PPD sustained, and improved on, the momentum of its third-quarter results as the US-based contract research organisation reported operating income up by 66.2% year on year to US$62.9 million in the fourth quarter of 2010.
At the same time, PPD announced that David Grange, its chief executive officer (CEO) since mid-2009, would be retiring as of the company’s annual shareholders’ meeting on 18 May. The succession planning process is underway.
Net revenues in the three months ended 31 December 2010 were US$388.5 million, 8.7% higher than in the fourth quarter of 2009. Net service revenues were 9.0% ahead at US$358.1 million. Both figures topped the analyst consensus of $353.7 million quoted by Thomson Reuters.
Diluted earnings per share in the latest quarter more than doubled from US$0.16 to US$0.40. Analysts polled by Thomson Reuters were expecting earnings per share (EPS) of US$0.38 on average.
The reported Q4 2010 figure included a gain of US$7.7 million related to PPD’s investment in Celtic Therapeutics (this was for a planned strategic alliance, announced in October 2009, to identify, acquire and invest in a diversified portfolio of novel therapeutic candidates), impairments of equity investments totaling US$4.2 million, and non-recurring building impairment and lease termination costs amounting to US$2.9 million.
The main revenue driver in the fourth quarter was Clinical Development Services, generating net revenues of US$276.9 million, 7.9% more than in the fourth quarter of 2009. Net revenues from Laboratory Services were US$81.2 million, up by 13.7%.
Fourth-quarter operating income was US$50.7 million (+37.4% year on year) for Clinical Development Services and US$12.2 million (-1.6%) for Laboratory Services.
Together these businesses make up PPD’s Development segment, following the spin-off of PPD’s compound-partnering business, Furiex Pharmaceuticals, in June 2010. In the fourth quarter, there was also a US$30.5 million contribution (+5.9%) from reimbursed revenues and, in the final quarter of 2009, revenues of US$547,000 from the legacy Discovery Sciences operation.
For the whole of 2010, PPD’s net revenues climbed 3.5% to US$1.47 billion, while operating income was 12.5% lower at US$187.5 million and diluted EPS came in at US$1.04 versus US$1.34 for 2009.
Gross authorisations during the fourth quarter of 2010 amounted to US$602.3 million while backlog as of 31 December 2010 was US$3.4 billion. Contract cancellations and adjustments for the fourth quarter totalled US$167.9 million.
“We were pleased to deliver on our commitment to shareholders by achieving our full year 2010 net revenue and diluted earnings per share guidance,” Grange commented. “We intend to remain focused on our business development efforts, global productivity improvement and cost control to create value for our shareholders.”
Grange joined the PPD board in 2003 and served as an independent director before taking up the CEO’s position in July 2009. The remit, he noted, was to bolster the executive management team alongside new executive chairman Dr Fred Eshelman and “to assist the company in responding to what was a very challenging business environment”.
Indeed, 2009 “proved to be a difficult year for PPD, but we advanced our strategic and financial objectives over the course of 2010”, Grange said. “With the completion of the spin-off of compound partnering and the many accomplishments and progress we made in 2010, I feel my commitment to the board is now fulfilled.”
Grange will assist in the transition of his duties during the remainder of his tenure and will continue to provide assistance to PPD under a consulting agreement for the balance of 2011. Following his retirement, and until a new CEO is in place, his responsibilities will be handled by Eshelman and other members of PPD’s management team.