US-based contract research organisation (CRO) PPD has raised its international profile a few more notches by agreeing to acquire InnoPharm, an independent CRO based in Smolensk, Russia, for an undisclosed sum.

The announcement came as PPD reported a 15.0% increase in net revenues for the fourth quarter of 2007. Operating income dropped by 3.4%, though, as ballooning clinical development costs for a statin compound licensed from India’s Ranbaxy once again pushed up research and development (R&D) expenses.

One of the first CROs to be established in Russia, InnoPharm was a pioneer in the implementation of good clinical practice in the former Soviet Union, PPD noted. The company, which provides Phase II-IV clinical trial support, data management and biostatistics services to the pharmaceutical and biotechnology sectors, also has offices in Moscow and St. Petersberg, Russia, and Kiev, Ukraine, with a total staff of more than 300.

Subject to regulatory approvals and the usual closing conditions, the acquisition is expected to close in the second quarter of 2008. The current director general of InnoPharm, Dr Sergey Sudilovsky, will oversee operations for PPD in Russia and Ukraine.

“With more than 143 million people in Russia alone, Eastern Europe is a high-growth market for clinical trials and a region PPD has targeted for expansion,” noted the US company’s chief executive officer Fred Eshelman.

“We have subcontracted work to InnoPharm since 2004 and have great confidence in the team’s clinical research capabilities and its commitment to quality. In addition to extending our geographic footprint and enhancing our ability to conduct global studies for our clients, we are gaining a high-calibre group of clinical research professionals.”

PPD has been particularly active at expanding that footprint of late. Last month the CRO extended its global central laboratory services into China through an exclusive agreement with local testing laboratory Peking Union Lawke Biomedical Development Limited. During the third quarter, the CRO both realigned its regional clinical operations and opened new offices in Australia, Denmark, Portugal and Peru.

Fourth-quarter results
Net revenues in the fourth quarter, which included reimbursed out-of-pocket expenses, were US$375.0 million, up from US$326.2 million in the corresponding period of 2006. Operating income slipped from US$58.0 million to US$56.0 million as R&D expenditure for the latest quarter more than tripled to US$5.0 million.

Earnings per diluted share of US$0.34, down from US$0.35 in Q4 2006, were in line with analysts’ estimates while net revenues were markedly ahead of the analyst consensus.

Stripping out reimbursed out-of-pocket expenses, net revenues from development services were US$334.9 million for the fourth quarter, a rise of 15.1%. Operating income in the development segment improved only marginally, by 0.7% to US$59.1 million.

In the discovery sciences segment, Q4 net revenue was 23.1% higher at US$6.4 million but the heavy R&D investment pushed the segment into a US$3.1 million operating loss, compared with a US$0.7 million loss for the fourth quarter of 2006.

Full-year net revenue across the two businesses was US$1.4 billion in 2007, 13.4% higher than in the previous year. Operating income for the year ended 31 December 2007 grew by 4.5% to US$230.0 million and earnings per diluted share were US$1.36 against US$1.32 in 2006.

The development segment generated net revenues of US$1.28 billion for the full year, up by 14.6% on 2006, and operating income of US$246.6 million (+17.1%). Net revenue from the discovery sciences segment dived by 39.8% to US$20.0 million in 2007, although the previous year’s revenue of US$33.2 million included a US$15.0 million milestone payment for the start of a Phase III clinical trial with alogliptin (SYR-322), a DPP-4 inhibitor for the treatment of type-2 diabetes under development with Takeda.

The Japanese company recently filed a new drug application with the US Food and Drug Administration (FDA) for the compound, which is expected to trigger further milestone payments this year.

The discovery sciences segment recorded an operating loss of US$16.6 million for 2007, compared with a US$9.4 million operating income for 2006.

PPD had an order backlog of US$2.65 billion as of 31 December 2007, 18.6% ahead of its backlog at the end of 2006. Gross new business authorisations for the fourth quarter amounted to US$613 million (+23.8% year on year) and the cancellation rate for the quarter was 19.7%, giving a book-to-bill ratio of 1.44.