Net revenues at US-based contract research organisation (CRO) PPD dipped by 1.8% year on year to US$368.2 million in the fourth quarter of 2008. But operating income surged by 28.3% over the same quarter of 2007, to US$71.9 million.

PPD reported diluted earnings per share (EPS) of US$0.40 for the quarter ended 31 December 2008, up by 17.6% over the same period of 2007. The EPS figure included asset impairment charges of US$7.0 million, or US$0.04 per share, resulting from the bankruptcy of former co-development partner Accentia Biopharmaceuticals in November 2008.

In March last year Accentia announced that SinuNase, an amphotericin B suspension for the treatment of chronic rhinosinusitis under development with PPD, had failed to achieve statistical significance for its primary endpoint in a Phase III clinical trial. The CRO’s operating income for the first quarter of 2008 included a write-off charge for the US$1.6 million of remaining unamortised value from its royalty interest in SinuNase.

Stripping out the asset impairment charges gave PPD diluted EPS of US$0.44 for the fourth quarter, in line with analysts’ estimates. Analysts polled by Thomson Reuters were expecting revenues of US$363.7 million for the quarter.

PPD’s Development segment generated net revenues of US$338.7 million in the report period, just 1.1% higher than the year-before quarter. Operating income in the segment rose by 23.1% to US$72.8 million.

Net revenues from the Discovery Sciences segment dropped by 20.3% to US$5.1 million in the fourth quarter. The resulting operating loss of US$0.9 million was an improvement on the US$3.1 million loss recorded in the final quarter of 2007, something PPD attributed mainly to lower research and development expenditure.

Priligy boost

Discovery Sciences is due for a revenue boost following the announcement that Janssen-Cilag has secured regulatory clearance in Finland and Sweden for Priligy (dapoxetine), the ‘on-demand’ treatment for premature ejaculation. PPD, which licensed the development rights for dapoxetine to Janssen-Cilag’s affiliate Alza, will receive a milestone payment of US$2.5 million for each of the first two national approvals.

In the full year, PPD achieved net revenues of US$1.57 billion, 11.0% more than in 2007. This topped the revised guidance for revenues of US$1.47 billion to US$1.49 billion given by the CRO when it announced its third-quarter results last October. The previous guidance was for full-year revenues of US$1.53 billion to US$1.59 billion.

The lower guidance, which included an EPS forecast of US$1.70 to US$1.74, reflected “moderately slower than expected” revenue growth in the third quarter, as well as “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 was jointly developed with PPD’s Discovery Sciences business, the CRO explained at the time.

Earnings per share for 2008 came in at the lower end of the range, i.e., US$1.70. But that was ignoring asset and impairment charges of US$24.1 million, or US$0.14 per share, which brought the full-year figure down to US$1.56 – 14.7% more than in the previous year. Operating income for 2008 was US$281.8 million, an increase of 22.5% over 2007.

In the fourth quarter, new business authorisations totalled US$788.9 million, a year-on-year increase of US$28.6%. The figure included US$110.0 million in authorisations related to PPD’s acquisition of a US vaccine testing laboratory and related equipment in Wayne, Pennsylvania as part of a collaborative agreement with Merck & Co.

The net book-to-bill ratio for the quarter was 1.73:1 and backlog stood at US$3.2 billion as of 31 December, a 21.3% increase year on year.
“We have made significant progress executing on our global business strategy in 2008, and are delighted to finish the year with strong new business wins and outstanding operating cash flow,” said Fred Eshelman, chief executive officer of PPD.

“Although full-year revenue was slightly below target, we have entered 2009 with clear indicators for growth and will continue to focus on core business execution throughout the year to drive value for our clients, partners and shareholders.”