PPD spins out its in-house biotech as sale rumors swirl

PPD, rumored to be up for sale, spun out its wholly owned biotech company into a stand-alone entity, a move the CRO said will maximize shareholder value.

X-Chem, which PPD acquired in 2014, will strike out on its own, developing in-house drug candidates and lending out its compound library to biopharma partners in exchange for cash. At the heart of X-Chem's business is a proprietary discovery platform based on a library of more than 100 billion molecules, according to the company. Each is tethered to a DNA tag that logs its history, X-Chem says, allowing investigators to peer in on a host of chemical reactions and ferret out the best potential drug.

That model has helped X-Chem ink R&D partnerships with Johnson & Johnson ($JNJ), Roche ($RHHBY), Pfizer ($PFE) and 6 other drugmakers, and the company is collaborating on more than 70 programs. In tandem with the announcement of its independence, X-Chem disclosed new relationships with Sanofi ($SNY) and the University of Texas MD Anderson Cancer Center that will make use of its compound library.

"Our goal as an independent biotechnology company is to continue to evolve our platform and work closely with our partners to fully integrate our capabilities as a central drug discovery paradigm," X-Chem CEO Richard Wagner said.

Meanwhile, PPD's private equity owners are reportedly looking at selling the CRO for as much as $8 billion. Last month, Reuters reported that Carlyle Group and Hellman & Friedman are consulting with investment bankers and planning a dual track for PPD, through which they'd hold an auction for the company while preparing to possibly take it public, settling on whichever option created the most value. PPD has said that it does not comment on rumors per company policy.

Carlyle and Hellman & Friedman took PPD private with a $3.9 billion buyout in 2011. PPD first took up a majority stake in X-Chem in 2010 before buying the company outright four years later.

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