PPD‘s (NYSE:PPDI) $3.9 billion sale to The Carlyle Group and Hellman & Friedman offered shareholders of the clinical research organization a nearly 30 percent premium over the company’s closing stock price before the private equity deal was announced.
But www.footnoted.com, a unit of Morningstar that looks for hidden items buried in securities filings, suggested that newly-named CEO Ray Hill might come away with an even better deal – nearly $8 million for two and a half weeks of work. Hill, a former IMS Health executive, was announced as the new CEO of the Wilmington, North Carolina CRO on September 19.
Footnoted notes that the October 3 press release announcing the PPD sale makes no mention of Hill at all, “which seems kind of odd to us, given that he is the company’s CEO. We think it’s a pretty safe bet that some PR person would have whipped up a nice quote for Hill if he was planning on sticking around.”
Hill’s employment agreement and severance agreement have not yet been filed; PPD said it would file those documents with the company’s quarterly filing. But the 8-K filing regarding Hill’s appointment discloses Hill’s salary as $575,000. With stock and options, Footnoted calculated that the total tops $5 million. Hill’s severance agreement calls for 2.99 times the sum of his base salary or $1.7 million, plus benefits, according to the filing.
If Hill is on his way out, the CRO has made no such indications. In the proxy statement filed with the SEC, the company includes a letter from PPD founder and Chairman Fred Eshelman distributed to all employees. In the letter, Eshelman said: “Nothing will change in our day-to-day operations as a result of this transaction. Our management team is working closely together to ensure the company remains focused on our current objectives and strategy. We believe the experience and leadership skills of our senior management team, including CEO Ray Hill (emphasis mine), and all of our employees will add great value as we navigate through this transition.”
That suggests that the plan is for Hill to remain with PPD. And while it is not unheard of for management to change following an ownership change, and that may yet happen, I don’t see that as likely. After Hill’s hire, I asked William Blair analyst John Kreger his thoughts on its significance to the company. He told me two things. One, a sale of the company might not be imminent because he thought it unlikely the company would make two major announcements close together. Two, he said a new executive might be a condition for the sale. So Kreger was one for two. But regardless, Hill brings important global healthcare experience from IMS that fits with PPD’s strategy of growing as a global organization. It makes sense for him to stay on.
Still, Footnoted didn’t ask PPD if Hill was staying. So I did.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
In typical corporate fashion, I did not get a “yes” or “no” answer. Ned Glascock, PPD’s associate director of corporate communications, responded to my query with an e-mailed statement, attributed to Hill: “I am proud to be part of PPD during such an exciting time. This transaction is just one example of how highly respected PPD is in the industry. It serves as a testament to the excellent client service delivered by PPD employees and Dr. Eshelman. With the quality of our team, I am certain we can achieve unsurpassed leadership and operational excellence for our new owners and our clients.”
Sounds like Hill is sticking around.
