New business authorisations picked up at PPD, Inc as the US contract research organisation (CRO) reported a 14.1% increase in net revenues for the third quarter of 2007.
Operating income was only 1.6% higher, though, largely due to a sharp increase in research and development expenditure to support further clinical development of a statin compound licensed from India’s Ranbaxy.
Gross new business authorisations were worth US$570.6 million in the quarter, a sequential increase of 20.6% that gave a net book-to-bill ration of 1.4. The book-to-bill ratio – net new business divided by quarterly revenue – gives an insight into the likely revenue trend in quarters ahead. Ratios of more than 1.0 suggest the CRO is winning new business over and above revenues in the current report period.
In the second quarter of 2007, PPD lowered its revenue and earnings per share (EPS) guidance for the full year, partly blaming a shortfall in new business authorisations. These came to only US$473 million in the quarter, with a cancellation rate of 26%. The cancellation rate for the third quarter was 21.8%.
Net revenues for the three months ended 30 September were US$357.2 million compared with US$313.1 million for the third quarter of 2006. These figures included reimbursed out-of-pocket expenses of US$28.7 million and US$23.3 million for the 2007 and 2006 periods respectively. Operating income for the latest quarter was US$52.9 million against US$52.0 million in the third quarter of 2006, which included stock compensation expenses of US$4.3 million and US$5.0 million in 2007 and 2006 respectively.
Research and development expenses jumped from US$1.9 million to US$8.4 million, mainly due to the costs of Phase I trials for PPD’s statin compound for the treatment of dyslipidaemia. As a result, the company’s discovery sciences segment recorded an operating loss of US$8.3 million for the third quarter, compared with a US$1.7 million loss in the same quarter last year.
Net revenues in the discovery sciences segment, which did not include reimbursed out-of-pocket expenses, edged up 4.4% to US$4.7 million. There was a much stronger showing from the core development segment, where net revenues (again, excluding reimbursed out-of-pocket expenses) grew by 13.5% over the third quarter of 2006 to US$323.8 million. Operating income in the development segment was US$61.2 million, a 14.0% improvement.
PPD had a busy third quarter internally, adding three new members to its management team and realigning its regional clinical operations. Earlier this month the company named Paul Colvin, formerly with Eli Lilly, as senior vice president of clinical operations for North America and Simon Britton, formerly with GlaxoSmithKline, as vice president of clinical operations for Asia.
With Britton’s appointment to this newly created role, PPD divided its Phase II-IV operational units into four distinct territories: North America; Latin America; Europe, the Middle East and Africa (EMEA); and Asia. The strategic restructuring would “enhance our ability to leverage PPD talent globally, strengthen internal standardisation of our processes and further our ability to manage complex multinational trials efficiently”, it explained.
The third management appointment during the quarter was Daniel Darazsdi, who joined PPD from Honeywell International as chief financial officer with effect from 1 October 2007.
PPD has also extended its global footprint, opening new offices in Sydney (the company’s second in Australia), Copenhagen (Denmark), Lisbon (Portugal) and Lima (Peru). The new openings reflect continued expansion of PPD’s Phase II-IV services in key therapeutic areas, the CRO said.