring an IPO, which took place in early February and raised a reported $1.62 billion.
 
The company’s stock traded at about $30 per share on its opening day on Nasdaq. It was at $28.78 per share as of 1 p.m. Thursday.
 
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