Operating and integration expenses for recent acquisitions as well as higher business development costs were blamed primarily for a 31.2% decline in PPD’s operating income for the second quarter of 2010.
Income in the latest quarter was also affected by increased R&D expenditure prior to the spin-off of PPD’s compound partnering business, Furiex Pharmaceuticals, and by administrative costs related to the separation, noted the US-based contract research organisation (CRO). PPD completed the Furiex spin-off on 14 June.
Despite the slump in operating income and net income that came in 63.9% lower year on year at US$21.0 million for the second quarter, PPD still managed to beat analysts’ forecasts for the latest reporting period.
Analysts polled by Thomson Reuters were projecting average earnings per share (EPS) of US$18.0, which would typically include any exception items. PPD’s basic and diluted EPS from continuing operations in the second quarter were US$0.20 versus US$0.35 in the same period last year. Net revenues rose by 4.3% year on year to US$369.9 million, while the analyst consensus was US$339.3 million.
With all other factors taken into account, basic and diluted earnings per share for the second quarter of 2010 were US$0.18 compared with US$0.49 in the year-before quarter.
Diluted EPS in Q2 2009 included an after-tax gain of US$0.16 from the sale of PPD’s Piedmont Research Center, while EPS for the latest quarter included an income tax charge of US$3.8 million, or US$0.03 per share, related to the Furiex spin-off and a net loss of US$2.6 million, or US$0.02 per share, from the closure of PPD’s dermatology business unit.
In the company’s core Development segment, net revenues inched up 1.1% over the second quarter of 2009 to US$333.8 million. Operating income in the Development segment fell by 26.8% year on year to US$43.1 million.
Net revenues from the Discovery Sciences segment, which included a US$7.5 million milestone payment from Takeda Pharmaceutical Company, were US$7.7 million compared with US$162,000 for Q2 2009.
Gross authorisations for the latest quarter came to US$610.5 million, with contract cancellations and adjustments amounting to US$145.3 million. PPD’s backlog as of 30 June 2010 was US$3.23 billion.
Chief executive officer David Grange said the company was “pleased to continue the momentum from the first quarter necessary to achieve our 2010 goals”.
That momentum included strong gross authorisations during the second quarter, cancellations and adjustments that were lower than historic levels, and a sequential increase in the Development segment’s operating margin, he noted.
