PPD shares fall on weak new business and high cancellations

BANGALORE, July 22 (Reuters) - Shares of Pharmaceutical Product Development Inc PPDI.O fell 16 percent Wednesday, as poor bookings and high cancellations disappointed investors even though the clinical-research service provider's quarterly profit topped market estimates.

Analysts were also concerned about another cut in outlook from the company.

"The new business wins were $115 million below our expectation and cancellations were $60 million higher. That's an unfortunate combination," Jefferies & Co analyst David Windley said.

"That is the second quarter in a row of very weak new business wins," he added.

On Tuesday, PPD reported second-quarter new business authorizations of $465.9 million, while contract cancellations were $212.9 million.

Windley, who thinks the company will have to cut its prior forecast, said PPD's "earnings achievement was driven by cost-cutting, which will not get them back to a growth mode."

Second-quarter earnings were $58.1 million, or 49 cents a share, compared to $49.0 million, or 41 cents a share in the year-ago period.

Income from continuing operations was 33 cents a share, that beat analysts' expectations of 29 cents a share. [ID:nWNAB9715]

"PPD's position in the market may be waning as lower-margin and more aggressive marketing organizations appear to be taking share," said Robert W. Baird analyst Eric Coldwell, who downgraded the stock to "neutral" from "outperform.

Coldwell also cut his price target on the stock by $3 to $23 and said the company's prior outlook looks difficult to achieve.

In April, PPD had reduced its 2009 earnings forecast to $1.54 to $1.60 a share, on revenue of $1.40 billion to $1.47 billion.

Shares of the company were down 16 percent in premarket trade from their Tuesday's close of $22.08 on Nasdaq. (Reporting by Esha Dey in Bangalore; Editing by Aradhana Aravindan)