US-based contract research organisation (CRO) PPD has lowered its guidance for revenues and earnings per share in 2008 despite turning in a strong performance for the third quarter, with net revenues up by 11.6% and operating income by 34.9%.
While third-quarter revenue growth was “moderately slower than expected”, PPD noted, the revised guidance also reflected “the effect of current business conditions” and delayed payment of a US$25.0 million milestone from Japan’s Takeda for alogliptin, the DPP-4 inhibitor for type-2 diabetes that has been jointly developed with PPD’s discovery sciences business.
A US new drug application (NDA) for alogliptin was accepted by the Food and Drug Administration (FDA) at the end of February, and PPD was expecting the US$25.0 million NDA approval milestone during the fourth quarter.
However, the CRO announced earlier this month that the FDA would not be able to complete its review of the alogliptin NDA by the designated Prescription Drug User Fee Act date of 27 October. According to Takeda, this was due to internal resource constraints at the FDA, although no information was available on when an approval might come through.
In the meantime, PPD reported net revenues of US$398.5 million for the quarter ended 30 September, compared with US$357.2 million in the same quarter last year. Operating income was US$71.3 million against US$52.9 million for the third quarter of 2007. PPD’s diluted earnings per share for the latest quarter were US$0.43, in line with analysts’ expectations and 34.4% higher than in the year-before period.
Net revenues from development services came to US$358.7 million, up by 10.8% on Q3 2007, and operating income in the segment rose by 13.3% to US$69.3 million. In discovery sciences, net revenues were 65.6% ahead at US$7.8 million (including a US$3.0 million milestone payment from Takeda on submission of its alogliptin NDA in Japan), while operating income was US$2.0 million compared with a US$8.3 million operating loss in last year’s quarter.
Making up the total net revenue figure were reimbursed out-of-pocket expenses of US$32.0 million, 11.4% more than in Q3 2007.
New business
New business authorisations for the latest quarter were worth US$705.1 million, an increase of 23.6% year on year. Contract cancellations amounted to US$207.7 million, giving a book-to-bill ratio of 1.36 for the third quarter. Excluding foreign exchange adjustments, the cancellation rate for the quarter was around 24%. As of 30 September 2008, PPD had a backlog of US$3.0 billion, up by 20.0% year on year.
Chief executive officer Fred Eshelman said PPD was “very pleased with the level of new business wins and the rebound from the second quarter”. Demand for drug development services remained strong “and we believe our new authorisations and existing backlog should help drive future top-line sustained growth”, he added.
PPD’s guidance for net revenues (excluding reimbursed out-of-pocket expenses) in 2008 is now US$1,465 million to US$1,490 million, compared with the previous guidance of US$1,535 million to US$1,590 million. Full-year earnings per diluted share are expected to be US$1.70-US$1.74, as opposed to US$1.82-US$1.92 previously.
