PPD, Inc. (Nasdaq: PPDI) today reported its financial and operating results for the third quarter ended September 30, 2008.
PPD recorded net revenue of $398.5 million for the third quarter of 2008, an increase of 11.6 percent over net revenue of $357.2 million for the third quarter of 2007. Income from operations for the third quarter of 2008 increased $18.4 million to $71.3 million, an increase of 34.9 percent compared to income from operations of $52.9 million for the same period in 2007. Third quarter 2008 diluted earnings per share were $0.43, an increase of 34.4 percent compared to diluted earnings per share of $0.32 for the same period last year.
Segment Performance
Development segment net revenue for the third quarter of 2008 was $358.7 million, an increase of 10.8 percent over the same period in 2007. Development segment income from operations for the third quarter of 2008 was $69.3 million, an increase of 13.3 percent compared to $61.2 million for the same period in 2007.
Discovery sciences segment net revenue for the third quarter of 2008 was $7.8 million, an increase of 65.6 percent compared to $4.7 million in the same period last year. Discovery sciences segment income from operations for the third quarter of 2008 was $2.0 million, compared to a loss from operations of $8.3 million for the third quarter of 2007. The increase in income from operations for the third quarter of 2008 was due primarily to lower research and development expenditures and a $3.0 million milestone payment from Takeda Pharmaceutical Company Limited triggered by the submission of a new drug application for alogliptin in Japan. The company also recorded a $2.1 million impairment of its equity investment in Accentia in the third quarter of 2008.
Other Financial Information
New business authorizations for the third quarter of 2008 totaled $705.1 million, a 23.6 percent year-over-year increase. Contract cancellations for the quarter were $207.7 million, resulting in a book-to-bill ratio of 1.36 for the quarter. Excluding foreign exchange adjustments, the cancellation rate for the third quarter of 2008 was approximately 24 percent. Backlog at September 30, 2008, was $3.0 billion, a year-over-year increase of 20.0 percent.
Days sales outstanding (DSO) for the quarter were 41.6 days, bringing year-to-date DSO at September 30, 2008, to 44.3 days, compared to 50.8 days at December 31, 2007. Third quarter 2008 cash flow from operations was $81.8 million. At September 30, 2008, PPD had $612.1 million in cash and investments, after giving effect to the payment of the company’s third quarter dividend and the use of $30.1 million in cash to repurchase PPD shares during the quarter under its previously announced share repurchase program. The effective tax rate for the third quarter of 2008 was 32.5 percent.
“We were very pleased with the level of new business wins and the rebound from the second quarter,” said Fred Eshelman, chief executive officer of PPD. “While third quarter revenue growth was moderately slower than expected, demand for drug development services remains strong, and we believe our new authorizations and existing backlog should help drive future top line sustained growth. In addition, our commitment to operational excellence and financial management generated strong cash flow and earnings for the quarter, and we plan to continue to focus on these areas going forward.”
Commenting on compound partnering, Eshelman said, “Although we were disappointed that the FDA will not be able to complete its review of the alogliptin NDA by the PDUFA date due to the lack of resources, Takeda advanced its overall alogliptin program with the submission of the alogliptin NDA in Japan and the alogliptin/ACTOS NDA in the United States. We continue to believe in our compound partnering strategy as a long-term value driver.”
Guidance
PPD issued financial guidance for 2008 on January 8, 2008. The company is revising 2008 revenue and earnings guidance to reflect the impact of its recent announcement that the U.S. Food and Drug Administration will not complete its review of the alogliptin NDA by the PDUFA date of October 27, 2008, and the effect of current business conditions. Full year 2008 net revenue, excluding reimbursed out-of-pocket expenses, is expected to be in the range of $1.465 billion to $1.490 billion, compared to previous guidance of $1.535 billion to $1.590 billion. The range for development segment diluted earnings per share for the full year of 2008 has been narrowed based on actual year-to-date performance. In addition, as previously disclosed, the company no longer expects to receive the $25.0 million alogliptin NDA approval milestone in the fourth quarter of 2008. As a result, full year 2008 diluted earnings per share for the total company are expected to be in the range of $1.70 to $1.74, compared to previous guidance of $1.82 to $1.92.
The following table shows the previous and revised full year 2008 net revenue and diluted earnings per share guidance for each segment and the total company.
Previous 2008 Guidance | Revised 2008 Guidance | ||||
Net revenue(a) | |||||
| Development | $ | 1,475 - $1,525 | $ | 1,430 - $1,450 | |
| Discovery sciences | 60- 65 | 35- 40 | |||
| Total company | $ | 1,535 - $1,590 | $ | 1,465 - $1,490 | |
EPS | |||||
| Development | $ | 1.64 - $1.72 | $ | 1.64 - $1.68 | |
| Discovery sciences | 0.18- 0.20 | 0.06- 0.06 | |||
| Total company | $ | 1.82 - $1.92 | $ | 1.70 - $1.74 | |
(a) Net revenue in millions, excludes reimbursed out-of-pocket expenses. | |||||
PPD will conduct a live conference call and audio webcast tomorrow, October 22, 2008, at 9:00 a.m. ET to discuss its third quarter 2008 results and revised full-year guidance. A Q&A session will follow. To access the webcast, please visit http://www.ppdi.com and follow the directions under the Investor Presentations & Events link in the Corporate section of the PPD Web site. A replay of the webcast will be available shortly after the call. The conference call will be broadcast live over the Internet, and the live call may be accessed via the following direct dial number:
| Participant dial in: | +877 644 0692 (U.S./Canada) | |
| +973 200 3387 (International) | ||
| Conference ID: | 64199951 |
PPD is a leading global contract research organization providing discovery, development and post-approval services as well as compound partnering programs. Our clients and partners include pharmaceutical, biotechnology, medical device, academic and government organizations. With offices in 33 countries and more than 10,500 professionals worldwide, PPD applies innovative technologies, therapeutic expertise and a commitment to quality to help its clients and partners maximize returns on their R&D investments and accelerate the delivery of safe and effective therapeutics to patients. For more information, visit our Web site at http://www.ppdi.com.
Except for historical information, all of the statements, expectations and assumptions contained in this news release, including statements regarding PPD’s 2008 financial guidance, are forward-looking statements that involve a number of risks and uncertainties. Although PPD attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors which could cause actual results to differ materially include the following: general economic conditions and uncertainties, including those resulting from current and future conditions in the global financial markets; outsourcing trends in the pharmaceutical, biotechnology and medical device industries and academic and government-sponsored research sectors; competition within the outsourcing industry; success in sales growth; loss of large contracts; increased cancellation rates; risks associated with the development and commercialization of drugs, including R&D expenses, earnings dilution and obtaining regulatory approvals; risks associated with acquisitions and investments, such as impairments; risks associated with and dependence on collaborative relationships; currency fluctuations; the ability to attract and retain key personnel; rapid technological advances that make our products and services less competitive; and the other risk factors set forth from time to time in the SEC filings for PPD, copies of which are available free of charge upon request from the PPD investor relations department.
| PPD, Inc. Statement of Operations Data (in thousands, except per share amounts) (unaudited) | |||||||||||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, | ||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| Net revenue: | |||||||||||||
| Development | $ | 358,674 | $ | 323,769 | $ | 1,077,120 | $ | 940,452 | |||||
| Discovery Sciences | 7,773 | 4,694 | 31,798 | 13,577 | |||||||||
| Reimbursed out-of-pockets | 32,020 | 28,732 | 92,811 | 85,388 | |||||||||
| Total net revenue | 398,467 | 357,195 | 1,201,729 | 1,039,417 | |||||||||
| Direct costs: | |||||||||||||
| Development | 173,748 | 163,221 | 534,484 | 472,651 | |||||||||
| Discovery Sciences | 2,741 | 2,775 | 8,065 | 7,595 | |||||||||
| Reimbursable out-of-pocket expenses | 32,020 | 28,732 | 92,811 | 85,388 | |||||||||
| Total direct costs | 208,509 | 194,728 | 635,360 | 565,634 | |||||||||
| Research and development | 1,657 | 8,353 | 7,911 | 14,221 | |||||||||
| Selling, general and administrative | 101,684 | 87,129 | 301,711 | 245,016 | |||||||||
| Depreciation and amortization | 15,332 | 14,057 | 45,182 | 40,330 | |||||||||
| Impairment of intangible asset | - | 78 | 1,607 | 234 | |||||||||
| Income from operations | 71,285 | 52,850 | 209,958 | 173,982 | |||||||||
| Reimbursement on (impairment of) investments | (2,092 | ) | - | (15,435 | ) | - | |||||||
| Other income, net | 6,635 | 4,224 | 14,907 | 12,798 | |||||||||
| Income before income taxes | 75,828 | 57,074 | 209,430 | 186,780 | |||||||||
| Income tax expense | 24,644 | 18,834 | 69,110 | 63,906 | |||||||||
| Net income | $ | 51,184 | $ | 38,240 | $ | 140,320 | $ | 122,874 | |||||
| Net income per share: | |||||||||||||
| Basic | $ | 0.43 | $ | 0.32 | $ | 1.18 | $ | 1.04 | |||||
| Diluted | $ | 0.43 | $ | 0.32 | $ | 1.16 | $ | 1.03 | |||||
| Dividends declared per common share | $ | 0.10 | $ | 0.03 | $ | 0.30 | $ | 0.09 | |||||
| Weighted average number of | |||||||||||||
| shares outstanding: | |||||||||||||
| Basic | 118,704 | 118,739 | 119,093 | 118,297 | |||||||||
| Diluted | 120,152 | 120,065 | 120,620 | 119,759 | |||||||||
PPD, Inc. | |||||
| September 30, 2008 | December 31, 2007 | ||||
Cash, cash equivalents, short-term and long-term investments | $ | 612,123 | $ | 502,384 | |
| Accounts receivable and unbilled services, net | 458,405 | 481,477 | |||
| Total assets | 1,796,921 | 1,684,375 | |||
| Unearned income | 232,499 | 205,779 | |||
| Shareholders' equity | 1,216,013 | 1,150,096 | |||
Additional information | |||||
| Cash, cash equivalents, short-term and long-term investments categories | |||||
| September 30, 2008 | December 31, 2007 | ||||
| Cash and cash equivalents | $ | 462,489 | $ | 171,427 | |
| Auction Rate Securities | 117,112 | 209,475 | |||
| Other municipal debt securities | 22,522 | 111,230 | |||
| Other securities | 10,000 | 10,252 | |||
| $ | 612,123 | $ | 502,384 | ||
Contacts:
Dan Darazsdi, 910-558-7915
daniel.darazsdi@wilm.ppdi.com
or
Luke
Heagle, 910-558-7585
luke.heagle@wilm.ppdi.com
