Harvard Bioscience, Inc. (HBIO)
2003 Interview with: David Green, President
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
broad range of scientific instruments, used to accelerate drug discovery research at pharmaceutical and biotechnology companies, universities and government laboratories worldwide.

Cover Story

Index &

Current Issue



and Reports





Contact & Ordering

"To print this page go to file and left click on print"

Harvard Bioscience’s focus on the bottleneck and drug discovery is leading to above average growth in revenues and above average margins

wpe57.gif (6873 bytes)

Biotech/Scientific Instruments


Harvard Bioscience, Inc.

84 October Hill Rd.
Holliston, MA 01746
Phone: 508-893-8999

wpe5D.gif (45066 bytes)

David Green

Interview conducted by:
Lynn Fosse

February 2003

David Green

Graduated from Oxford University in 1985 with honours degree in physics.

Brand Manager Lux and Shield soaps for Lever Brothers (Unilever) in London for four years.

Graduated with distinction from Harvard Business School in 1991.

Strategy consultant with Monitor Company in Cambridge, MA and Johannesburg, South Africa for four years.  South Africa work was advising the African National Congress on competitiveness and increasing GDP growth rate.

Put together VC backed deal to buy Harvard Bioscience (ne Harvard Apparatus) in 1995 becoming President.

At Harvard Bioscience we have grown from $8m in revenues in 1996 to guidance of $80m in 2003.  Our products are used to accelerate drug discovery.  We went public in December 2000 on the NASDAQ market and trade under the symbol HBIO.

Company Profile:
Harvard Bioscience, Inc. (NASD: HBIO) is a global developer, manufacturer and marketer of a broad range of specialized products, primarily scientific instruments, used to accelerate drug discovery research at pharmaceutical and biotechnology companies, universities and government laboratories worldwide. HBIO sells its products to thousands of researchers in over 100 countries through its direct sales force, its 1000 page catalog (and various other specialty catalogs), and through its distributors, including Amersham Biosciences and PerkinElmer. HBIO has sales and manufacturing operations in the United States, the United Kingdom, Germany, Austria and Belgium with sales facilities in Japan, France and Canada.

CEOCFOinterviews: Mr. Green, I know Harvard has a long history, how important is that to you today and what is the current focus of the company?

Mr. Green: “The company does have a very long history; the company began in 1901 at Harvard Medical School under the name of Harvard Apparatus. We changed the name of the company to Harvard Bioscience a few years back in order to better reflect a much broader product line today than we had back when the company was founded. Today, we focus on a broad range of tools, which are primary scientific instruments, used by major pharmaceutical and biotech companies as well as major research universities, to accelerate drug discovery. Every major pharmaceutical company and every major research university is a customer of ours. We make scientific instruments to help them to automate bench research.”

CEOCFOinterviews: What distinguishes Harvard Bioscience from other companies in your space?

Mr. Green: “One of the things that distinguishes our company from other small public companies in the tools for drug discovery space is that we do have a broad product line; most of the other companies have a single product and a single technology. We have made a very conscious business decision to pursue a broad product line because this industry is characterized by very rapid technological change. We think it is very high-risk as a business to be dependent on a single technology because technology moves rapidly and the applications that drug discovery scientists are working on move rapidly.”

CEOCFOinterviews: Can you tell us about your distribution channels?

Mr. Green: “We have three separate distribution channels.  We have a capital equipment field sales force worldwide. We have several OEM distributors; most of them are very big names in the life science tools industry; such as Amersham Biosciences (the life sciences business of Amersham plc – LSE: NYSE: OSE: AHM) and PerkinElmer. Virtually every one of the Mass Spectrometry companies is an OEM (Original Equipment Manufacturers) distributor of ours. We believe in leveraging their distribution channels as well as our own. We have a major catalog and website for distributing our lower priced products as well. Those are our three distribution channels.  We tend to like products and product lines that have strong market positions within niches. This industry of supplying tools to the pharmaceutical industry is a niche industry. There are very few big product segments within the industry and we chose deliberately not to compete head-on with the big instrument companies, on the contrary, we tend to work with them for them to distribute products of ours that have a unique position. We use our own sales force outside that around the world.”

CEOCFOinterviews: So you are not defined by a signature or flagship product.

Mr. Green: “I don’t think there is one signature product that defines us as a company. That’s is one of the ways we are very different to the one technology companies.”

CEOCFOinterviews: Do customers know what they want when they come to you or are you introducing products to them?

Mr. Green: “Both of those are true. With the more mature products under the Harvard Apparatus name, which have been around for many years, our customers tend to know exactly what they want. Some of our more cutting-edge technologies carry a price tag of a 100 to 300 thousand dollars. With those we are often educating the customer about a new technique and a new approach. For instance, we sell a very important instrument, called COPAS, which can be used to automate animal research. I am talking about worms, and flies and fish, which can be handled in an automated fashion. Drug discovery scientists can now routinely screen potential pharmaceutical molecules for activity in these living breathing organisms, at over a thousand compounds a day. This is the kind of technology where there is a significant education process with the customers about the technology and the use of organisms like worms, flies, and fish in the drug discovery process. Therefore, it is a mix of both educating customers to very new cutting-edge products and customers looking for some of our products, which are very well established.”

CEOCFOinterviews: Are there disposable parts to what you sell?

Mr. Green: “Primarily we sell scientific instruments and there are some consumables that go with the products; the consumables are less than 10% of our revenues.”

CEOCFOinterviews: Do you need to maintain a large inventory, and how do you handle that?

Mr. Green: “I think we have modest inventory levels. Gross margins are relatively high and since we are keeping these products at manufacturing costs, and reporting cost rather than retail value, the cost of the inventory isn’t that high.”

CEOCFOinterviews: Do you still develop any products on your own, and how much of the R&D goes on at Harvard?

Mr. Green: “We do develop product lines that we own and manufacture. We have our own in-house engineering and scientific staff to create the next generation of the products that we currently own. When we look for radically new technologies, we typically do not try to invent those ourselves. If you look at the history of the people who have tried to invent new technology by themselves, they usually have incurred massive operating losses for many years before, if ever, achieving profitability, and that is not our business model; our business model is to make money every quarter. We have found it is more efficient and effective to buy small companies once they have already reached the revenue stage, and we can leverage our strengths in operational management and in sales and marketing. We can bring in those technologies, once they have some level of proof in the market place, rather than trying to invent those from the ground up, because it is a risky business to invent new technologies completely from scratch. When trying to develop technologies that are more cutting-edge we will typically only do that with a major pharmaceutical company who are willing to fund some of that development work.”

CEOCFOinterviews: You recently completed the acquisition of
BTX Division of Genetronics Biomedical Corporation (GEB: AMEX and TSX); tell us about that and how that fits into your strategy?

Mr. Green: “BTX is a small company; it is about 3 (three-and-a-half) million dollars in annual revenues and it is what we call a “tuck under” acquisition. We have made many acquisitions over the last six or seven years and many of them are small product lines between one million and five million dollars in annual revenues. These are very complementary to product lines that we already sell and therefore we can really leverage the existing distribution channel we have whether it is our relationship with OEM distributors, or whether it is through our field sales force or our catalog and website. We tend to like expanding our product line by acquiring these strong franchises in niche markets. BTX is going to be consolidated into our headquarters here in Holliston, Massachusetts. We expect that to be accretive to our earnings per share immediately upon moving it here. That is typical of the ‘tuck-under’ acquisitions that we do because we can leverage our existing infrastructure in terms of general and administrative expense and also sale and marketing expense. We have done several of these acquisitions a year for the past four or five years.

BTX has some upside associated with it as well. BTX has recently completed the development of a new generation of technology for their core application area,
electroporation, which is a technique for getting drugs, DNA and RNA into cells. Electroporation, I believe, will be a growth market going forward because of a new technique called RNAi (RNA interference). RNA interference, is the answer to many pharmaceutical researcher prayers for a way to accelerate a key bottlenecks in the drug discovery process called “target validation”, which is insuring that a protein molecule in the human body, is indeed, implicated in a disease. It is very easy now with genomics technology such as the sequencing of the human genome, and gene chips, to identify targets. It is much harder to validate that those targets are genuinely implicated in a human disease. RNA interference allows you to do that very quickly compared to historical ways of doing that, which had to use knockout animals, which is expensive and slow. I think RNA interference is something we are going to hear a lot more about in the future. BTX is the first to market with a 96 well version of the technology which means it can be done in high throughput which is a requirement for virtually all research today. Initial reaction from customers even before the product had been officially launched was very positive.”

CEOCFOinterviews: I’m assuming that there are a tremendous amount of patents involved in what you do; are there some areas where you are the only people supplying this equipment?

Mr. Green: “Yes, BTX, the 96 well example I just gave is one. The COPAS instruments are unique to us; there is no one else who sells products like that. We have patents elsewhere in our portfolio that protect key elements for our technologies. I believe patents are not nearly as valuable as they appear to be to many people in this industry. There are many small and unprofitable tools for drug discovery companies. These companies have one hundred to two hundred patents. That doesn’t guarantee their commercial success. It can often be a distraction in pursuing all of those patents because they are very expensive unless you really have a completely unique solution. We prefer to put our efforts into sales and marketing and operating businesses efficiently and we will get patents where we think they are justified. Generally, we are not the kind of company that goes out and patents everything that moves.”

CEOCFOinterviews: What are the areas of growth for you?

Mr. Green: “We deliberately target our products to two of the key bottlenecks in drug discovery.  Drug discovery is a very long and expensive process. It takes nearly a billion dollars to bring a drug to market and it takes twelve to fifteen years; it’s a long and multi-step process. Some of those steps are genuine bottlenecks. One is target validation and I think that
RNA interference and the BTX products can really help there. Likewise the COPAS products.  Another one is ADMET screening. ADMET stands for Absorption, Distribution, Metabolism, Elimination and Toxicology. That is what happens to a drug once it enters your body. We have invested to create and acquire products that target those areas.

In October of last year, we closed the acquisition of Genomic Solutions, which has a very strong set of technologies in bottleneck areas in drug discovery, particularly the purification of proteins, which is commonly used in target validation as most targets are proteins. Genomic Solutions also sells some very strong technologies for crystallizing proteins and that is an important step before doing x-ray crystallography. The beauty of x-ray crystallography is that you can determine the exact shape of a protein and the exact shape of a protein after a drug molecule is bound to that protein. If you perform those steps, it becomes easy to rationally design your drugs. In other words if you know the lock you can design the key.  That is a way to cut out a lot of the ‘hit and miss.’ You may find it surprising but most drugs are not rationally designed today, most are discovered by ‘hit and miss’ which is one reason it is so expensive.

We have deliberately built our portfolio of products, whether it is through internal development or whether it is through acquisition, to focus on the bottlenecks in drug discovery because we believe that is how we get above average growth in revenues and above average margins. I think our track record, supports the validity of that strategy. Over the last five years, we have seen revenues grow at a compound annual growth rate of 38%, and we have seen pro forma earnings per-share over the last five years, grow at a rate of 23%. I think that strategy is validated by the strong performance of the company.”

CEOCFOinterviews: Are there any geographic area that you would like to increase your presence?

Mr. Green: “We are already very widely distributed around the world, both under our own brand names and also through our OEM distributors, such as Amersham Biosciences and PerkinElmer, Inc. (NYSE: PKI). These two distributors have about a thousand field  people worldwide between them. We can leverage their distribution channels by having these OEM relationships into areas of the world and particular customers where we don’t have as strong a presence. We have field sales people in the United States, Europe, and Japan, so we already cover the biggest markets on our own.”

CEOCFOinterviews: What are your biggest challenges going forward and how are you prepared?

Mr. Green: “The biggest challenge for us going forward is to increase the size of the company to the point where we get much greater stock market recognition for what we do. As a business, we believe we have a fundamentally sound and sustainable business model of high revenue growth and high earnings per share growth within the tools for drug discovery space. The reality is we are about a 75 or 80 million dollar run rate of revenues, company today. That is still very small to be a public company, and I think as a result, we suffer a liquidity discount in our stock because we are small and thinly traded. It is important for us to continue our growth and get ourselves to the size that we cannot be ignored by the stock market anymore, and I think by doing that we will see disproportionate returns to the stock price.”

CEOCFOinterviews: Will growth come from higher sales or increase in product line?

Mr. Green: “I think it is both of those. But, I don’t think it is possible for us to get the significant growth we want without further expanding our product line and I think there are many opportunities to do that. We have been a very acquisitive company over the last five years and we expect to remain that way; it is a core part of our strategy and not an add-on. We expect to be acquiring more companies and product lines as we go forth because there is still significant leverage opportunities in the large fixed cost areas of managing a field sales force and even in managing catalog and websites. I foresee further acquisitions and because of the decline in the public stock markets over the last couple of years the pricing of acquisitions has come down substantially. Many companies that might have gone public two or three years ago have no hope of going public today, therefore, they are much more interested in partnering up with a company such as us. We typically are working on half-a-dozen or a dozen potential acquisitions at any point in time. Right now, I think the opportunities for acquisitions have probably never been better.”

CEOCFOinterviews: About how much of your sales come from catalog and website and is that an increasing area for you?

Mr. Green: “Roughly our sales split about one third, one third, and one third between the field sales force, the OEM distributors, like Amersham Biosciences and Bruker Daltonics and the catalog website.”

CEOCFOinterviews: In closing, what would you like to say to shareholders and potential investors?

Mr. Green: “I think the key thing to focus on from an investor point of view is that we are in a growth market, and there aren’t very many growth markets around these days. We are a profitable company, and always have been. I think our financial performance speaks for itself; five years revenue growth at 38% and five-year pro forma eps growth at 23%. I think simply recognizing those facts, which may be buried in long documents like a 10-k filing, is the right thing to be focusing on.”


CEOCFOinterviews.com – Any reproduction or further distribution of this article without the express written consent of CEOCFOinterviews.com is prohibited.

ceocfointerviews.com does not purchase or make
recommendation on stocks based on the interviews published.