Pharmaceutical Product Development NASDAQ: PPDI Fred Eshelman Chief Executive Officer

Transcription

1 Pharmaceutical Product Development NASDAQ: PPDI Fred Eshelman Chief Executive Officer Bear Stearns 20 th Annual Healthcare Conference 10 September 2007

2 Safe Harbor Except for historical information, all of the statements, expectations and assumptions discussed in today s presentations, including statements and expectations regarding PPD s future financial performance, the market for CRO services and its compound partnering initiatives, 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 may differ from the assumptions on which such statements are based. Additional factors that could cause actual results to differ materially are set forth from time to time in the SEC filings of PPD. To ensure compliance with Reg. FD, PPD will not disclose during this presentation or Q&A session any material information that has not been previously publicly disclosed.

3 Regulation G This presentation includes selected non-gaap financial measures. For a presentation of and reconciliation to the most directly comparable GAAP financial measures, go to the link titled GAAP/Non-GAAP Reconciliation under News & IR Presentations in the Investors section of PPD s Web site located at

4 Our Business Statement We are in the business of pharma, biotech, medical device and government sponsored R&D. Our mission is to help our partners maximize returns on their R&D investment.

5 Company Overview Development services since 1985 Clients have included 45 of top 50 pharmaceutical* companies and 250+ biotechnology/small pharmaceutical and medical device companies Second largest Phase II-IV IV CRO business Industry leading margins Innovative compound partnering/risk sharing model * Ranked according to R&D spend

6 Two Business Segments 1. Contract Research & Development 2. Discovery Sciences / Compound Partnering

7 Our Clients Net Revenue, Backlog by Client Type - 3 months ended 6/30/07 Revenue Backlog Pharma 59% Biotech 29% Pharma 49% Biotech 37% Government/ Other 12% Government /Other 14%

8 Service Scope Phase II-IV Development Phase II-IV trial management Data management & biostats Medical communications Market development Clinical informatics Regulatory management Phase I Clinics State-of-the-art Phase I clinic in Austin, Tx Phase I/IIa clinical studies Specializing in larger, complex studies Dental research clinic Lab Services Bioanalytical labs in Richmond, VA and Madison, WI cgmp lab in Madison, WI Central labs (Highland Heights, KY and Austin, TX) Discovery Preclinical Phase I Phase II Phase III Post-Launch Discovery Services Piedmont Research Center specialty non-clinical research lab (oncology) Biomarker services Compound Partnering Development-based risk sharing model Pipeline of three partnered products in various stages of development

9 Where We Play Breakdown of global R&D spending 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Uncategorized Phase IV Regulatory Phase III Phase II Phase I Discovery/Preclinical 52% PPD operates traditionally in large scale development, but performs services in almost all of these areas Source: PhRMA, 2005 Industry Report

10 Key Service Areas Net Revenue by Business and Rx Area 3 months ended 6/30/07 Business Group Therapeutic Area Phase II-IV 82% AI/AV Endocrine Cardio CNS Labs 13% Phase I 4% Discovery 1% Oncology 1 Other

11 Global Scale 9,400+ professionals worldwide Offices in 28 countries Canada U.S. Mexico Belgium England France Germany Italy Netherlands Scotland Spain Sweden Denmark Poland Czech Republic Hungary Greece Israel India China Korea Taiwan Hong Kong Thailand Singapore Peru Chile Brazil Argentina South Africa Australia

12 Geographic Mix Development Net Revenue 1 Mix / Growth by Region - FY2006 EU/AF/AU Asia Latin America Discovery 06/ 05 Growth 2 North America EU/AF/AU Latin America Asia 16% 24% 43% 155% North America 1 Net revenue amounts exclude reimbursed out-of-pockets 2 North America growth excludes discovery sciences revenues

13 Growth Drivers Pharmabio R&D investment % per year Outsourcing penetration 1 Estimated 22%+ Growth in government segment PPD market share gains PPD top line growth ~15% (Sector 12-15% CAGR through ) 1 Source: Goldman Sachs 12 Sep, 2005, William Blair March 15 05, R&D Directions, PPD Estimates

14 Growth Drivers Total outsourced R&D expected to nearly double from 2005 to $14.0 B grows to $25.9 B, 13% CAGR CROs get 67% to 70% of above Public CRO Cohort TTM revenue growth Q1 06 through Q2 07 of 15%-20% has outstripped background R&D 2 On balance, outsource spending across a continuum of services expected to grow in 07 Significant work going to preferred vendors 3 1 Goldman Sachs Healthcare Services, April 06 2 Company filings and reports, PPD analysis, which includes PPDI, CVD, ICLR, PRAI, KNDL, PRXL 3 Contract Pharma, May 2006

15 Growth Drivers RFQs and New Authorizations Dollar Value of RFPs* ($ billions) New Authorizations ($ millions) CAGR 21% ,000 1,800 1,600 1,400 1,200 1, CAGR 22% 1,971 1,766 Gross Cancellations Net 1,212 1,002 1, * Excludes RFQs from Discovery Sciences

16 Two Business Segments 1. Contract Research & Development 2. Discovery Sciences / Compound Partnering

17 Compound Partnering / Discovery Overview Mid- to long-term financial strategy for PPD Received $50MM in milestones, recognized $94MM CRO revenue through YE 06 Dilutive through 2H 07 Has the potential for substantial boost to EPS in future Hedge against potential cycles and shouldering of CRO growth

18 Compound Partnering / Discovery Compound Partnering - Why partner with PPD? Vast development experience in most therapeutic areas Big development machine to pair with discovery engines Flexibility, speed in getting deals done Rigor, speed, innovation in driving to market Compounds don t get lost in the shuffle Innovator preserves more value

19 Compound Partnering / Discovery Compound Partnering - PPD Approach? Compound/lead series close to IND or Phase I Must have clear outcome measure Straight forward, reasonably short development profile Clear regulatory path Acceptable COGS Solid patent and/or regulatory protection Supportable market forecast Iterative NPV/EPS modeling Favorable financial terms Number of drugs in pipeline to balance risk, enhance rate of return

20 Compound Partnering / Discovery Pipeline Pre-IND Phase I Phase II Phase III NDA/MAA Dapoxetine (genitourinary) w/jnj TAK 322 (DP4 Inhibitor, type II diabetes) w/takeda TAK 472 (DP4 Inhibitor) SinuNase AmpB for CS w/ Accentia RBX statin HMG-CoA reductase inhibitor w/ranbaxy

21 Pipeline Dapoxetine Dapoxetine Indication: Status: Source: Sales/Marketing: Market: Economic Terms: Premature ejaculation NDA accepted for filing 2/05; not approvable letter 10/05; EU filing target 12/07 Eli Lilly Johnson & Johnson Estimate ~30% of males experience PE PPD bought out Lilly s share (up to peak annual sales of $800 MM) for $65 MM. J&J responsible for development and marketing costs; remaining deal terms include up to $5 MM potential pre-marketing milestones on Ex-US regulatory approvals, up to $50 MM in sales-based milestones, double digit royalties which increase with sales levels.

22 Pipeline DPPIV Inhibitors (Takeda) Indication: Type II diabetes Status: TAK 322 late Phase 3; TAK 472 Phase 2 Source: Syrrx (Takeda) Sales/Marketing: Market: Economic Terms: Takeda $10-12 billion PPD made $25MM equity investment (11.7%) in Syrrx now repaid. Received up-fronpayment for dosing of 20 th patient in Phase III from TAK. payment of $15MM and $15MM Remaining deal terms include a potential of up to $70.5 MM development milestones; up to $33 MM sales-based milestones; US sales-based royalties from mid-single digit to low double digit levels; ROW royalty range from mid-to-upper single digit levels.

23 Pipeline SinuNase (IN AmpB) Indication: Chronic Sinusitis Status: Source: Sales/Marketing: Market: Economic Terms: Phase 3, granted FDA Fast Track status 4/06 Accentia TBD $5 billion PPD has $15MM equity investment in Accentia; made $2.5MM one-time cash payment in 9/04 for 7% royalty on future sales of specified antifungal products for the treatment of chronic sinusitis (CRS).

24 Pipeline RBX Statin Indication: Status: Source: Sales/Marketing: Market: Economic Terms: Dyslipidemia Phase 1B (in patients); Phase 2 October 07 Ranbaxy TBD $32+ billion PPD paid $250,000 up-fronfuture development, manufacturing and commercial expense; license fee; PPD responsible for PPD pays potential development and sales-based milestones up to $44 million and royalties on potential product sales. PPD has worldwide exclusive license except India.

25 Compound Partnering Relative Revenue Potential Of Existing Pipeline DPPIV Dapoxetine Statin SinuNase Based on projections for gross revenue streams including milestones and royalties, and assumptions regarding product pricing and acceptance. Future revenue projections associated with compound partnering programs may not be realized and depend on numerous factors, including: achieving development milestones, obtaining regulatory approvals; competitive products; ability to successfully manufacture products; product pricing and demand and other factors set forth in PPD s SEC filings.

26 Competitive Differentiation Clear strategy Leading CRO business focused on quality and large, complex development projects to mitigate pricing pressure Compound partnering as licensee and licensor Management Experienced Hands-on Financial Performance Sustained revenue & EPS growth* Robust cash flow Virtually no LTD * Excluding impairments to equity investments, $65 MM payment for dapoxetine patents, gain on sale of assets and restructuring charges associated with discovery sciences.

27 Historical Performance Backlog ($MM) CAGR 28% $2,238 $1,799 18% $2,027 $2,386 $974 $1,120 $1,293 $498 $ Q2'06 Q2'07

28 Historical Performance Net Revenue 1 ($MM) CAGR 22% $774 $962 $1,146 $669 $345 $432 $563 13% $283 $ Q2'06 Q2'07 1 Net revenue amounts shown exclude reimbursed out-of-pockets.

29 Historical Performance Earnings-per-share*, split-adjusted $0.32 CAGR 28% $0.81 $0.87 $0.64 $0.47 $1.13 $ % $0.34 $ Q2'06 Q2'07 * Earnings per diluted share from 2000 to 2006 and Q2 06, Q2 07 exclude non-cash stock option expense Excludes $33.8 million in non-operating, non-cash charges related to the impairment of equity investments, $32 million of which is related to impairment of our equity investment in DNA Sciences 2 Excludes $10.1 million related to the impairment of equity investments, $1.9 million restructuring charge, $5.7 million gain related to the sale of assets of the Discovery business, and $65 million payment to acquire dapoxetine patents 3 Excludes $2.6 million restructuring costs, a $3.7 million tax benefit associated with release of valuation allowance and $2.0 million related to impairment of equity investments. 4 Excludes $5.1 million gain on exchange of assets, a $0.8 million reduction in a capital loss valuation allowance, and a $5.9 million impairment of investment

30 Balance Sheet PPD, Inc. Balance Sheet Data (in thousands) (unaudited) June 30, December 31, Cash, cash equivalents and short-term investments $ 403,137 $ 435,671 Accounts receivable and unbilled services, net $ 453,348 $ 408,917 Working capital $ 516,807 $ 412,711 Total assets $ 1,541,531 $ 1,481,565 Unearned income $ 184,289 $ 195,707 Current maturities of long-term debt $ 69 $ 75,159 Shareholders' equity $ 1,057,794 $ 952,900

31 PPD Why invest in PPD? 31 consecutive quarters of backlog growth (leads sector) Industry-leading margins Solid track record of growth No LTD Solid cash position, dividend Ability to generate robust free cash flow Clear long-term strategy to drive EPS growth and generate cash

32 Pharmaceutical Product Development NASDAQ: PPDI Fred Eshelman Chief Executive Officer Bear Stearns 20 th Annual Healthcare Conference 10 September 2007