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Fast times at contract research firm PPD

Published on 03/11/09 at 06:29am

Pharmaceutical Product Development (PPD) has unveiled several new initiatives to re-inject some growth momentum into the business as its third-quarter sales declined 13% to $340 million.

Like its peers in the contract research industry PPD is suffering from delays and cancellations of pharmaceutical drug development projects, and as a result has been forced to cut its 2009 revenue and earnings forecasts.

Bookings for the third-quarter came in at $426 million, but the firm also missed out on $160 million in cancelled contracts. As a result it has trimmed its full-year earnings per share to $1.38-$1.40 from its earlier prediction of $1.54-$1.60.

In a reaction to the tough operating environment, PPD has announced a dramatic reorganisation of its structure. The company is planning an acquisition to boost its clinical research operations in Asia, as well as the spin-off of its compound partnering unit, in order to be well-positioned for a recovery in the pharmaceutical sector.

Unusually for a CRO, PPD has operated a drug development and product partnering unit that takes over early-stage drug candidates and then develops them further with a view to licensing them out later to pharmaceutical companies at a profit.

PPD has now decided to separate its contract research business from its product partnering activities, and will spin the latter out into two separate public companies due to be created in 2010, with an initial warchest of $100 million to fund additional compound licenses.

The company has also boosted the partnering business with a $100 million investment in Celtic Therapeutics Holdings, a fund that provides financial backing for drug discovery and development projects. The aim is to set up a strategic alliance to perform clinical development services, it said.

CRO 'pure play'

The spin-out means that PPD will effectively be a CRO pure-play and will operate free from the "earnings dilution" from the partnering business, said the firm's executive chairman Fred Eshelman.

Meanwhile, PPD's contract services business has been boosted via the acquisition of Excel PharmaStudies, which ranks among the largest CROs in China.

The company said the deal "significantly increases its employee and client base in Asia Pacific", and boosts its capacity to carry out phase II to IV trials for clients, as well as laboratory testing and other services.

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