A Stock Split Can Make You Forget
PPD's two-for-one stock split is good news for the top global clinical research organizations. Investors attracted to the sector by the company's split announcement Feb. 8 can focus on PPD and other top CROs rather than the sideshow embattled SFBC has become. When new investors look at top CROs such as PPD, Quintiles , PRA, ICON, Parexel and Covance, they will see the pharmaceutical outsourcing industry ready to consolidate around a handful or so of these companies.These global CROs have a big advantage over the estimated 1,000 other small CROs throughout the world. They have international infrastructure in place to conduct complex clinical trials in thousands of patients at sites across multiple countries.That global presence is not easy to build and represents a barrier to entry for small CROs trying to roll up into a global player.
New investors will see how the overall outsourcing trends favor the top CROs now as they hit their stride. Pharmaceutical companies required it much more frequently of CROs these days. And PPD and other global CROs are benefiting.
Already, 27 percent of PPD’s outsourcing business is overseas. CEO Fred Eshelman said recently that a few years ago, he would never have guessed that his business would become so global. That trend will continue as pharma moves trials into Latin America, India, China and other countries. Last year, PPD’s head count in Latin America jumped 50 percent.
PPD's success and stock split can only continue to be great news for the company and others in the top tier of CROs. The company sports a global growth story, revenues already growing at more than 20 percent and potential upsides with its unique compound-partnering business. It’s the kind of story that will make you forget about SFBC for now.