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Pharma demand for clinical trial services drives PPD’s 1Q earnings

PPD‘s net income soared to $37.3 million in the first quarter, more than double the profits the clinical research organization reported a year ago, as the Wilmington, North Carolina-based company continued to report strong growth providing clinical trial services to pharmaceutical companies. First-quarter net revenue for PPD (NASDAQ:PPDI) was $383.2 million, a more than 10 […]

PPD‘s net income soared to $37.3 million in the first quarter, more than double the profits the clinical research organization reported a year ago, as the Wilmington, North Carolina-based company continued to report strong growth providing clinical trial services to pharmaceutical companies.

First-quarter net revenue for PPD (NASDAQ:PPDI) was $383.2 million, a more than 10 percent increase compared to the $346.8 million PPD reported in the same period in 2009. PPD said that its income from operations was higher due to higher net revenue and  lower overhead expenses. PPD also saw a decrease in R&D expenses, much of which was spun off last year into a new company, Furiex Pharmaceuticals (NASDAQ:FURX). While PPD’s revenue figure exceeded the consensus analyst estimate of $356.3 million, earnings came in at 14 cents per share, a penny short of what analysts had expected.

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A Deep-dive Into Specialty Pharma

A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.

PPD’s clinical development services continued to grow, accounting for $279.7 million of the company’s first-quarter revenue. But laboratory services were not as strong. That segment accounted for $76.5 million in revenue, an increase of  just 2.6 percent year over year. CEO David Grange said in a statement that the laboratory services results were impacted by “higher-than-normal project cancellations and postponements.” But PPD shows other indicators of growth. The company reported a book-to-bill ratio of 1.31. The ratio is regarded as a business indicator for CROs and a ratio higher than 1 suggests sales growth.

Investors apparently liked the company’s numbers and PPD’s stock price, a 52-week high of $32.26 on Tuesday that reached $32.38 in after-hours trading. PPD will hold a conference call on Wednesday morning to discuss the results in greater detail. It will be Grange’s last as CEO of the company. PPD announced in February that Grange will retire in May.