PPDI Beats Zacks Estimates – Analyst Blog

Pharmaceutical Product Development’s (PPDI) second quarter 2010 earnings (excluding special items) of 23 cents per share surpassed the Zacks Consensus Estimate by 5 cents. On a reported basis, the company earned 18 cents per share as against 49 cents in the year-ago quarter.

 

Earnings included income tax related charges of 3 cents per share resulting from the spin-off of the company’s compound partnering business and a loss from discontinued operations, net of taxes, of 2 cents per share, arising from the closure of the company’s dermatological segment. The year-ago reported earnings figure was inclusive of an after-tax gain of 16 cents per share resulting from the sale of Piedmont Research Center.

 

 

Net revenues for the reported quarter climbed 4.3% year-over-year to $369.9 million and handsomely surpassed the Zacks Consensus Revenue Estimate of $340.0 million. The year-over-year rise was primarily driven by increases in development revenues.

 

Development segment net revenues increased 1.1% to $333.8 million in the reported quarter. Discovery sciences segment net revenues jumped to $7.7 million in the reported quarter as opposed to a mere $0.2 million in the year-ago quarter. The huge jump in revenues in this segment was attributable to a $7.5 million milestone payment from Takeda Pharmaceutical Company Limited following regulatory and pricing approvals for Nesina (alogliptin) in  Japan. Reimbursable out-of-pocket revenues accounted for the balance.  

 

Operating income in the reported quarter declined 31.2% year-over-year to $40.1 million. The fall was primarily attributable to operating and integration expenses arising from the recent acquisitions by the company coupled with a rise in business development expenses. Furthermore, the increased compound partnering research and development expenses before the spin-off and general and administrative costs pertaining to the spin-off also impacted operating income during the reported quarter.

 

Gross authorizations for the quarter came in at $610.5 million. Backlog at the end of the quarter stood at $3.23 billion. Contract cancellations and adjustments amounted to $145.3 million.

 

Cash flow from operations came in at $59.5 million. The effective tax rate (for continuing operations) in the reported quarter stood at 42.6%.

 

 

Pharmaceutical Product Development is a Zacks #3 Rank (Hold) company, implying that the stock is expected to perform in line with the overall US equity market over the next 1-3 months. Our Neutral long-term stance on the stock indicates that the stock is expected to replicate its short-term performance but over 6+ months. Consequently, we advise investors to retain the stock over the time period.