PPD Announces Plans to Spin off Compound Partnering Business
Expected to unlock the value of compound partnering and core CRO businesses
WILMINGTON, N.C. (October 27, 2009) - PPD, Inc. (Nasdaq: PPDI) today announced its board of directors has authorized management to proceed with preparations to spin off its compound partnering business from its core contract research organization, or CRO, business.
The spin-off will result in two well capitalized, highly focused, independent public companies. Acknowledging the different needs of the profitable CRO services business and a pharmaceutical research and development business, this transaction creates two "pure play" investments for PPD's shareholders and potential future investors. The CRO business will continue to operate under the PPD name and will be focused solely on its drug discovery and development service businesses and will no longer be coupled with the earnings dilution from the company's compound partnering business. The compound partnering business will have the opportunity to focus on developing and commercializing its drug candidates and to access external capital, if needed, without any constraints associated with operating in combination with the CRO business. In addition to, and as a result of these substantial corporate-level benefits, both businesses will be better positioned to create long-term shareholder value.
"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," said Fred Eshelman, executive chairman of PPD. "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."
The compound partnering company resulting from the spin-off is expected to have the following compounds, rights and investments:
rights to royalties and sales-based milestones from our collaboration with ALZA Corporation, a Janssen-Cilag affiliate, on Priligy®, the first and only approved treatment for premature ejaculation, which has been approved for marketing in Sweden, Finland, Portugal, Spain, Austria, Germany, Italy, Mexico and South Korea;
rights to potential future regulatory and sales-based milestones and, if approved, royalties on sales for Takeda Pharmaceutical Company Limited's dipeptidyl peptidase IV (DPP-4) inhibitor, alogliptin, for which the FDA issued a complete response letter in June 2009 and requested Takeda conduct an additional cardiovascular safety trial to satisfy the FDA's December 2008 guidance on anti-diabetic therapies;
the dermatology program PPD acquired with the acquisition of Magen BioSciences, Inc., in April 2009;
the statin compound licensed from Ranbaxy Laboratories Ltd. for the treatment of dyslipidemia, for which we have completed a high dose comparator study in healthy volunteers that indicated the drug was well-tolerated and suggested it compares favorably to currently marketed statins; and
rights to all potential new compounds acquired by PPD prior to the spin off.
PPD anticipates it will expand its compound partnering portfolio through the licensing of two additional compounds in the fourth quarter of 2009. PPD also expects to capitalize the compound partnering company with approximately $100 million in cash to provide it with a strong financial position to leverage its existing collaborations, seek additional strategic opportunities and capitalize on its commercial opportunities.
After the spin-off transaction, PPD will continue as a leading global CRO providing discovery, development and post-approval services. PPD will continue to be listed on the NASDAQ Stock Market under the company's current ticker symbol "PPDI."
PPD expects to accomplish the proposed spin-off through a tax-free, pro rata dividend distribution of stock of the compound partnering company to the shareholders of PPD. Completion of the proposed spin-off is subject to numerous conditions, including final approval of PPD's board of directors, receipt of a private letter ruling or independent opinion that the spin-off will be tax-free to PPD and its shareholders, and the filing and effectiveness of a Form 10 with the Securities and Exchange Commission.
The expected stock distribution ratio and the record date for determining shareholders of record entitled to receive the distribution dividend will be determined at a later date. PPD has retained Goldman, Sachs & Co. as its financial advisor, Deloitte & Touche LLP as its accounting and tax advisor, and Wyrick Robbins Yates & Ponton LLP as its legal advisor. PPD expects the transaction to be completed in the middle of 2010. Approval by PPD's shareholders is not required for completion of the spin-off.
PPD is a leading global contract research organization providing discovery, development and post-approval services as well as compound partnering programs. Our clients and partners include pharmaceutical, biotechnology, medical device, academic and government organizations. With offices in 38 countries and more than 10,000 professionals worldwide, PPD applies innovative technologies, therapeutic expertise and a commitment to quality to help its clients and partners maximize returns on their R&D investments and accelerate the delivery of safe and effective therapeutics to patients. For more information, visit our Web site at http://www.ppdi.com.
Except for historical information, all of the statements, expectations and assumptions contained in this news release, including expectations and assumptions about the timing of the spin-off and the value of the two businesses following the spin-off, are forward-looking statements that involve a number of risks and uncertainties. Although PPD attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors which could cause results to differ materially include the following: the possibility that we will decide not to proceed with the spin-off, risks inherent in organizing a new publicly traded company, the fact that analyses are currently ongoing regarding whether the spin-off transaction can be effected on a tax-free basis to the Company and its shareholders, there can be no guarantee that the transaction will not be taxable, and risks that we may not continue our dividend policy, as well as the factors set forth from time to time in the SEC filings for PPD, copies of which are available free of charge upon request from the PPD investor relations department.