PPD plans to separate compound partnering business from CRO business; spin-off to result in independent public companies

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.

http://www.ppdi.com.