In a combination of deals, discovery and development services provider PPD Inc. will both refocus and expand on key areas of its services.

The Wilmington, N.C., company reported an agreement to purchase Eminent Research Systems Inc., of New Hope, Minn., and its Clinsights subsidiary in Rockville, Md., companies providing services to the medical device industry, and it will spin off biomarkers used in functional genomics to SurroMed Inc., of Mountain View, Calif. It will shut down those activities in its Menlo Park, Calif., facility, which will be taken over by SurroMed.

PPD has agreed to acquire Eminent and Clinsights for $25 million in cash. In the spin-off to SurroMed, PPD will in return receive $24 million of a new series of SurroMed senior preferred stock. Additionally, PPD has agreed to purchase biomarker discovery services from SurroMed over a four-year period and act as SurroMed's nonexclusive representative for sales of additional biomarker discovery services.

While somewhat simultaneous, the two deals are "totally separate efforts," Nancy Zeleniak, head of corporate communications for PPD, told BioWorld Today.

Zeleniak said that PPD "has been looking at other businesses to continue to grow the company in the right ways." She added: "The medical device market is significant in size and we expect some nice growth over the next few years."

Eminent Research and Clinsights focus on providing services to companies in the interventional cardiology fields. Zeleniak said this would be PPD's primary initial focus, though she did not close off the possibility of later expansion into other device arenas. She projected the interventional and stent areas in particular to grow up to 40 percent over the near term.

"We have done minimal work in medical devices - a few projects. But we looked at this area and said we could bring in the expertise [of Eminent and Clinsights] and what they offer in pre- and post-market services."

In the deal with SurroMed, she said that PPD had decided to move out of the functional genomics area, "curtail [efforts in] early stage discovery, and emphasize more lead optimization and preclinical work" for pharmaceuticals - areas seen by the company as having greater market opportunity. She said that the company had looked at "market indices and drivers" in functional genomics and decided this field "is not looking as robust - certainly not where it was when we got involved in it."

At the same time, she noted that PPD would maintain strong emphasis in other areas of biomarker discovery and work with SurroMed.

The relationship has important economic ties already, since in April 2002 PPD made a $5 million equity investment in SurroMed via Series E preferred stock.

Gordon Ringold, chairman and CEO of SurroMed, noted that the two companies would have an expanded relationship in several areas. "We believe that the collaboration with PPD will allow SurroMed to achieve positive cash flow and sustainability and to expand our leadership position in the field of biomarker discovery. We intend to use the cancer biomarkers we have acquired from PPD to begin a focused effort in cancer diagnostics and will seek to partner related cancer therapeutic opportunities."

Besides announcing the two deals, PPD issued its latest earnings report, saying that it had net second-quarter revenue of $185 million, an increase of 22 percent over the year-ago quarter. Income from operations was $34.2 million, an increase of 31 percent from the 2002 quarter.

PPD's stock (NASDAQ:PPDI) fell $4.70 Thursday, or 16.4 percent, to close at $24.05.