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Bioanalytical Systems is a contract research firm that
helps pharmaceutical companies put together information for the FDA to demonstrate that
new therapies will be both safe and effective
Healthcare
Biotechnology & Drugs
(BASI: NASD)
Bioanalytical Systems,
Inc.
2701 Kent Avenue West
Lafayette, IN 47906
Phone: 765-463-4527
Peter Kissinger
Chairman
Chief Executive Officer
Interview Conducted By:
Diane Reynolds
Associate Publisher
CEOCFOinterviews.com
August 2004
BIO OF CHAIRMAN/CEO
Peter T. Kissinger, Ph.D. is Chairman and CEO of Bioanalytical Systems, Inc. in West
Lafayette, Indiana and remains on the faculty of Purdue University as part-time Professor
of Chemistry.
Dr. Kissinger received a B.S. in Chemistry (1966)
from Union College in Schenectady, New York and a Ph.D. in Analytical Chemistry (1970)
from the University of North Carolina in Chapel Hill. Prior to joining the faculty at
Purdue in 1975, Dr. Kissinger was a Research Associate at the University of Kansas
(1970-1972) and an Assistant Professor at Michigan State University (1972-1975). Dr.
Kissinger’s academic research has involved the study of modern liquid chromatography
techniques and in vivo methodology for drug metabolism and the neurosciences. He founded
BASi in 1974.
Dr. Kissinger has published over 200 scientific
papers and has given more than 400 invited lectures. The Indiana Health Industry Forum
honored him for his Outstanding Contributions to the Health Care Industry with their 1999
World of Difference Award. He was elected a Fellow of the American Association of
Pharmaceutical Scientists (1998) and the American Association for the Advancement of
Science (2001).
Company Profile:
Bioanalytical Systems, Inc. (BASi) is a drug development firm providing contract research
services and unique products for the pharmaceutical, biotechnology and medical device
industries. The company is a leading manufacturer of specialized instrumentation and
accessories for liquid chromatography, in vivo sampling (whole blood, plasma,
microdialysis and ultrafiltration), veterinary medicine and electrochemistry. Our services
and products have been well received in drug metabolism research, pharmacokinetics
studies, pharmacology, toxicology, veterinary health and pharmaceutical product analysis.
BASi provides contract research services under FDA, GLP and cGMP quality assurance
systems.
The company has laboratories in the USA and UK and a
partner laboratory in France, Biotec Centre. Bioanalytical chemistry using the latest
96-well robotics, LC/MSMS (15 instruments) and Watson LIMS software is one specialty. In
the preclinical area BASi works with laboratory animal models from mice to primates and
follows the “refine, reduce, replace” philosophy of animal research. The company
also supports all phases of human clinical trials.
CEOCFOinterviews: Dr. Kissinger, please give my readers a
brief history of Bioanalytical Systems and where it is today.
Dr. Kissinger: “Bioanalytical
Systems is a company that participates in the pharmaceutical and biotechnology industries.
We are a contract research firm that helps businesses put together information for the FDA
to demonstrate that new therapies will be both safe and effective. We are in a highly
regulated business and we work across many therapeutic areas such as oncology, central
nervous system, diabetes, HIV, cardiovascular and so on. We provide both products and
services to leading pharmaceutical companies in this area, companies such as Pfizer,
Merck, Lilly and Glaxo.”
CEOCFOinterviews: A lot
of your business relies on your alliances, contract research and the products. Of the
three, where is the majority of the focus, or is it equally divided?
Dr. Kissinger: “It
is divided. About 70% of our revenue comes from contract research and that is a reflection
of some recent acquisitions we closed in the last year or so. We also do our own research
and design our own tools that are used by the same clients to get data in their internal
research operations. This whole business is about getting data, getting numbers to
validate new therapeutics. These numbers come from preclinical laboratory animal work;
they come from clinical trials in humans and from studies of drug substances themselves,
all of which is required by the FDA. They review applications ultimately to approve the
new therapy for clinical use.”
CEOCFOinterviews: How
big is the veterinary medicine end of your research?
Dr. Kissinger: “We
actually make products through our Vetronics division where we sell instruments to
veterinary practices. There are about 2,000 veterinary clinics in the US and many overseas
as well that use our products for electrocardiology, blood pressure, pulse oximetry,
temperature and respiration monitoring in companion and laboratory animals. So when you
bring your dog or cat in for a diagnosis, a lot of those measurements will be made with
our equipment. We also use the same technology to look at medicines that would ultimately
be used in animals. One of the facts of animal research is a lot of criticism from animal
rights people who do not like the use of animals for research on human medicines. In
reality, a lot of animal research is done to benefit other animals. The mice, rabbits,
dogs and so forth contribute to developing medicines for their own kind and not only for
humans.”
CEOCFOinterviews: You do
trials on animals, but you also carry out clinical trials on human studies as well.
Dr. Kissinger: “We
like to think of ourselves as “mice to human.” We work with intact
mammals, all in one piece as opposed to discovery work that is often done these days with
cell cultures and snippets of mammals. For example, if we are considering a central
nervous system disease, discovery companies might look at cultured neurons or cancer cells
growing in a dish independent from the mammal. That end of the business is known as “discovery”
and occurs across the whole landscape of biotech and pharmaceutical businesses. Our work
begins when those discovery ideas come into proof of concept in an intact mammal, starting
with a mouse and carrying all through the stages of clinical trials in humans. We try to
use integrated technology across that whole landscape often based on mass spectrometry and
chromatography and other analytical technologies used to get numbers about chemical
substances in blood that we need to monitor. For example, whether it is a mouse or a
human, this may be the drug substance itself or protein biomarkers of disease or
toxicology. All of those numbers go into an FDA filing that is used to justify the fact
that the new therapy is safe and effective for its intended use.”
CEOCFOinterviews: You
have laboratories in the US and UK, but you also have a partner laboratory in France. How
important to you is that laboratory in France?
Dr. Kissinger: “It
has been very important to us. The partnership is with Biotech Centre in Orleans, France.
It’s a small boutique company serving European life science companies in the same
areas we serve. They help us both on the contract research side and in delivering our
animal science products to the European market. We have partnerships here in the US as
well with small boutique companies that have unique skill sets somewhat different from our
own. Our own operation in Europe is near Birmingham in the UK and is primarily focused on
bioanalytical chemistry and biomarkers support for clinical trials.”
CEOCFOinterviews: You
have robotics doing a lot of the work. How new is this method, especially with technology
changing so much?
Dr. Kissinger: “Automation
is a very important part of our business. Very often we need to run 24/7 processing
samples, clinical trial samples for example, automatically throughout the night and we use
a lot of robotics coupled with mass spectrometry. The word of the day is “productivity,”
and we need to put those resources together to be productive. There are many things that
need to be done that would be put into the “boring” category for humans. Robots
are good at doing the boring things so humans can make decisions. So, yes, we try to use
automation as much as we can to get more leverage out of our talent.”
CEOCFOinterviews: Has
public awareness of health issues put a demand on this company?
Dr. Kissinger: “Absolutely!
Healthcare is clearly one of the big ones out there, especially in this Presidential
election year. The FDA has put a large emphasis on pediatric clinical trials to evaluate
safety and effectiveness in children. There are multiple initiatives to treat diseases
such as HIV, tuberculosis and malaria that are more prevalent in the underdeveloped world.
Developing innovative approaches has helped both our product and contract research
businesses. The worldwide web is certainly a wonderful tool for patients with cancer who
can get onto a website and learn a lot more about the drugs their doctors are prescribing
and what the alternative therapies are. It is great to have a more educated patient work
with their doctor as a team member instead of just accepting whatever the medical
community tells them. The more you learn about your disease the better the system can
work.”
CEOCFOinterviews: What
are your current major products and services?
Dr. Kissinger: “As
I mentioned, our products determine drug concentrations in blood, measure physiological
parameters such as blood pressure, and can monitor animal behavior. Our lead family of
products are robotic devices for monitoring parameters in laboratory animals, taking blood
samples and monitoring blood pressure, behavior and electrocardiograms and that sort of
thing, all in an integrated fashion with no humans present. That has been a huge success
for us in the last several years and virtually all the major pharmaceutical companies have
invested in our technology.”
CEOCFOinterviews: You
have mentioned new products and one of these is the Bambino benchtop workstation. How much
has it played a role in the company, as I know it is fairly new?
Dr. Kissinger: “This
is a new product in the Culex line. Its smaller footprint and lower cost enables academics
and small companies to get more information about laboratory animals in a painless way
while maintaining the automation of the larger Culex product. This is something we are
very excited about. What we like to do with these instruments is get more information from
a single model of human disease by making measurements in parallel that previously were
done in series. This is a wonderful way of reducing the number of animals needed while
dramatically improving the quality of the data obtained by our customers.”
CEOCFOinterviews: How
many acquisitions have you closed on this year and how have they benefited the company?
Dr. Kissinger: “We
closed on two, looking back over about 18 months; the second one is about a year old. One
of these is a bioanalytical lab in Oregon, near Portland, and the other is a Phase I
clinical shop in Baltimore, Maryland that we are real excited about. It is a 110-bed
clinic and that is our primary site for working on human studies of new pharmaceuticals.
That business is improving a lot. We are excited about the Maryland life sciences
biomedical community. The Johns Hopkins and the University of Maryland Medical campuses
are great neighbors.”
CEOCFOinterviews: Do you
feel they are relatively integrated now where you can start to see some benefits on the
revenue side?
Dr. Kissinger: “We
are benefiting on the revenue side, but full integration of acquisitions takes probably
three or four years before everyone is thinking alike. It takes that long to get the DNA
of the culture of the individual companies melted into one harmonious whole. We do pretty
well after six months, but it really takes several years to get every system working and
integrated – the accounting, the scientific software, the robotics and communications
and all of those things. There is a lot more work in an acquisition than many people
realize, and having done a number of these we are getting used to it. We are getting
better at it step by step, but it is never easy; it takes time.”
CEOCFOinterviews: Do you
see any future acquisitions say, in the next 18 months or so?
Dr. Kissinger: “Right
now we are still looking while consolidating the steps we have taken over the last couple
of years. It’s not just acquisitions; lots of investments were made to expand the
physical space in our Evansville, Indiana laboratory operation that is on a 50-acre site.
We’ve expanded in the UK and added a new building in West Lafayette, Indiana. There
has been a lot of investment and we are focused on filling that capacity. We will be
spending less on those kinds of things for the next year or so, but further acquisitions
are a good possibility.”
CEOCFOinterviews: I know
that the pharmaceutical research market continues to change all the time. You made a
statement that you “continue to be cautiously optimistic.” What did you mean by
that?
Dr. Kissinger: “That
is true. The industry gets a lot of criticism, as you know. If you listen to politicians,
they sometimes refer to the “evil pharmaceutical industry” or talk about
importing drugs from Canada. There is a lot of concern about the role of innovation and
the cost that ultimately results for patients, particularly the elderly Americans who
represent a large percentage of a market. They often are prescribed a number of drugs
simultaneously. There is a political threat and legal threat to the industry as the
perceptions of very high costs get tossed around. However, with that aside, there are many
new technologies available to develop drugs that are much safer and more effective than we
have seen in the recent past. These developments take time and money and the question
ultimately is whether society is ready to accept the costs of getting to better therapy.
It is not easy to develop new medicine. It is very costly. You spend hundreds of millions
of dollars on this and sometimes you end up with nothing. We all wish it were easier but
it simply isn’t. The human system is complicated. Treating the diseases that threaten
us is hard when we are trying to push for ultimate safety, effectiveness and reasonable
costs. Along with dealing with all of the compromises necessary to do that is a concern
for speed. The safer and more effective the drug is, the longer it is going to take for us
to get that drug developed and approved and the longer it takes, the more costly it
becomes. We have the three dimensions of cost, effectiveness and safety all working
against each other, so balancing all of this is really tough, politically, economically
and scientifically.”
CEOCFOinterviews: How
much does your company spend on R&D in a year?
Dr. Kissinger: “Virtually
all of our contract research business is R&D money being spent through us by our
client companies. Internally, we spend a fair amount of R&D monies on our own
products. Some of that is supported by federal grants that are available to small
businesses. In a typical year we spend about 6-8% of our own revenue on internal R&D.”
CEOCFOinterviews: How
are you going to hold your competitive position going forward in the future?
Dr. Kissinger: “That
is always tough, but that is what drives a capitalistic society. We just have to be
faster, smarter and maintain innovation in products and services, keeping our team up to
date, making sure we don’t get into any trouble with violation of quality mandates,
which happens sometimes even with the larger companies. Being caught with some violation
of regulatory compliance is unacceptable to us and to our clients.”
CEOCFOinterviews: You
have to increase the efficiency and reduce the costs that it takes in getting the new
drugs out there to the marketplace.
Dr. Kissinger: “Yes,
we have to maintain quality and a very high level of ethics and also constantly innovate
with instrumentation and software. You can’t stand still; the technology we use is
changing more rapidly than it ever did because of what we now know about human genetics
and how we can use that information to develop better therapies. Our partner
pharmaceutical companies are hustling to get new medicines out there. They feel the
pressure from patients, Wall Street and the government to get more done, to get drugs that
are better, safer and more economical. Everyone has patient benefit in mind. That is what
we are driving for, but you still have to balance the practical realities. These things
cost money. Some of this is taxpayer money and sometimes the Congress and the White House
have different degrees of tolerance for how much they want to spend on healthcare-related
research.”
CEOCFOinterviews: The
government is the first to admit that there is a healthcare need; however, they aren’t
there to meet the need for half of it.
Dr. Kissinger: “Well,
sometimes they are a little inconsistent. They may focus on drugs being too expensive one
minute, then the next minute they are making so many rules that it makes the drugs even
more expensive than they were before. But this is normal. This is no different than the
government’s role in the environment, or in product liability or any area. It’s
just one of those things we need to live with in a democracy.”
CEOCFOinterviews: You have a good line behind you and your 30th
anniversary is coming up. As a matter of fact, you are the founder of the company and you
are still here.
Dr. Kissinger: “Yes,
and I haven’t had a promotion in 30 years.”
CEOCFOinterviews: What
was your biggest challenge in your 30 years?
Dr. Kissinger: “I
think that the biggest challenge is always finding and inspiring really good people and
getting those people to see the same vision we all see, which is to provide the best
quality on schedule. We have 375 very talented people, again, from the UK, Baltimore,
Indiana and Oregon. We are quite happy with what we have geographically. We would like to
do a little more in Asia going forward. Generally the challenge is getting new people. If
you get good people you can achieve more and add other good resources to help them achieve
more.”
CEOCFOinterviews: Do you
feel there is a lack of people leaving colleges and getting into this kind of field?
Dr. Kissinger: “Yes,
in general there is a shortage of technical talent focused on the kind of things we do,
bioanalytical chemistry, toxicology, drug metabolism and so forth. Not everyone should go
to law school; we need more people to go to graduate school in the life sciences. The
country has been doing a pretty good job of this until recently by importing very bright
people from Asia and Europe into our educational system. But the war on terrorism has put
a damper on obtaining talent from overseas, which has slowed things down a bit and we are
worried about that. We feel it is inappropriate, for example, to put those stringent
requirements on scientists from China since there has been no indication whatsoever that
the Chinese have had any participation in terrorist behavior prior to or after September
11. The government is still putting regulations on visa permits for this kind of talent
and it’s been a little tough, but we do OK. There are certainly very talented
students of all national origins here in the Midwest. The big university systems and
private colleges are a great supplier of talented people, so we are getting by in that
regard.”
CEOCFOinterviews: In
closing, what should investors be looking for and recognizing about Bioanalytical Systems?
Dr. Kissinger: “I
think it is pretty clear that what we do is very badly needed. There is a lot of work in
this area being funded for obvious reasons – the aging population, new diseases and
epidemics such as diabetes. All these have a big impact on the need for the kind of work
we do. This summer marks our 30th anniversary in business. In most of those 30
years we made money, with the exception of three. That is a pretty good record for a life
science company. The macroscopic drivers are pretty compelling. We have a good patent
portfolio on our products. We have a lot of innovative work to do, and probably the number
one thing for investors to consider is the quality of clients we have. We do provide
products and services to virtually all of the top 25 pharmaceutical companies globally and
we are very proud of that.”
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