A US$15.0 million milestone payment from Takeda Pharmaceutical Company helped push US-based contract research organisation (CRO) PPD’s net revenues for the first quarter up by 19.3% to US$396.2 million.
The milestone payment was triggered by the US Food and Drug Administration’s acceptance of Takeda’s New drug Application (NDA) for alogliptin, the selective DPP-4 inhibitor for the treatment of type 2 diabetes that the Japanese company is developing with PPD.
The CRO was less fortunate with another co-development compound, SinuNase. In March, Accentia Biopharmaceuticals announced that SinuNase, an amphotericin B suspension for the treatment of chronic rhinosinusitis, had failed to achieve statistical significance for its primary endpoint in a Phase III clinical trial.
As a result, PPD’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. The CRO also holds an equity stake in Accentia.
The positive impact of Takeda’s milestone payment was also blunted by research and development expenses that more than doubled in Q1 from US$1.9 million to US$4.3 million. This was mainly down to the costs of clinical trials for the statin compound for dyslipidaemia licensed by PPD from India’s Ranbaxy Laboratories.
The CRO still managed a 13.1% increase in operating income to US$67.9 million for the first quarter, although net income was 4.4% lower at US$40.1 million.
Net revenues for the quarter included US$28.7 million (+3.5%) in reimbursed out-of-pocket expenses. Ignoring these, revenues from the core development services segment were US$347.8 million, a 15.9% improvement over the first quarter of 2007. Operating income in the development segment dropped by 5.4%, though, to US$58.3 million.
Despite that slippage, the development services business can look ahead to the coming months with some optimism. New business authorisations were worth a record US$690.0 million in the first quarter, up by 27.7% year on year. The cancellation rate for the quarter was 19.6%, giving a book-to-bill ratio of 1.51. PPD’s backlog as of 31 March 2008 was US$2.84 million.
The book-to-bill ratio – net new business divided by quarterly revenues – gives an insight into the likely revenue trend for the 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 discovery sciences segment, net revenues for Q1 jumped by 227.8% to US$19.7 million, reflecting the milestone payment from Takeda. Operating income for the segment was US$9.6 million compared with a US$1.5 million operating loss in the first quarter of 2007.
