<PAGE>   1

                                                                   EXHIBIT 10.86



                    PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
                          EMPLOYEE STOCK PURCHASE PLAN


         THIS INSTRUMENT is executed as of the 15th day of May, 1997 by
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North Carolina corporation (the
"Company").

                              Statement of Purpose

         The Company desires to establish the Pharmaceutical Product
Development, Inc. Employee Stock Purchase Plan in order to provide eligible
employees with the opportunity to purchase shares of the common stock of the
Company and to thereby share in the continued growth and success of the Company.

         NOW, THEREFORE, the Company hereby establishes the PHARMACEUTICAL
PRODUCT DEVELOPMENT, Inc. Employee Stock Purchase Plan effective as of July 1,
1997, consisting of the following Articles I through VIII:

                                    ARTICLE I
                   NAME, PURPOSE, CONSTRUCTION AND DEFINITIONS

         Section 1.1. Name. The Plan shall be known as the "Pharmaceutical
Product Development, Inc. Employee Stock Purchase Plan."

         Section 1.2. Purpose. The purpose of the Plan is to provide
Participants in the Plan with an opportunity to purchase Common Stock in the
Company through payroll deductions and other contributions, thereby encouraging
Participants to share in the economic growth and success of the Company through
stock ownership.

         Section 1.3. Construction. Article, Section and paragraph headings have
been inserted in the Plan for convenience of reference only and are to be
ignored in any construction of the provi-




<PAGE>   2

sions hereof. If any provision of the Plan shall be invalid or unenforceable the
remaining provisions shall nevertheless be valid, enforceable and fully
effective. It is the intent that the Plan shall at all times constitute an
"employee stock purchase plan" within the meaning of Section 423(b) of the Code,
and the Plan shall be construed and interpreted to remain such. The Plan shall
be construed, administered, regulated and governed by the laws of the United
States to the extent applicable, and to the extent such laws are not applicable,
by the laws of the State of North Carolina.

         Section 1.4. Definitions. Whenever used in the Plan, unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:

                  (a) Beneficiary, with respect to a Participant, means such
         Participant's "Beneficiary" under the group term life insurance plan
         maintained by the Company.

                  (b) Board or Board of Directors means the Board of Directors
         of the Company or any Committee or Committees of said Board of
         Directors of the Company to which, and to the extent, said Board of
         Directors of the Company has delegated some or all of its power,
         authority, duties or responsibilities with respect to the Plan.

                  (c) Code means the Internal Revenue Code of 1986, as the same
         may be amended from time to time, and references thereto shall include
         the valid Treasury regulations issued thereunder.

                  (d) Committee means the "Committee" as defined under the
         Retirement Savings Plan which is responsible for the 


                                       2
<PAGE>   3

         administration of the Plan in accordance with Article VI hereof.

                  (e) Common Stock means shares of the $0.10 par value common
         stock of the Company and any other stock or securities resulting from
         the adjustment thereof or substitution therefor as described in Section
         3.4.

                  (f) Company means Pharmaceutical Product Development, Inc., a
         North Carolina corporation.

                  (g) Compensation means "Contribution Compensation" as defined
         under the Retirement Savings Plan, except that Compensation under the
         Plan shall not be limited by Section 401(a)(17) of the Code.

                  (h) Effective Date means July 1, 1997.

                  (i) Employee means a person employed by the Company.

                  (j) Fair Market Value, with respect to a share of Common Stock
         from time to time, means (i) if the Common Stock is traded on the
         National Market System, the closing price of the Common Stock for the
         applicable date, as published in the NASDAQ National Market Issues
         report in the Eastern Edition of The Wall Street Journal, (ii) if the
         Common Stock is not traded on the National Market System but such
         Common Stock is listed on a national securities exchange, the mean
         between the highest price and the lowest price at which the Common
         Stock shall have been sold regular way on a national securities
         exchange on the applicable date during an Offering Period or, if there
         are no sales on said date, then on the next preceding date on which
         there were sales of Common Stock, (iii) if the Common Stock is not
         

                                       3
<PAGE>   4

         traded on the National Market System or listed on a national securities
         exchange, the mean between the bid and asked prices last reported by
         the National Association of Securities Dealers, Inc. for the
         over-the-counter market on the applicable date during an Offering
         Period or, if no bid and asked prices are reported on said date, then
         on the next preceding date on which there were such quotations, or (iv)
         if the Common Stock is not traded on the National Market System or
         listed on a national securities exchange and quotations for the Common
         Stock are not reported by the National Association of Securities
         Dealers, Inc., the fair market value determined by the Committee on the
         basis of available prices for the Common Stock or in such manner as the
         Committee shall agree.

                  (k) Offering means the offering of shares of Common Stock to
         Participants pursuant to this Plan that occurs on each Offering Date.

                  (l) Offering Date means July 1, 1997 and each succeeding
         January 1 and July 1.

                  (m) Offering Period means the period from an Offering Date
         through the immediately succeeding Offering Date. 

                  (n) Participant means an Employee who has become a Participant
         pursuant to Section 2.2 of the Plan.

                  (o) Plan means the Pharmaceutical Product Development, Inc.
         Employee Stock Purchase Plan, as set forth herein, together with any
         and all amendments thereto.


                                       4
<PAGE>   5

                  (p) Retirement Savings Plan means The Pharmaceutical Products
         Development, Inc. Retirement Savings Plan as in effect from time to
         time.

                  (q) Stock Purchase Account, with respect to a Participant,
         means the account established on the books and records of the Company
         for such Participant representing the payroll deductions credited to
         such account in accordance with the provisions of the Plan.

                                  ARTICLE II
                                PARTICIPATION

         Section 2.1. General. No person shall become a Participant unless or
until such person is or becomes an Employee and upon or following satisfaction
of the eligibility requirement set forth in the Plan. In addition, in no event
shall any person be eligible to participate in the Plan before the Effective
Date.

         Section 2.2. Participation Requirements.

         (a) Eligibility Requirement. An Employee shall satisfy the eligibility
requirement for the Plan on the date the Employee is first employed by the
Company, subject to the provisions of Section 2.2(c) below.

         (b) Commencement of Participation. Each person who satisfies the
eligibility requirement of Section 2.2(a) on or before the Effective Date shall
become a Participant in the Plan:

                  (1) on the Offering Date coinciding with the Effective Date,
         if such person is an Employee on such Offering Date; or

                  (2) if such person is not an Employee on such Offering Date,
         then on the first Offering Date coinciding with or 


                                      5
<PAGE>   6

         next following the date (if any) on which such person again becomes an
         Employee after the Effective Date.

Each person who satisfies the eligibility requirement of Section 2.2(a) after
the Effective Date shall become a Participant in the Plan:

                  (1) on the first Offering Date after such person satisfies the
         eligibility requirement, if such person is an Employee on such Offering
         Date; or

                  (2) if such person is not an Employee on such Offering Date,
         then on the first Offering Date coinciding with or next following the
         date (if any) on which such person again becomes an Employee.

         (c) Exclusions. Notwithstanding any provision of the Plan to the
contrary, in no event shall the following persons be eligible to participate in
the Plan:

                  (1) Any Employee whose customary employment with the Company
         is twenty (20) hours or less per week; or

                  (2) Any Employee whose customary employment with the Company
         is for not more than five (5) months in any calendar year.

         Section 2.3. Eligibility of Former Participants. If a person terminates
employment with the Company after becoming a Participant and subsequently
resumes employment with the Company, such person shall again become a
Participant on the Offering Date coinciding with or next following such
resumption of employment with the Company without having to satisfy again the
eligibility requirement of Section 2.2(a).


                                       6

<PAGE>   7

                                   ARTICLE III
                            OFFERING OF COMMON STOCK

         Section 3.1. Reservation of Common Stock. The Board of Directors shall
reserve five hundred thousand (500,000) shares of Common Stock for the Plan,
subject to adjustment in accordance with Section 3.4. The aggregate number of
shares of Common Stock which may be purchased under the Plan by Participants
shall not exceed five hundred thousand (500,000) shares, subject to adjustment
in accordance with Section 3.4.

         Section 3.2. Offering of Common Stock.

         (a) General. Subject to Section 3.2(b), each Participant in the Plan on
an Offering Date shall be entitled to purchase shares of Common Stock on the
last day of the Offering Period beginning with such Offering Date with the
amounts deducted from such Participant's Compensation or otherwise contributed
during such Offering Period pursuant to Article IV. The purchase price for such
shares of Common Stock shall be determined under Section 3.3.

         (b) Limitations. Notwithstanding Section 3.2(a), the maximum number of
shares of Common Stock a Participant may purchase pursuant to an Offering under
Section 3.2(a) shall be subject to the following limitations:

                  (1) If as of the Offering Date for such Offering such
         Participant owns (including stock which such Participant is considered
         to own under Section 425(d) of the Code) stock (including the Common
         Stock such Participant would be entitled to purchase pursuant to an
         Offering) possessing five percent (5%) or more of the total combined
         voting power or value of all classes of stock of the Company, then the
         maximum number of shares of Common Stock such Participant may purchase
         pursuant to such Offering shall be reduced so 

                                       7

<PAGE>   8

         that the number of shares of Common Stock such Participant may purchase
         pursuant to such Offering when added to the number of shares of stock
         of the Company such Participant owns (including stock which such
         Participant is considered to own under Section 425(d) of the Code)
         (excluding the Common Stock such Participant would be entitled to
         purchase pursuant to such Offering) is less than five percent (5%) of
         the total combined voting power or value of all classes of stock of the
         Company; and

                  (2) If such Participant could acquire within the same calendar
         year as an Offering shares of stock of the Company under all "employee
         stock ownership plans" within the meaning of Section 423(b) of the Code
         sponsored by the Company (including the Common Stock such Participant
         would be entitled to purchase pursuant to such Offering) having a total
         fair market value (determined as of the date of such Offering) which
         exceeds Twenty-Five Thousand Dollars ($25,000), then the maximum number
         of shares such Participant may purchase pursuant to such Offering shall
         be reduced so that such total fair market value does not exceed
         Twenty-Five Thousand Dollars ($25,000).

         Section 3.3. Determination of Purchase Price for Offered Common Stock.
The purchase price per share of the shares of Common Stock offered to
Participants pursuant to an Offering shall be equal to eighty-five percent (85%)
of the lesser of:

                  (a) the Fair Market Value of a share of Common Stock as of the
         first day of the Offering Period for such Offering; or 

                  (b) the Fair Market Value of a share of Common Stock as of the
         last day of the Offering Period for such Offering; provided, however,
         that in no event shall the purchase price be less than the par value of
         a share of Common Stock.

                                       8


<PAGE>   9

         Section 3.4. Effect of Certain Transactions. The number of shares of
Common Stock reserved for the Plan pursuant to Section 3.1 and the determination
under Section 3.3 of the purchase price per share of the shares of Common Stock
offered to Participants pursuant to an Offering shall be appropriately adjusted
to reflect any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, a consolidation of shares, the payment of a
stock dividend or any other capital adjustment affecting the number of issued
shares of Common Stock. In the event that the outstanding shares of Common Stock
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company or another corporation, whether through
reorganization, recapitalization, merger, consolidation or otherwise, then there
shall be substituted for each share of Common Stock reserved for issuance under
the Plan but not yet purchased by Participants, the number and kind of shares of
stock or other securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be exchanged.


                                   ARTICLE IV
                               PAYROLL DEDUCTIONS

         Section 4.1. Payroll Deduction Elections. A Participant in the Plan (or
a person who will become a Participant in the Plan on the next Offering Date if
such person is an Employee on such Offering Date) who wishes to purchase shares
of Common Stock to be offered to such Participant on the next Offering Date
shall elect to have the Company deduct from the Compensation payable to such
Participant during the Offering Period beginning on such 

                                       9
<PAGE>   10

Offering Date any amount between one percent (1%) and fifteen percent (15%) of
such Participant's Compensation, in whole multiples of one percent (1%). Such
election shall be made by delivering to the Committee during the forty-five (45)
day period preceding such Offering Date a written direction to make such
deductions. Such election shall become effective as of the first day of such
Participant's first pay period that begins on or after such Offering Date and
shall remain effective for each successive pay period until changed or
terminated pursuant to this Article IV. In addition, at any time during an
Offering Period, a Participant may make additional contributions from the
Participant's own funds towards the purchase of Common Stock under the Plan for
such Offering Period. Such additional contributions must be made in cash or its
equivalent under procedures established from time to time by the Committee.

         Section 4.2. Election to Increase or Decrease Payroll Deductions.
Subject to Section 4.5, a Participant who has a payroll deduction election in
effect under Section 4.1 may prospectively increase or decrease during an
Offering Period the percentage amount of the deductions being made by the
Company from such Participant's Compensation (including a decrease to zero (0))
by delivering to the Committee a written direction to make such change. Such
change shall become effective as soon as practical after the Committee's receipt
of such written direction and shall remain in effect until changed or terminated
pursuant to this Article IV.

         Section 4.3. Termination of Election Upon Termination of Employment.
The termination of employment of a Participant with

                                       10
<PAGE>   11

the Company for any reason shall automatically terminate the election (if any)
of such Participant to have amounts deducted from such Participant's
Compensation pursuant to this Article IV that is then in effect. Such
termination shall be effective immediately following the pay period during which
such termination of employment occurs, but shall not affect the deduction from
Compensation for that pay period.

         Section 4.4. Change or Termination Not Retroactively Effective. Neither
the change nor the termination of any election to have amounts deducted from
Compensation under this Article IV shall increase, decrease or otherwise affect
the deduction from the Compensation of a Participant for any pay period ending
prior to the effective date of such change or termination.

         Section 4.5. Form, Timing and Frequency of Elections. Any written
direction by any Participant with respect to any deductions from Compensation
pursuant to this Article IV shall be on a form furnished by the Committee for
such purpose and shall be made by such Participant's completing, signing and
filing such form with the Committee in the manner prescribed from time to time
by the Committee. A Participant shall be permitted to increase or decrease the
percentage amount of the deductions being made by the Company from such
Participant's Compensation only once during an Offering Period; provided,
however, a Participant may terminate the deductions being made by the Company
from such Participant's Compensation at any time during an Offering Period
notwithstanding any prior change in the amount 

                                       11
<PAGE>   12

of such Participant's Compensation deductions during such Offering Period.

                                  ARTICLE V
             STOCK PURCHASE ACCOUNTS AND PURCHASE OF COMMON STOCK

         Section 5.1. Stock Purchase Accounts. A Stock Purchase Account shall be
established and maintained on the books and records of the Company for each
Participant. Amounts deducted from a Participant's Compensation or otherwise
contributed by the Participant pursuant to Article IV shall be credited to such
Participant's Stock Purchase Account. No interest or other increment shall
accrue or be payable to any Participant with respect to any amounts credited to
such Stock Purchase Accounts. All amounts credited to such Stock Purchase
Accounts shall be withdrawn, paid or applied toward the purchase of Common Stock
pursuant to the provisions of this Article V.

         Section 5.2. Purchase of Common Stock.

         (a) General. As of the last day of each Offering Period, the amount to
the credit of a Participant in such Participant's Stock Purchase Account shall
be used to purchase from the Company on such Participant's behalf the largest
number of whole shares of Common Stock which can be purchased at the price
determined under Section 3.3 with the amount then credited to such Participant's
Stock Purchase Account subject to the limitations set forth in Article III on
the maximum number of shares of Common Stock such Participant may purchase. As
of such date, such Participant's Stock Purchase Account shall be charged with
the aggregate purchase price of the shares of Common Stock purchased on such
Participant's behalf. The remaining balance

                                       12
<PAGE>   13

(if any) credited to such Participant's Stock Purchase Account shall be credited
to such Participant's Stock Purchase Account for the immediately succeeding
Offering; provided, however, if such Participant has withdrawn from the Plan
pursuant to Section 5.3, such remaining balance shall be distributed to such
Participant as soon as administratively practical.

         (b) Issuance of Common Stock. The shares of Common Stock purchased for
a Participant on the last day of an Offering Period shall be deemed to have been
issued by the Company for all purposes as of the close of business on such date.
Prior to such date, none of the rights and privileges of a shareholder of the
Company shall exist with respect to such shares of Common Stock. As soon as
practicable after such date, the Company shall issue and deliver, or shall cause
its stock transfer agent to issue and deliver, a certificate for the number of
shares of Common Stock purchased for a Participant on such date, which such
certificate shall be issued in the Participant's name.

         (c) Insufficient Common Stock Available. If as of the last day of any
Offering Period, the aggregate Stock Purchase Accounts available for the
purchase of shares of Common Stock pursuant to Section 5.2(a) would purchase a
number of shares of Common Stock in excess of the number of shares of Common
Stock then available for purchase under the Plan, (i) the number of shares of
Common Stock which would otherwise be purchased for each Participant on such
date shall be reduced proportionately to the extent necessary to eliminate such
excess, (ii) the remaining balance to the credit of each Participant in each
such Participant's Stock Purchase Account shall be distributed to each such
Participant

                                       13

<PAGE>   14

and (iii) the Plan shall terminate automatically upon the distribution of the
remaining balance in such Stock Purchase Accounts.

         Section 5.3. Withdrawal From Plan Prior to Purchase of Common Stock. In
the event (i) a Participant terminates employment with the Company for any
reason during an Offering Period, or (ii) a Participant terminates deductions
from such Participant's Compensation pursuant to Article IV during an Offering
Period and such Participant elects to withdraw in writing from the Plan, then
the entire amount to the credit of such Participant in such Participant's Stock
Purchase Account shall be distributed to such Participant (or if such
Participant is deceased, to such Participant's Beneficiary) as soon as
administratively practicable after such termination of employment or withdrawal
(as the case may be). If a Participant terminates deductions from such
Participant's Compensation pursuant to Article IV during an Offering Period but
such Participant does not elect to withdraw in writing from the Plan, the amount
to the credit of such Participant in such Participant's Stock Purchase Account
shall be used to purchase shares of Common Stock for such Participant as of the
last day of such Offering Period to the extent provided in Section 5.2(a) and
the remaining balance in such Participant's Stock Purchase Account shall be
distributed to such Participant as soon as administratively practicable.
Notwithstanding the preceding sentence, if a Participant terminates deductions
from such Participant's Compensation pursuant to Article IV during an Offering
Period and the amount to the credit of such Participant in such Participant's
Stock Purchase Account upon such termination of Compensation deductions 

                                       14

<PAGE>   15

does not exceed One Hundred Dollars ($100.00), then such Participant shall be
deemed to have withdrawn from the Plan upon such termination of Compensation
deductions for purposes of this Section 5.3.

                                   ARTICLE VI
                                   COMMITTEE

         Section 6.1. Organization of Committee. The Committee for purposes of
the Plan shall be the "Committee" as defined under the Retirement Savings Plan.
The Committee may appoint such agents, who need not be members of the Committee,
as it may deem necessary for the effective performance of its duties, and may
delegate to such agents such powers and duties, whether administerial or
discretionary, as the Committee may deem expedient or appropriate. The Committee
shall act by majority vote and may adopt such bylaws, rules and regulations as
it deems desirable for the conduct of its affairs.

         Section 6.2. Powers of Committee. The Committee shall administer the
Plan. The Committee shall have all powers necessary to enable it to carry out
its duties under the Plan properly. Not in limitation of the foregoing, the
Committee shall have the power to construe and interpret the Plan and to
determine all questions that shall arise thereunder. It shall decide all
questions relating to eligibility to participate in the Plan and to purchase
Common Stock under the Plan. The Committee shall have such other and further
specified duties, powers, authority and discretion as are elsewhere in the Plan
either expressly or by necessary implication conferred upon it. The decision of
the Committee upon all matters within the scope 

                                       15

<PAGE>   16

of its authority shall be final and conclusive on all persons, except to the
extent otherwise provided by law.

         Section 6.3. Expenses of Committee. The reasonable expenses of the
Committee incurred by the Committee in the performance of its duties under the
Plan, including without limitation reasonable counsel fees and the expenses of
other agents, shall be paid by the Company.

         Section 6.4. Indemnification of Committee. To the extent permitted by
applicable law, the Company shall indemnify and hold harmless each member of the
Committee from and against any and all liability, claims, demands, costs and
expenses (including the costs and expenses of attorneys incurred in connection
with the investigation or defense of claims) in any manner connected with or
arising out of any actions or inactions in connection with the administration of
the Plan except for such actions or inactions which are not in good faith or
which constitute willful misconduct.

                                  ARTICLE VII
                           AMENDMENT AND TERMINATION

         Section 7.1. Amendment of Plan. The Company expressly reserve the
right, at any time and from time to time, to amend in whole or in part any of
the terms and provisions of the Plan for whatever reason(s) the Company may deem
appropriate; provided, however, no amendment may without the approval of the
shareholders of the Company (i) increase the number of shares of Common Stock
reserved under the Plan, (ii) change the method of determining the purchase
price for shares of Common Stock, (iii) materially increase the benefits
accruing to Participants, or 

                                       16

<PAGE>   17

(iv) materially change the eligibility requirement for participation of the
Plan.

         Section 7.2. Termination of Plan. The Company expressly reserves the
right, at any time and for whatever reason it deems appropriate, to terminate
the Plan. Upon any termination of the Plan, the entire amount credited to the
Stock Purchase Account of each Participant shall be distributed to each such
Participant.

         Section 7.3. Effective Date and Procedure for Amendment or Termination.
Any amendment to the Plan or termination of the Plan may be retroactive to the
extent not prohibited by applicable law. Any amendment to the Plan or
termination of the Plan shall be made by the Company by resolution of the Board
of Directors and shall not require the approval or consent of any Participant or
Beneficiary in order to be effective.

                                  ARTICLE VIII
                                 MISCELLANEOUS

         Section 8.1. Transferability of Rights. To the extent permitted by law,
rights to purchase shares of Common Stock are exercisable only by the
Participant to whom such rights are granted and are not transferable by such
Participant other than by will or the laws of descent and distribution.

         Section 8.2. No Employment Rights. Participation in the Plan shall not
give any employee of the Company any right to remain in the employ of the
Company or upon termination of employment, any right or interest in the Plan
except as expressly provided herein.

         Section 8.3. Compliance with Law. No shares of Common Stock shall be
issued under the Plan prior to compliance by the 

                                       17

<PAGE>   18

Company to the satisfaction of its counsel with any applicable laws.

         Section 8.4. Repurchase of Common Stock. The Company shall not be
required to repurchase from any Participant any shares of Common Stock which
such Participant acquires under this Plan.

         Section 8.5. Approval of Plan. The effectiveness of this Plan is
subject to its approval by the shareholders of the Company at the annual meeting
of the shareholders of the Company scheduled for May 1997. In the event that
this Plan is not approved in accordance with the preceding sentence, all amounts
deducted from the Compensation of Participants and credited to each
Participant's Stock Purchase Account shall be refunded to each such Participant
without interest as soon as administratively practicable.

         IN WITNESS WHEREOF, the Company have caused this Instrument to be
executed by its duly authorized officer as of the day and year first above
written.

                                       PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.


                                       By: /s/ Fredric N. Eshelman
                                          -------------------------------------
                                       Name:  Fredric N. Eshelman
                                            -----------------------------------
                                       Title: Chief Executive Officer
                                             ----------------------------------

                                       "Company"

                                       18