PPD cuts outlook on Q3 results; spins-off compounds and buys in China

By Gareth Macdonald

- Last updated on GMT

Related tags: Contract research organization, Asia-pacific, Ppd

PPD accompanies news of drop in Q3 profits with announcement of plans to spin-off compound partnering and buy China’s Excel PharmaStudies.

First of all, the financials. The contract research organisation (CRO) saw operating income for the period fall 32 per cent to $47m, as revenue slid some $53m to $341.1m.

Like many of its peers in the sector, PPD has suffered from project cancellations and delayed pharmaceutical industry spending as customers hold off on R&D in the global economic downturn.

The trend has continued in the three months to September with revenue from development operations declining 11 per cent to $316m while that derived from discovery services, a much smaller part of PPD’s business, fell 67 per cent to $1.1m.

New business authorisations for Q3 were also lower than expected at $425.5 million, with contract cancellations and adjustments totalling some $160.3m.

In response, PPD lowered its guidance for 2009 and now expects net revenue to be in the $1.28bn to $1.31bn range on earnings per share of between $1.38 and $1.40.

Despite this, CEO David Grange saw reason for optimism, explaining that: “Although third quarter new business authorisations were below target, PPD was recently selected as a strategic outsourcing partner by five sponsors​.”

PPD will hold a webcast at 9am (ET) today to discuss its results.

Compound partnering spin off and Excel PharmaStudies deal

PPD also chose October 27 as the day to unveil plans to hive off its compound partnering business as a separate entity.

The new, as yet unnamed, company is expected to have rights to a number of existing deals including: the Alza Priligy collaboration; the Takeda alogliptin partnership; as well as having access to the dermatology program acquired with Magen in April.

In a separate statement, PPD also announced plans to buy Chinese CRO Exel PharmaStudies as a way of strengthening its Phase II-IV operations in the country’s thriving research sector.

Exel PharmaStudies, which is based in Taizhou, employs 300 people in a variety of data management, biostatistics, regulatory, QA and trial roles. The acquisition is expected to complete in the fourth quarter.

Speaking at the Q3 presentation PPD executive chairman Fred Eshelman said: “We believe that by separating our compound partnering business from our core CRO business, we can unlock the intrinsic value of both businesses.”

He went on to say that the acquisition of Excel PharmaStudies will strengthen the firm’s position in the Chinese development market and create a platform for growth in the Asia-Pacific region as a whole.

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