“Unprecedented cancellation levels, significant rescheduling of existing backlog and lower-than-expected authorisations” cut into PPD’s revenues and earnings for the first quarter of 2009, the US-based contract research organisation (CRO) reported.
The company lowered its financial guidance for the full year as net revenues for the first quarter slipped 7.0% year on year to US$364.9 million. Ignoring special charges, operating income fell by 2.7% to US$65.2 million.
Factoring in ‘other’ income and a US$16.3 million charge for impairment of investments in the first quarter of 2008, operating income before taxes in the latest quarter was 15.2% higher at US$65.0 million, while diluted earnings per share (EPS) came in at US$0.38 compared with US$0.33 in the first quarter of 2008.
The consensus forecast from analysts polled by Thomson Reuters was for first-quarter EPS of US$0.39 on revenues of US$365.30 million.
Net revenues from PPD’s Development segment dropped by 3.6% to US$335.3 million in the quarter, generating income from continuing operations of US$62.8 million – 7.7% higher than in Q1 2008. Net revenue from the much smaller Discovery Sciences business was 64.5% lower at US%.7 million, with income from continuing operations down 71.6% at US$2.5 million.
PPD has revised its revenue and earnings guidance for 2009 to reflect current business conditions and changes in its Discovery Sciences segment. Earlier this month, the CRO said it was selling its preclinical services subsidiary Piedmont Research Center – which was part of Discovery Sciences – to fellow CRO Charles River Laboratories International for US$46.0 million in cash.
At the same time, PPD announced the acquisition of Magen BioSciences, a US biotechnology company specialising in dermatological therapies, for US$14.5 million in cash.
Earnings per share for the whole of 2009 are now expected to be US$1.54-US$1.60, while the net revenue forecast for the full year is US$1.39 billion to US$1.47 billion. In January, PPD was forecasting diluted EPS of US$1.97 to US$2.05 for 2009 – ahead of the then analyst consensus of US$1.95 per share – and net revenues of US$1.595-US$1.670 billion.
Quarterly diluted earnings per share for the next three quarters are projected as follows: Q2: US$0.42-US$0.44; Q3: US$0.38-US$0.40; Q4: US$0.36-US$0.38.
New business authorisations in the first quarter of 2009 totalled US$579.7 million, while contract cancellations and adjustments were US$214.6 million, including a US$76.9 million cancellation from “a large biotech client for a multinational clinical trial”. The net book-to-bill ratio was 1.07 for the quarter and backlog at 31 March 2009 was US$3.2 billion.
Tokyo office
PPD also announced that it was opening an office in Tokyo, Japan, expanding its Phase II-IV clinical development services “in response to growing client demand in East Asia”. PPD will provide clinical management services in key therapeutic areas from this location.
The CRO was already working regionally and through a subcontractor in Japan. The country “offers competitive timelines for site start-up and patient enrolment, and the government is making major improvements to streamline drug development, bringing Japan’s regulatory timelines more in line with the rest of the world”, commented PPD’s chief executive officer, Fred Eshelman.
“With our clients increasingly including Japan in their global drug development programmes, having a base of operations in Tokyo will enable us to better meet their growing needs,” he added.
