“Unprecedented cancellation levels” dent PPD’s earnings

By Nick Taylor

- Last updated on GMT

Related tags: Contract research organization

PPD’s revenues dipped in Q1 as the company was hit by contract cancellations totaling $215m (€166m), which included a $77m deal with a large biotech for a multinational clinical trial.

The majority of contract research organisations (CROs) have reported spikes in cancellations in recent months, which has reduced revenues and resulted in cautious outlooks for the year ahead.

PPD is the latest company to be affected by this trend, which played a role in the drop in Q1 net revenues from $393m to $365m. This is below expectations and has resulted in PPD revising its guidance for 2009.

Fred Eshelman, CEO of PPD, explained the difficulties saying: “In this challenging economic environment, we have experienced unprecedented cancellation levels, significant rescheduling of existing backlog and lower-than-expected authorisations for the first quarter​.

As a result, we have adjusted our 2009 financial guidance accordingly. Despite these challenges, we continue to believe the CRO market remains attractive, and we will remain focused on core business execution throughout the year​."

Net revenues in the development segment fell from $348m to $335m and the income generated by the discovery sciences business plummeted by 64 per cent to $5.7m.

New business authorisations were also down compared with last year, with PPD inking $580m worth of deals in 2009 compared with $690m in Q1 2008.

Continued expansion despite downturn

PPD also announced the completion of its takeover of AbCRO, which expands its presence in Central and Eastern Europe (CEE), and the opening of a new office in Japan.

CEE has been identified by PPD and other CROs as a high-growth market that has good access to patients, a centralised and well-developed healthcare system and low density of clinical trials.

The establishment of a permanent base in Japan, where PPD has previously operated through a subcontractor, is in response to growing client demand for Phase II to IV trials in the country.

Related topics: Clinical Development

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