The contract research organisation (CRO) is intending to buy InnoPharm, another CRO based in Smolensk, Russia, which also has offices in Moscow and St Petersburg and a staff of 300.
The acquisition of InnoPharm, which offers Phase II-IV clinical trials, data management and biostatistics services, will not only provide PPD with a foothold in the vast clinical territory of Russia, but also in neighbouring Ukraine, where it has an office in Kiev.
"With more than 143m people in Russia alone, Eastern Europe is a high-growth market for clinical trials and a region PPD has targeted for expansion", said Fred Eshelman, PPD's CEO.
In an analyst conference call, Eshelman said that he expects the Innopharm deal to close at the end of first half of this year, and basic revenue profile he sees it as "slightly accretive" for the remainder of the year.
PPD has subcontracted work to InnoPharm since 2004 on a non-exclusive basis.
Eschelman also said: "We will put the accelerator down in Russia as much as we can, there are a lot of opportunities in terms of oncology and the large population… we will take a look at what other offices we are going to open there, we are dealing with 12 different time zones which makes travel difficult for CRAs".
Looking at the world in its entirety, he said that the firm is "assessing all the factors to try and come up with a cohesive plan as where we would go and expect to grow in one region more than another".
Meanwhile, the expansion news came on the same day that PPD announced its financial results for the fourth quarter of 2007.
Although the company generated revenue of $341m, a 15 per cent increase on the comparable 2006 quarter, it also saw income from operations drop $2m to $56m. Pre-tax profit also dipped by $1.1m to $61.2m. PPD cited an increase in R&D expenses related to the costs incurred in conducting trials for its in-house experimental statin compound as the reason.
Indeed, R&D expenses for the fourth quarter were $5m, compared to $1.6m for the same period last year.
The firm's decision to in-license an investigational compound is proving to be a drag on its bottom line as PPD continues to seek a development partner for the drug.
The CRO bought the statin from India's Ranbaxy early in 2007 in a deal worth up to $44m and the company's R&D spending has shot up ever since.
The compound showed positive results in a first-in-human study and based on these results, PPD started a first-in-patient study as well as a Phase II proof-of-concept study.
During the conference call the company announced for the first time the preliminary results of the in-patient study, which was comparing 160mg of PPD's compound with 80mg doses of two marketed stains and placebo.
According to Eshelman, high doses of the stain were "well tolerated."
In regards to efficacy with respect to lowering LDL cholesterol, the drug was "above the mid point in efficacy between the marketed statins".
"The reduction of the ratio of total cholesterol to lowering HDL cholesterol was comparable to the highest dose of a major competitor", said Eshelman, who added that the drug effectively "lowered total cholesterol, LDL cholesterol and triglycerides with blood levels that were "four to six times lower than the comparators".
These results are "consistent with preclinical and clinical data and support our hypothesis that our statin may be less likely to cause muscle toxicity".
PPD's in-licensing move is highly unusual for a CRO like PPD, whose primary business model is providing drug development assistance on a fee-for-service basis.
However, the new compound was taken under the wing of PPD's small but growing Compound Partnering division, which currently has four compounds in development with three partners.
The company has been "aggressively seeking a commercial partner" for the statin in order to help shoulder the burden that the added R&D expenditure is having on the business.
During the analyst call, PPD said that it remains in "active discussions with a couple of potential licensees in regards to the compound… we have not had a chance to officially share the new data with these prospects… where these discussions will go we have no idea."
Finding a partner for the drug is crucial for PPD.
The company said that although the first part of its clinical programme is now completed, the second part is still in progress, and it is still incurring expenses for this, along with preclinical and manufacturing work.
Furthermore, the only development milestone remaining for the firm is a marketing approval in Europe.
Meanwhile, SG&A expenses rose 26 per cent during the quarter to $93m. During the conference call, PPD's CFO Dan Darazsdi said that SG&A was somewhat affected by foreign exchange, although "we have to be tenacious on SG&A, and we are managing this on a week to week basis… its getting a tremendous amount of operational scrutiny… we are implementing strategies and processes for better long term performance".
He also added that this does not relate to billable staff: "We are hiring direct billable staff as fast as we can find them".