PPD's Q1 results lacklustre

Operating profit dipped 1 per cent from the comparable period last year to $60.0m (€44.3m), while pre-tax profit rose 1 per cent to $64.6m. Meanwhile, direct costs jumped 18 per cent to $154.3m. However, the performance was in line with analysts' expectations.

It was the contract research organisation's Development segment that performed the strongest, with a 10 per cent elevation of sales to $300.2m and an operating profit up 26.7 per cent to $61.6m on the same period in 2006.

The smaller Discovery sciences segment was a different story and continued to remain loss-making, with revenues diving 77 per cent to $4.4m and an operating loss of $1.5m, compared to income from operations of $12.3m for the first quarter 2006.

The shortfall was also a worsening of the $0.7m loss reported in the fourth quarter of 2006.

Commenting on this, PPD said it "did not receive any payments related to compound partnering programmes in the first quarter of 2007, whereas first quarter 2006 net revenue included a $15.0m milestone payment for the start of the ongoing Phase III clinical trial for Takeda's dipeptidyl peptidase IV (DPP4) inhibitor candidate."

Looking forward CEO Fred Eshelman said: "We plan to remain focused on core business execution this year and are optimistic about the prospects of our compound partnering efforts generating value for our partners and shareholders as these programmes continue to advance."

The company recently in-licensed a preclinical anti-cholesterol compound off India's Ranbaxy in a deal worth up to $44.0m and the firm will have bagged itself a bargain if the drug successfully reaches the lucrative statin market.

In the first quarter, PPD tripled its R&D expense to $1.9m to evaluate the Ranbaxy drug in order to file an investigational new drug (IND) application and prepare to initiate Phase I clinical studies of the compound.

The new compound has been taken under the wing of PPD's small but growing Compound Partnering division, which currently has four compounds in development with three partners, and the firm is " aggressively seeking a commercial partner" in order to help shoulder the burden that the added R&D expenditure will continue to have on the business.

"If we do not find a partner by the end of 2007 we will have to look at restructuring our Compound Partnering division in order to avoid having to alter our financial guidance," said Eshelman.