In July PPD confirmed a strategic review was underway but since then financial markets have been hit by a string of events. Now, with Raymond Hill, formerly president of IMS Health Consulting, hired as CEO speculation that buyers are struggling to reach an agreement with PPD has intensified.
Eric Coldwell, equity analyst at RW Baird, said: “We believe PPD and potential private equity buyers and lending institutions may have struggled to come to terms. The CEO appointment certainly signals that PPD may be preparing for a future in the public markets.”
Worsening financial conditions could have hindered efforts to agree on a leveraged buyout (LBO). “Following a tightening in the credit markets and a series of negative events from large lending banks in recent weeks, the deal environment has quickly contracted”, Coldwell said.
Alternative takes
Coldwell predicted the likelihood of a LBO is now 25% but other analysts are more confident a deal can be reached. Sandy Draper, equity analyst at Raymond James, said the strategic review outcome is less obvious than it was last month but conversations with PPD suggest the process is ongoing.
For others the appointment indicates it may take longer than expected to close the strategic review. John Kreger, equity analyst at William Blair, now expects the earliest news of the strategic review outcome will be released is the end of October but still thinks a deal could happen.
David Windley, equity analyst at Jefferies and Company, agreed. Windley said: “Hill is both joining from a company that itself was LBO-ed, and lacks public company leadership experience. Investors should not perceive either of these as a signal that a deal involving PPD is not coming.”
The appointee
In a press release naming Hill as CEO PPD highlighted the “strategy of aggressive organic and acquisition-based growth” he oversaw at IMS and analysts broadly welcomed the appointment.
Hill lacks experience working at contract research organisations (CRO) but this could work in his favour. Windley said: “[Hill’s] consulting background will serve PPD well given the direction the relationships between global CROs and large pharma are heading.”
PPD declined to update Outsourcing-Pharma on the status of the strategic review. In an emailed statement incoming-CEO Hill said: “I look forward to [helping] position the company to respond to the many challenges impacting our clients in maximising their research and development spend.”
Shares in PPD dropped 8% following the news but recovered to close down 4%.