PPD hit by higher number of cancellations in Q4

09-Feb-2010 - Last updated on 30-Nov-2023 at 13:49 GMT

Related tags Contract research organization Revenue

US contract research organisation (CRO) PPD reported a “higher than anticipated” number of cancellations in Q4, bringing to a close 12 months that saw operating income fall 46 per cent to $192m.

The firm, which released its full 2009 results late yesterday, said that $284.9m worth of research projects had been pulled in the three months ended December 31, equivalent to around four per cent of its backlog for the year.

Project cancellations have been a recurring theme for PPD in 2009, beginning in April when the company said that “unprecedented cancellation levels” of $215m had hurt its Q1 revenues.

This trend, which continued throughout the year, clearly hurt PPD, with operating income and net revenue for 2009 falling 31 per cent to $193m and 8.3 percent to $1.42bn, respectively.

PPD’s development unit appears to have been most affected by the cancellations last year, with net revenue dropping to $1.31bn from $1.42 in 2008.

Meanwhile, discovery sciences contributed $6.3m, roughly a third of what it generated two years ago although, as PPD pointed out, it received two milestone payments from Japanese partner Takeda in 2008.

Despite the tough year, PPD CEO David Grange was upbeat, suggesting that: “Although fourth quarter cancellations and adjustments were higher than anticipated, [PPD]…is continuing to establish new strategic outsourcing partnerships.”

And, while Grange did not go into details, the firm did report new business authorizations of $465.6m in the three months to December 31, 2009, which supports his contention.

Company executive chairman Fred Eshelman was also positive, explaining that PPD had made progress on several strategic fronts during the reported 12 months, expanding into emerging markets and new service areas.

These strategic moves include sale of the Piedmont Research Center to Charles River Laboratories, the divestiture of its biomarkers business and creating of a new laboratory in Singapore.

PPD also bought Exel PharmaStudies, which is based in Taizhou, China and employs 300 people in a variety of data management, biostatistics, regulatory, QA and trial roles.

The firm also plans to spin-off its compound partnering business sometime this year.