Drug Safety Concerns Create CRO Opportunity, PPD Says
This article was originally published in The Pink Sheet Daily
Executive Summary
Contract research organizations could see financial opportunities in "more intricate safety monitoring," CEO Eshelman says during earnings call. Regulatory uncertainty accompanies shift in PPD's business away from big pharma, toward biotech firms.
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FDA's renewed focus on drug safety could benefit the contract research organization market, PPD CEO Fred Eshelman said during the company's July 14 second quarter earnings call. "I would suspect that there is an opportunity for PPD and others in our industry associated with this on a go-forward basis, whether it involves more intricate safety monitoring pre-approval, peri-approval and/or post-approval," Eshelman said. PPD is not seeing a "marked change" in companies' approaches to clinical trials, but Eshelman noted a level of uncertainty with respect to the changing regulatory environment. "I would say that we feel like we're in a bit of…a lull with respect to folks stepping back [and] having a look at what they're doing." Eshelman cited questions regarding the Office of Drug Safety and "whether or not there's a separate safety oversight board; if so, what will be the requirements; how much are we going to look at risk management plans at the time of approval, and so forth." Uncertainty at the regulatory level accompanies a movement in PPD's business away from major pharmaceutical manufacturers toward biotech firms. "The percent of our revenue that comes from big pharma continues to decline as compared to the portion from biotech, because biotech is growing faster I think," Eshelman stated. "We're certainly continuing to see a shift in our business." PPD signed nearly twice as many "large" new contracts (in excess of $10 mil.) in the second quarter as in the first quarter, Eshelman noted. "I'm going to say about 50% of those were biotech or what could be classified as biotech and about 50% pharma." PPD's net sales increased 22.2% to $245 mil. in the quarter, with earnings per share flat at $0.41 and net income from operations up 4% to $33.5 mil. Through an agreement with Takeda announced July 13, PPD will conduct Phase II and Phase III trials on the company's DPP4 inhibitors to treat type 2 diabetes and receive milestone payments and royalties on sales of the products, a significant step for the firm's compound partnering program (see 1 (Also see "Takeda Broadens Diabetes Pipeline With PPD Agreement For DPP4 Inhibitors" - Pink Sheet, 14 Jul, 2005.) ). The Takeda agreement caused PPD to revise its 2005 sales and earnings guidance. The firm is now projecting full-year EPS of $2.26 to $2.30 vs. its previous $1.85-$1.93 range, with net revenue of $940-$950 mil. compared to the previous $885-$900 mil. range. - Daniel Healey |