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PPD shares dip as founder and CEO Eshelman changes role

Fred Eshelman

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Shares in contract research organization Pharmaceutical Product Development Inc. (Nasdaq: PPDI) dropped 2.4 percent Wednesday following the news that founder and chief executive officer Fred Eshelman is taking on a new role with the firm.

PPDI announced after the markets closed Tuesday that Eshelman would become executive chairman, a new position.

Eshelman turned the chief executive role over to David Grange, a former U.S. Special Forces soldier and member of Delta Force. Grange, a member of the PPD board, is leaving the McCormick Foundation where he was CEO.

As part of the management shakeup at the Wilmington-based company, long-time chairman Ernest Mario gives up that role to become the lead independent director. Mario has served as non-executive board chair since 1993.

The move led analysts at William Blair to lower PPDI shares to “market perform” from “outperform.”

Meanwhile, Steven Halper, an analyst for Thomas Weisel Partners, said he was "perplexed" by the change, according to the Associated Press. He believes the moves indicate a serious problem for the company.

"There are probably more significant operational issues at PPD than we previously believed," the AP quoted him as writing in a report. "Given this management change as well as the results from other contract research organizations, we believe there are probably more operational issues affecting PPDI than the broader market slowdown," Halper wrote in a note to investors.

However, the AP noted that other analysts appeared less concerned by the changes. For example, Ross Muken of Deutsche Bank said no major strategic shifts appear to be planned. He also pointed out that Eshelman remains in charge.

Eshelman launched the company in 1985. He is the firm's largest shareholder with nearly 8 million shares of PPD's stock.

PPD operates a major facility in Research Triangle Park with some 1,900 employees and has nearly 4,000 workers in its home state. It employs more than 10,000 people in 38 countries.

The changes take effect July 1.

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