PPD shares fall as 2Q bookings data disappoints

Shares of Pharmaceutical Product Development Inc. fell Wednesday as the contract research company reported weaker new business gains than expected in the second quarter, overshadowing an otherwise positive financial report.

Late Tuesday, Wilmington, N.C.-based Pharmaceutical Product Development, or PPD, reported quarterly earnings of $49 million, or 41 cents per share, compared with profit of $42.6 million, or 36 cents per share, during the same period a year prior. Revenue rose to $407 million from $350 million.

Analysts polled by Thomson Financial expected profit of 39 cents per share on revenue of $374.2 million.

Although results topped expectations, investors focused on the company's bookings _ up 16.7 percent _ and its cancellation rate of 26.2 percent. Wall Street had been expecting a stronger boost in new business and a lower cancellation rate.

Shares slipped $2.68, or 6.5 percent, to $38.27 in midday trading Wednesday. The stock has traded between $33 and $49.39 over the last 52 weeks.

The disappointing bookings come at a time when clinical research organizations are seeing a boom in business from big pharma and biotech outsourcing and emerging markets like China and India. Wall Street has kept a mainly positive view on PPD and its peers.

"Our biggest concern is that this quarter's lower business development may hinder revenue growth in the second half as PPD must fill a new hole in its backlog," wrote Lehman Brothers analyst Douglas Tsao in a note to investors.

Tsao suggested the company's approach toward the market may need to change, or new personnel may be needed to improve the business to take advantage of the strong market. He maintained an "Overweight" rating on PPD.

Goldman Sachs analyst Randall Stanicky, meanwhile, maintained a "Neutral" rating on the stock.

"While the core development operating margin rebounded nicely and would have led to upside if not for higher tax and lower interest income, it appears that there was virtually no headcount additions since the first quarter which continues to surprise us," he said, in a note to investors.