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PPD: Discoverizing the CRO Model

Executive Summary

A period of rapid growth during the mid-1990s, which included a series of acquisitions and an IPO, distracted PPD's management' from the fundamentals of running their business. And By 1999, CEO Fred Eshelman saw that his company was running the risk of becoming untracked. The problems ranged from project delays to uneven quality to inadequate fiscal management. In response, PPD's leadership implemented a series of measures to address those deficiencies. These efforts, and a little luck, helped PPD weather the two-year CRO slump far better that did its competitors. But PPD is hardly resting on its laurels. With it becoming increasingly apparent that the traditional, pure fee-for service model is obsolete, PPD, like the other major CROs, is moving in to new areas in search of higher margins. PPD is, however, unique in venturing upstream in R&D, while the others have businesses in marketing, web-web-enablement and consulting services. PPD has built an already profitable discovery business designed to generate income from up-front and research support payments, as well as royalty fees and milestones. It's a move that, while perhaps riskier than the tack being taken by the other CROs, could yield far greater rewards.

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