Operating income at US-based contract research organisation (CRO) PPD jumped 89.5% to US$52.4 million in the first quarter of 2011.
The year-on-year increase was powered mainly by revenue gains, lower selling, general and administrative (SG&A) expenses, and a fall in both research and development and operating costs due to the spin-off of PPD’s compound-partnering business, Furiex Pharmaceuticals, in June 2010.
Net revenues for the latest quarter were US$383.2 million, 10.5% higher than in the first quarter of 2010 and well above the consensus estimate of US$356.33 million from analysts polled by Thomson Reuters.
The chief driver here was PPD’s Clinical Development Services segment, where first-quarter revenues were up by 12.2% year on year to US$279.7 million. Net revenues from Laboratory Services were US$76.5 million, just 2.7% ahead of the year-before quarter.
At the profit level, income from operations in the Clinical Development Services segment came to US$46.5 million, a 72.2% increase over the first quarter of 2010. In stark contrast, operating income from the smaller Laboratory Services business slumped by 36.8% to US$6.0 million.
According to David Grange, PPD’s soon-to-retire chief executive officer, the Laboratory Services results were affected by “higher than normal” project cancellations and postponements, as well as increased R&D investment to support future growth of the company’s drug discovery services business.
Company-wide, net income for the first quarter of 2011 more than doubled to US$37.4 million from US$17.2 million in Q1 2010, while diluted earnings per share (EPS) rose from US$0.14 to US$0.32. The analyst consensus for first-quarter EPS was US$0.33.
Book to bill
PPD reported gross authorisations of US$639.5 million for the quarter, while contract cancellations and adjustments totalled US$174.1 million. The CRO’s backlog as of 31 March 2011 was US$3.6 billion.
“We continued to make progress executing our strategic initiatives during the first quarter, as evidenced by a net book-to-bill ratio of 1.31, double-digit net revenue growth year-over-year, and a significant year-over-year decrease in SG&A expense,” commented executive chairman Fred Eshelman.
“We remain committed to improving our operational execution, controlling costs, and differentiating our global service offerings to drive value for our clients and shareholders,” Eshelman added.