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Biotech / Medical : PPDI - Pharmaceutical Product Development, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: kendall harmon who wrote (44)	9/11/1999 1:12:00 PM
From: Ron Harvey	Respond to of 71

(FIRST CALL) VOLP: PPDI: Covance's Problems Won't Hurt PPD VOLP: PPDI: Covance's Problems Won't Hurt PPD 07:04am EDT 9-Sep-99 Volpe Brown Whelan & Co. (Edward B Keaney 415-274-4473) Volpe Brown Whelan & Company Pharmaceutical Product Development, Inc. September 9, 1999 PPDI -- $19 9/16 Price Action Edward B Keaney 415-274-4473 ed.keaney@vbwco.com EPS 1998A 1999E 2000E Investment Opinion STRONG BUY Q1 $0.12 $0.26A $0.34 Price Target $40 Q2 $0.15 $0.27A $0.36 52-Wk Price Range $38 1/2-$18 Q3 $0.19 $0.29 $0.41 Shares Out. (million) 24.9 Q4 $0.24 $0.32 $0.44 Market Cap. (million) $487.0 Year(Dec) $0.70 $1.13 $1.55 3-Year EPS Growth Rate 30% First Call $1.13 $1.52 ___________________________________________________________________________ _____ PPDI: Covance's Problems Won't Hurt PPD Summary: PPD shares fell 14.7% yesterday, in sympathy with the value implosion that hit industry leader Covance. Covance announced a major earnings shortfall, due to a combination of contract cancellations and a weak new business effort in 1999. We expect PPD to maintain its momentum in both sales and earnings, and reiterate our STRONG BUY rating. As noted by Covance management, the Company's main problem is not a lack of demand. In fact, Covance reports that it is continuing to see a robust level of new business proposals. Covance's win rate on these contract proposals is the metric that has plummeted, a situation Covance attributes to being outmarketed by the likes of Quintiles and PPD. The latter two companies have pursued a policy of "strategic outsourcing partnerships" with the major pharma companies. This strategy assigns client responsibility on a global basis to a single team. In other words, one team at PPD markets preclinical services, central lab capabilities, PhaseI-IV trial management, project consulting, etc. to a pharma company such as Glaxo, regardless of where the services will be performed. Covance maintained both separate regional and product sales efforts, an approach that didn't mesh with the pharma companies' desire to utilize global capacity as a means of achieving greater efficiencies. PPD management has reiterated its comfort level with consensus expectations. We anticipate 30%-or-better revenue growth for at least the next four quarters. We believe a key indicator in the upcoming Q3:99 earnings release will be new business assignments: we project an increase of 20%-plus, or new business wins of $125 million. Lost in the shuffle was the announcement by PPD and Eli Lilly of positive Phase IIa results for dapoxetine, potentially a first-line therapy for premature ejaculation. Lilly now has 90 days in which to decide if it will reacquire the marketing rights to this compound, an action which would trigger a milestone payment to PPD of approximately $5.0 million (our estimate). In addition to managing additional clinical development for dapoxetine, PPD could be entitled to additional milestone payments depending upon the outcome of further trials.