Former director at Pharmaceutical Product Development Inc (PPD)
- Operating environment surrounding PPD, highlighting biotech funding, DCTs (decentralised clinical trials) and shifts in clinical trial methodologies
- CRO (contract research organisation) evolution of Thermo Fisher (NYSE: TMO) following acquisition of PPD – M&A analysis, customer relationships, solutions portfolio breakdown, highlighting clinical development, FSP (functional services partnership) and laboratory services segments
- PPD’s competitive positioning within the broader CRO market relative to players such as Icon (NASDAQ: ICLR), Syneos (NASDAQ: SYNH), Medpace (NASDAQ: MEDP) and Iqvia (NYSE: IQV), elaborating on relevant market share dynamics
- Therapeutic focus areas for PPD, including haematology, infectious diseases, oncology and CNS (central nervous system)
- 12-18-month outlook for PPD, noting imminent headwinds as well as staffing and supply chain headwinds
Starting from the beginning, how has PPD evolved under Thermo Fisher’s umbrella in terms of streamlining integration? Are there any key criteria investors should be monitoring in terms of PPD’s CRO [contract research organisation] development?
You alluded to how PPD fits into Thermo and how much R&D spend is allowed for the company to capitalise on opportunities within the CRO market. To what extent will Thermo fulfil the market need for end-to-end CRO solutions by increasing R&D spend allocated to PPD?
How significant a value proposition is it for Thermo to offer services as a PPD-Thermo combined entity along with Patheon CDMO [contract development and manufacturing organisation]? Do customers see this as a big value-add before reaching the clinical trial stages themselves, to combine the CRO and manufacturing capabilities? You mentioned manufacturing is also key in this case, so how does that combined offering assist Thermo and PPD?
I know a lot of smaller players such as Medpace have focused on smaller biotech companies but it’s interesting that even PPD, given its sheer size, is also focusing on these smaller biotechs. Could you see the company potentially shifting into larger biotechs and sponsors? What is the risk of its margins being so focused on smaller biotechs, given all the larger funding slowdown and other dynamics at play?
Thermo generally doesn’t publicise its numbers specifically for the PPD sector and including the book-to-bill ratio, RFP [request for proposal] flow or backlog, but in 2020, it was about 20%. What are your financial expectations for PPD going forward? Do you expect the company to perform at par with its peers?
CROs such as Syneos and Icon all have book-to-bill ratios around 1-1.3. Is that a range you would expect PPD to operate in? In expectation of the company’s Q4 2022 results, could that be a potential achievable target?
You said other companies had to close the gap but Syneos has had abysmal results in the last quarters. Do you think that is an indication of some larger dynamic at play, or is that more specific to Syneos? Do you expect PPD and other CROs to head into that direction, or is that just a one-off?
How significantly has PPD been impacted by the cancellations and delays? Of course, it’s not a new phenomenon for cancellations to occur, but what factors would you chalk these delays up to? Staffing of clinical sites seems to be a systemic issue for CRO cancellations. Could you elaborate on what’s driving them?
What is PPD’s global positioning? You said Asia is one place the company struggles in. Where has it succeeded and lagged, respectively?
How well is PPD placed in handling DCTs [decentralised clinical trials] or hybrid clinical trials? You indicated that companies had to pivot to DCTs and are now having to move back towards typical trial monitoring. Do you think the company has understood the importance of recruiting patients and getting creative with non-traditional means? It seems there’s a mix between hybrid and DCTs.
Where does PPD stand now in the DCT space relative to pre-pandemic? Is the company still a little ahead of the curve, or is it now levelling out relative to other players?
To what extent has PPD overcome challenges presented in the DCT space, talking about trial complexities such as patient recruitment, delivery and administration of medicine, regulatory requirements and study-level integrations? Patient requirement is definitely the single most challenging point.
You mentioned that other companies have been able to pull ahead with creative technologies. Would you say technological advancements are somewhere that PPD potentially lags behind? What are some advancements other companies have that the company doesn’t?
You spoke about patient recruitment as one potential challenge, maybe more of the regulatory requirements for these DCT trials as well as the study-level integrations. How does PPD play in that field?
Can you comment on PPD’s positioning within the FSP [functional services partnership] space, given many customers don’t require end-to-end services across all clinical phases? Do you think the company has been able to fill niche spaces for these customers, offering more flexibility when changing, perhaps relative to Icon? I know it has a lead in the space, but what is your opinion on its FSP segment?
I’ve heard FSP tends to be less profitable overall compared to the traditional CRO model, which makes sense given it’s trying to fill in the pieces. Do you think PPD should focus solely on the CRO model, given there’s less profitability available in the FSP space, or should the company continue investing a little more in FSP?
How would you frame the competitive landscape for PPD relative to the broader CRO market? The clinical development space is already quite commoditised. Do you think it does play at the same level as Syneos or Icon, maybe differentiating across scale, therapeutic specialisation and global reach as well? Do you think it has a bit of catch-up to do to these more established companies?
How would you position or rank players in terms of market share? Who comes out as the leader relative to PPD, and who should the company be worried about most?
You mentioned pre-Interview that PPD has a really strong post-clinical trial group. What made you come to that conclusion? What special qualities would you chalk the success of this segment up to, and is this a key differentiating factor for it?
PPD seems to be investing large sums of money into clinical research capacity expansion in multiple states across the US, mainly for central lab and biomarker service purposes. Can you speak to some of the scalability it has been able to achieve from pure capacity expansion? Is it sufficient? Does it potentially lag behind other CROs in terms of scalability?
What knock-on effects does staffing have on PPD and larger CROs? No CRO has been able to mitigate these pressures as much as they would have liked to, so is the company mostly filling positions from smaller biotech companies and do you think this is a viable long-term solution? I know pre-Interview you said this could potentially be a large opportunity for it to capitalise on, so could you elaborate on the overall staffing trends and the comment you made?
Has PPD been able to effectively mirror the larger CROs when it comes to therapeutic focus? As you said, haematology, infectious diseases and CNS [central nervous system] are the big areas. Are these segments in which the company has been able to differentiate itself, given CROs are becoming increasingly differentiated?
How deep a bench does PPD have within the oncology sphere? With the rapid rise of C> [cell and gene therapy], do you believe it has the research and technological heft to be a potential leader in this space?
PPD has been really strong on the clinical side, but do you predict the company capitalising broader capabilities in the preclinical space? Would this benefit it, or do you think it would be better to stick to the clinical development? A challenge noted is that it’s too focused on the clinical aspect of things, so how do you suggest it bridges that gap from the preclinical space into the clinical offering?
Thermo laid out its plans at the recent JPMorgan conference to spend approximately 60-75% of capital over time on M&A. How much might it devote to PPD? What are some levers on the consolidation front that could augment PPD’s capabilities going forward?
What is your assessment of the PPD’s relationship with Medable and Science 37? The company has partnered with both of these companies. Do you think it walks a thin line when working with these companies, given they’re potentially stepping on each other’s toes in terms of winning business, or have they been working well with one another?
Do you think it would make sense for PPD to potentially acquire Science 37? Could that be a viable business opportunity for the company down the line?
What are 2-3 key points on PPD that might be worthwhile for investors to take home, opining on a couple of near-term headwinds, challenges or tailwinds impacting near-term profitability and giving some concluding remarks?
Is there anything else you’d like to highlight on PPD that we might have missed during the Interview?
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