D’s 2009 profit forecast ahead of consensus

In an uncertain climate for the contract research industry, US-based PPD has forecast diluted earnings per share of US$1.97 to US$2.05 for 2009, ahead of the current analyst consensus of US$1.95 per share.

PPD’s guidance represents a projected increase of around 18% over the company’s forecast for earnings per diluted share (EPS) of US$1.70-US$1.74 in 2008. Announcing its third-quarter results last October, PPD lowered its guidance for both EPS and net revenues in the full year to reflect a slight slowdown in revenue growth as well as “the effect of current business conditions” and delayed payment of a US$25.0 million milestone from Takeda for alogliptin, the DPP-4 inhibitor for type-2 diabetes jointly developed with PPD’s discovery sciences business.

The previous EPS forecast for 2008 was US$1.82-US$1.92 while PPD had expected net revenues to come in at US$1,535 million to US$1,590 million. The company’s revised guidance for net revenues in 2008 was US$1,465 million to US$1,490 million and its newly issued guidance for net revenues in 2009 is US$1.595-US$1.670 billion, with target growth of around 12% over the revenue forecast for last year. The consensus estimate of analysts polled by Thomson Reuters was for net revenues of US$1.64 billion in 2009.

PPD is looking for revenues of US$1.530-US$1.605 billion from its core development services business in 2009, with revenue growth in this segment targeted at around 10%. Earnings per diluted share from development services are projected at US$1.75 to US$1.83, also delivering growth of around 10% over 2008.

Milestone payments

Revenues and EPS from the discovery sciences business this year are expected to be US$65 million and US$0.22 respectively. The 2009 guidance for discovery sciences includes three anticipated milestone payments from PPD’s compound partnering programmes.

Firstly, PPD is expecting approval of the marketing authorisation application (MAA) for its premature ejaculation treatment, dapoxetine, in Europe during the first quarter of 2009. In this case, the first two national approvals of dapoxetine will each trigger a US$2.5 million milestone payment to PPD from its partner, Janssen-Cilag.

The contract research organisation is forecasting approval of Takeda’s new drug application for alogliptin in the US during the second quarter of 2009. If that occurs, PPD will earn a US$25.0 million milestone payment from Takeda.
It also believes Takeda will submit an MAA for alogliptin to the European Medicines Agency (EMEA) in the third quarter of 2009. PPD will earn a US$10.0 million milestone payment from Takeda once the MAA for alogliptin is accepted by the EMEA. Guidance for the discovery sciences segment in 2009 does not include any royalties from PPD’s compound partnering programmes.

“We believe PPD is well-positioned to deliver solid financial results in 2009,” commented chief executive officer Fred Eshelman. “Our 2009 financial guidance demonstrates our confidence in the core development business, and we plan to continue to focus our efforts on sales execution and operational excellence throughout the year.”

Speaking at a conference call to discuss the 2009 guidance, chief operating officer William Sharbaugh said that while the company was entering 2009 “facing the stiff headwinds of the global recession, which may affect R&D spending, it is clear that biopharmaceutical companies see strategic partnering as an imperative”.

As research and development executives prioritised portfolios, “we believe late-stage assets will be allocated a larger percentage of the budget, and therefore late-stage CROs such as PPD will fare better in the current market conditions”, Sharbaugh added.