(PPDI) Pharmaceutical Product Development Shareholders Nod to Merger

Pharmaceutical drug research company Pharmaceutical Product Development, Inc. (PPDI) recently announced that its shareholders have approved the merger with privately held firms The Carlyle Group and Hellman & Friedman. The merger was announced in October 2011.

PPD shareholders have been offered a cash consideration of $33.25 per share. The total purchase consideration comes to $3.9 billion in cash. The merger is now subject to certain closing conditions and is expected to close before the end of 2011, following which PPD will become a private company and will no longer trade on NASDAQ.

Four banks have committed to finance the deal. These include Credit Suisse (CS), JP Morgan (JPM), Goldman Sachs (GS) and UBS (UBS). Because of the buyout, PPD did not hold a conference call to discuss the third quarter results.

Our Recommendation

We currently have a Hold recommendation on PPD. The company retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are impressed by the company’s strong bookings, stable backlog duration and sound expense control.

PPD is a leading contract research organization (CRO) providing drug discovery and development services to pharmaceutical and biotechnology companies. Companies like PPD and Charles River Laboratories (CRL) suffered in 2008-2009 due to a decline in demand for their services in time of a depressed economy.

The environment for CROs is gradually improving. Higher request for proposals (RFP) flows and key strategic partnerships secured by PPD with bio-pharma customers are a testament to such a revival, which would in turn result in bottom-line growth. However, we remain concerned about the high cancellation rates.

CHARLES RVR LAB (CRL): Free Stock Analysis Report

CREDIT SUISSE (CS): Free Stock Analysis Report

GOLDMAN SACHS (GS): Free Stock Analysis Report

JPMORGAN CHASE (JPM): Free Stock Analysis Report

PHARMA PROD DEV (PPDI): Free Stock Analysis Report

UBS AG (UBS): Free Stock Analysis Report

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