PPD Q3 profit increases, boosting dividend in the process
of 2006, an increase of 14.6 per cent over net revenue of $273.3m
for the third quarter of 2005. This has been buoyed on by the
strong performance by the company's developmental segment.
The third quarter has seen the contract research organisation's (CRO) fortunes offset by an operating income decrease to $52.0m from $56.7m in the prior year quarter. The income figure included $5.0m of stock compensation expense.
Net revenue for the third quarter 2006 included reimbursed out-of-pocket expenses of $23.3 million, compared to $18.7m for the same period in 2005.
PPD did not receive any payments on discovery programs or transactions in the third quarter of 2006, but third quarter 2005 net revenue included the $15.0m upfront payment from Takeda related to the July 2005 transfer of the development and commercialisation rights for the dipeptidyl peptidase IV (DPP4) inhibitor program to Takeda San Diego
DPP4 inhibitors, taken orally, block the degradation of GLP-1 (Glucagon-like peptide-1), and help to maintain the concentration of GLP-1 in blood for a longer period of time.
This is important because GLP-1 stimulates pancreatic beta cells to increase the secretion of insulin, and GLP-1 has the potential to improve beta cell function itself. Therefore, DPP4 inhibitors may represent a new generation of oral agents for diabetes treatment.
"We continued to see solid growth in a number of geographic areas and service segments within the industry, which enabled PPD to deliver another quarter of development segment revenue growth exceeding 20 per cent, a net book-to-bill of 1.51 and backlog growth of 25 per cent versus the same quarter last year," said Fred Eshelman, chief executive officer of PPD.
"PPD's board of directors, our management team and our employees are pleased to be able to reward our shareholders through the increase in our cash dividend rate, and we remain firmly committed to unlocking additional shareholder value through the delivery of high quality services and the advancement of our compound portfolio strategy."
Development segment net revenue for the third quarter of 2006, showed a 21.3 per cent increase over 2005's figure to $285.3m.
The development segment, with a 75 per cent of its focus on Phase II-IV trials, revealed income from operations for the third quarter 2006 was up 23.0 per cent to $53.6m from $43.6m for the same period in 2005.
Discovery sciences segment did not fare so well as net revenue was $4.5m for the third quarter of 2006, compared to $19.5m in the same period last year.
Discovery sciences segment third quarter 2006 loss from operations was $1.7m, compared to income from operations of $13.1m for the third quarter 2005.
Third quarter 2005 net revenue and income from operations for this segment included the effects of the $15.0 m upfront payment from Takeda.
The biotech industry is continuing to boom and backlog and revenue in the CRO sector is continuing to grow above R&D growth, signalling that these biotech companies are outsourcing more and more to companies like PPD.
Gross new business authorisations for the third quarter of 2006 totalled $531.0m. The third quarter 2006 cancellation rate was 17.8 per cent. Year-to-date net days sales outstanding at September 30, 2006, were 42.8 days.
Third quarter 2006 cash flow from operations was $11.6m, resulting in year-to-date cash flow from operations at September 30, 2006, of $116.4m. At September 30, 2006, PPD had $372.2m in cash, cash equivalents and short-term investments and $56.7m in debt, primarily related to the ongoing construction of the new corporate headquarters building in Wilmington, North Carolina.
