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Pharmaceutical Product Development to spin off drug development business

Fred Eshelman

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WILMINGTON, N.C. - Pharmaceutical Product Development plans to spin off its drug development business and capitalize it with $100 million.

Once the spinoff is complete, PPD (Nasdaq: PPDI) will operate its contract research organization under that name and focus on its core life science services business, company founder and Executive Chairman Fred Eshelman said Tuesday after the markets close.

The spinoff was just one item in a flurry of announcements from PPD operates in 38 countries with more than 10,000 employees. The firm, which maintains a presence in the Research Triangle Park area, also:

• Will invest $100 million in a private equity fund focused on acquiring and investing in potential drug compounds

• Acquire a CRO with 300 employees in China

• Beat Wall Street earnings forecasts by a penny (32 cents or $37.7 million) even though revenue fell by 13 percent from a year ago to $341 million.

Lowered its earnings forecast due in part to $160 million in contract cancelations

The compound partnering business will have rights to drugs under development that PPD is already supporting and deals that might take place before the spinoff is complete, PPDI added.

The as yet unnamed new business also will be publicly traded.

“While our innovative compound partnering program has benefited PPD over the years, we believe by separating this business from our core CRO business we can unlock the intrinsic value of both businesses,” Eshelman said.

“Each company will have the opportunity to focus exclusively on its core strengths, seek new strategic opportunities and compete more effectively in its respective market,” he added.

Eshelman took on the executive chairman title in May, giving up his CEO role. PPDI laid off some 270 workers in July and also pulled out of a commitment to open a facility employing 300 people at the North Carolina Research Campus in Kannapols.

PPDI will work with Goldman, Sachs & Co. as its financial advisor, Deloitte & Touche as its accounting an dtax advisor and Wyrick Robbins Yates & Pontona s its legal advisor.

The spinoff is expected to be completed by mid 2010.

In the other news:

• PPD is expanding its Asian footprint by acquiring China-based Excel PharmaStudies, which is one of the largest CROs in that country. It operates drug development labs in Beijing, where PPD has had a presence since 2003, and Singapore.

Financial terms were not disclosed.

Excel will operate as a PPD subsidiary.

• PPDI will invest $100 million in Celtic Therapeutics, a private equity fund based in the Bahamas. The fund launched in 2007 and has set a fund raising goal of $700 million. Celtic is focused on mid-stage drug development and expects to make investments in or acquire between 10 and 15 compounds.

“This investment in Celtic Therapeutics is intended to set the stage for a strategic alliance between Celtic Therapeutics and PPD,” PPD said in a statement.

Pharmaceutical industry veterans Stephen Evans-Freke and Peter Corr, who worked at Pfizer and Warner Lambert/Parke Davis respectively, lead Celtic.
 

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