PPD yo-yos on alogliptin delay

13-Oct-2008 - Last updated on 14-Oct-2008 at 11:09 GMT

Contract research organisation PPD will have to forego a scheduled $25m payment from Takeda of Japan in the fourth quarter after the US Food and Drug Administration (FDA) held up approval of a product for diabetes.

The FDA has said it needs more time to review alogliptin (SYR-322), dipeptidyl peptidase-4 inhibitor for the treatment of type 2 diabetes because of “internal resource constraints.” The agency had been due to deliver a verdict on the New Drug Application for the drug on October 27.

PPD’s shares dipped in early morning trading on the announcement, despite the fact that the delay seems to have no bearing on the chances that alogliptin will come through the review process. Once jitters calmed down the news was taken as a positive and PPD ended the day up 19 per cent at $35.62.

PPD’s primary business is as a CRO, but unlike most of its peers in the sector has also gone down the route of developing its own portfolio of in-licensed drugs. That move was made in the late 1990s when the contract research market was looking a little mature, and before the boom that has occurred as pharmaceutical companies have turned to outsourcing as a means of cutting their overheads.

The rationale was that if the CRO business slowed down, PPD would be supported with a stream of milestone payments and royalties from a few carefully chosen products. The company in-licenses promising compounds, adds value using its existing drug development expertise and then out-licenses them again to pharmaceutical companies.

Takeda paid $15m to PPD earlier this year when the FDA accepted a dossier for review. The former also filed an NDA with Japan’s Ministry of Health, Labor and Welfare (MHLW) earlier this month, triggering a $3m milestone. The NDA submission followed a similar filing in the USA as a monotherapy in December 2007 and alogliptin's combination with Actos in September this year.

In addition to alogliptin, PPD has four other compounds in development with three partners, namely dapoxetine with Johnson & Johnson, a follow-up diabetes drug with Takeda, a product for chronic sinusitis with Accentia BioPharmaceuticals and a novel statin originally developed by India's Ranbaxy.

PPD is one of the largest CROs in the sector, with a $5.1bn market cap that leaves it second only to Covance with a $6.1bn value.

The company hit a bit of a roadblock in its CRO business in its last set of quarterly results. Although revenues were ahead of expectations, some observers were concerned by a tail-off in new business authorisations and a higher than usual cancellation rate.

The company was quick to gloss over the slowdown as a blip, pointing to a $2.9bn backlog that should take three years or more to process.

If that blip should prove more long-lived, and alogliptin fulfils its potential and wins approval for diabetes, PPD could be thankful for the foresight that took it down the drug discovery road all those years ago.