Pharmaceutical Product Development Announces Joint Venture Called BioDuro Biologics

Goldman Sachs has published a research report on Pharmaceutical Product Development PPDI after the company committed $25 million dollars to a joint venture with Taijitu Biologics Limited called BioDuro Biologics. In the report, Goldman Sachs writes "After the close, PPD announced that it had entered into a joint venture called BioDuro Biologics with Taijitu Biologics Limited whereby the company committed $25 million of its capital for a majority stake. The JV was formed to develop and commercialize a technology platform for the discovery of monoclonal antibodies, a popular class of therapeutic agents, with MAB Discovery GmbH. According to management, the deal is expected to be dilutive by ~$0.02 to 2011 EPS. In addition, this new joint venture (1) augments PPD's development offering which originates from PPD's acquisition of Chinese drug discovery outsourcing company Bioduro in late-2009, and (2) allows the company to provide customers with a platform for the discovery of monoclonal antibodies. While we are positive on the growth prospects of the underlying market associated with the technology this new venture brings, we acknowledge that it is difficult to assess if deals such as this offer shareholders better return than share repurchases or increased dividends. We lower our 2011 EPS estimate to $1.55 (from $1.57) to account for the deal dilution. Our Buy rating and $31 6-month price target are unchanged, as are our 2010E and 2012E estimates. Looking forward, PPD will release fiscal 2011 guidance AMC on January 19." Goldman Sachs maintains its Buy rating and $31 price target. Pharmaceutical Product Development, Inc. closed yesterday at $27.31.