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PPD Inc.’s Q4 sales and earnings slide

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PPD Inc. (NSDQ:PPDI) posted fourth-quarter sales of $357.4 million for the three months ended Dec. 31, 2009, down 1.6 percent compared with $363.1 million during the same period last year. Net income fell 59.8 percent to $19 million, compared with $47.2 million during Q4 2008:

Press Release

PPD Reports Fourth Quarter and Full Year 2009 Financial Results

Highlights:

  • Completed two strategic acquisitions in China
  • Full year 2009 cash flow from operations of $253 million
  • Establishing strategic outsourcing partnerships
  • Planning to spin off compound partnering business by mid-2010

WILMINGTON, N.C. (February 8, 2010) – PPD, Inc. (Nasdaq: PPDI) today reported its financial and operating results for the fourth quarter and full year ended December 31, 2009.

PPD recorded net revenue of $357.4 million for the fourth quarter of 2009, compared to $363.1 million for the fourth quarter of 2008. Fourth quarter 2009 income from operations was $23.9 million, compared to $71.7 million for the same period in 2008. Fourth quarter 2009 diluted earnings per share were $0.16, compared to $0.40 for the same period last year. Fourth quarter 2009 diluted earnings per share included impairments of an intangible asset and equity investments totaling $10.0 million, net of tax, related to the company’s dermatology program within the compound partnering business and the company’s investment portfolio, respectively.

Net revenue for the full year ended December 31, 2009, was $1.42 billion, compared to net revenue of $1.55 billion for the full year 2008. Full year 2009 income from operations was $192.9 million, compared to income from operations of $282.4 million for the same period in 2008. Diluted earnings per share for the full year 2009 were $1.34, compared to diluted earnings per share of $1.56 for the same period last year.

Development

Development segment net revenue for the fourth quarter of 2009 was $328.1 million, compared to $338.7 million for the fourth quarter of 2008. Development segment income from operations for the fourth quarter of 2009 was $49.4 million, compared to $72.6 million for the fourth quarter of 2008.

Full year 2009 development segment net revenue was $1.31 billion, compared to net revenue of $1.42 billion for the full year 2008. Development segment income from operations for the full year 2009 was $223.2 million, compared to income from operations of $272.5 million for the same period in 2008. Full year 2009 income from operations for this segment included restructuring costs of $3.9 million.

Discovery Sciences

Discovery sciences segment net revenue for the fourth quarter of 2009 was $0.5 million, compared to $0.1 million for the fourth quarter of 2008. Discovery sciences segment loss from operations for the fourth quarter of 2009 was $25.5 million, compared to a loss from operations of $0.9 million for the same period in 2008. The loss for the fourth quarter of 2009 was higher than the prior year loss due to the impairment of an intangible asset, an increase in research and development expenditures related to the company’s dermatology business and the upfront costs and research and development expenses related to the two compounds PPD in-licensed from Janssen Pharmaceutica N.V. in the fourth quarter of 2009.

Full year 2009 discovery sciences segment net revenue was $6.3 million, compared to net revenue of $18.4 million for the full year 2008. Full year 2008 discovery sciences segment net revenue included two milestone payments from Takeda Pharmaceutical Company Limited totaling $18.0 million triggered by the U.S. Food and Drug Administration’s acceptance of Takeda’s new drug application, or NDA, for alogliptin in the United States and the submission of its NDA for alogliptin to the Ministry of Health, Labour and Welfare in Japan. Discovery sciences segment loss from operations for the full year 2009 was $30.3 million, compared to income from operations of $9.9 million for the same period in 2008.

As previously disclosed, in April 2009, PPD sold the assets of its wholly owned subsidiary, Piedmont Research Center, LLC. In December 2009, PPD also completed the sale of its wholly owned subsidiary, PPD Biomarker Discovery Sciences, LLC, which owned and operated a biomarker discovery laboratory in Menlo Park, CA. These businesses were part of the company’s discovery sciences segment. Therefore, the company is reporting current and historical financial results for these businesses in discontinued operations.

Other Financial Information

New business authorizations for the fourth quarter of 2009 totaled $465.6 million. Backlog at December 31, 2009, was $3.0 billion. Contract cancellations and adjustments for the quarter were $284.9 million, including three large project cancellations that together represented approximately four percent of year-end backlog.

Days sales outstanding for the full year 2009 were 31.3 days, compared to 42.2 days at December 31, 2008. Cash flow from operations for the fourth quarter of 2009 was $115.9 million. At December 31, 2009, PPD had $642.1 million in cash and investments. The effective tax rate for continuing operations in the fourth quarter of 2009 was approximately 20 percent.

"Although fourth quarter cancellations and adjustments were higher than anticipated, we delivered strong operating cash flow during the quarter and we are continuing to establish new strategic outsourcing partnerships," said David Grange, chief executive officer of PPD. "We remain committed to combining our financial and operational strength with our unrelenting focus on creating efficient solutions for our clients to maximize value for our shareholders."

Fred Eshelman, executive chairman of PPD, added, "PPD made significant progress on several strategic fronts in 2009, as evidenced by acquisitions and investments in emerging markets, expansion in new service areas, and the anticipated spin-off of our compound partnering business. We continue to believe in the fundamentals of the market for CRO services, and we intend to continue to focus on sales execution, operational performance, and building strategic partnerships with clients in the year ahead."

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