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Focused
on the healthcare industry
Services
Business Services
NASD: VTIV
Ventiv Health Inc.
200 Cottontail
Lane
Vantage Court, NJ 08873
Phone: 800-416-4962
Eran Broshy
Chief Executive Officer
John Emery
Chief Financial Officer
Interview conducted by:
Diane Reynolds, Co Publisher
CEOCFOinterviews.com
July 2002
Bio
of Eran Broshy, Chief Executive Officer
Mr.
Broshy is a widely recognized authority and frequent speaker on strategic issues in
pharmaceuticals and healthcare. Prior to
joining Ventiv he served as the partner responsible for the healthcare practice of The
Boston Consulting Group (BCG) across the Americas. During
his fourteen-year tenure at BCG, Mr. Broshy consulted widely with senior executives from
number of the major global pharmaceutical manufacturers, managed care organizations, and
academic medical centers, and advised on a range of strategic, organizational and
operational issues. Mr. Broshy has also
served as President and Chief Executive Officer of Coelacanth Corporation, a privately
held biotechnology company. Mr. Broshy is a
graduate of Harvard University (MBA), Stanford University (MS) and Massachusetts Institute
of Technology (BS).
Bio
of John Emery, Chief Financial Officer
Mr.
Emery has over 20 years of experience in financial and operational roles, much of it in
companies operating in the health care marketplace. As
Chief Financial Officer of MedQuist Inc. from 1997 to 2000, he helped grow the
company’s revenues nearly five-fold and increase market capitalization from $200
million to $1.5 billion. During his tenure,
the company completed the $230 million acquisition of its largest competitor, as well as
over 20 acquisitions of smaller competitors, and sold a 65% stake in the company to
Philips Electronics for $1.2 billion in cash. Prior
to joining MedQuist, Mr. Emery was with Integra LifeSciences Corporation, where he served
as Chief Financial Officer from 1994 to 1997 and Senior Vice President of Operations from
1995 to 1997. Mr. Emery earned a
Masters Degree in Business Administration from Harvard Business School and a Bachelor of
Arts degree in economics from Princeton University.
Company
Profile:
Ventiv
Health is the premier outsourced marketing and sales services provider for the
pharmaceutical and life sciences industries. They are uniquely positioned to provide their
clients with the solutions needed to grow a healthy, thriving business – globally and
seamlessly.
Ventiv Health was spun off from
Snyder Communications in September 1999 to focus exclusively on the health care industry.
Their success in executing impactful programs for their clients has established them as a
global leader in outsourced marketing and sales. Ventiv’s global leadership is
maintained through their broad presence across the United States, England, Germany,
France, Hungary and Austria.
CEOCFOinterviews: Some people
may mistake this company for some kind of healthcare provider; explain to my readers, who
is this company?
Mr. Broshy: Ventiv Health is a leading global provider of
pharmaceutical outsourcing services on the sales and marketing side. We provide a
range of services for pharmaceutical and life sciences companies to help them sell and
market their products primarily to the physician communities across the US and Europe.
The company’s range of services encompasses contract sales forces across a
broad number of therapeutic areas. It also encompasses analytical targeting and ROI
optimization services and a range of Specialty Services for selling and marketing
pharmaceuticals.
CEOCFOinterviews: The pharmaceutical companies that you are
providing the services, is it at your facility or do you do it at their facility?
Mr. Broshy: We provide outsourced sales and marketing services
externally. The majority of our employees are out in the field across all 50 states
and 4 different countries in Europe, calling every day on thousands of physicians on
behalf of our pharmaceutical clients. We are heavily a field-based organization with
resources and capabilities across each market we serve.
CEOCFOinterviews: Do you have enough manpower to fill these
positions?
Mr. Broshy: One of our greatest skills is the ability to recruit
and train the appropriate individuals to provide these services on behalf of our
pharmaceutical clients. We put together customized teams on behalf of our clients,
and one of our strong skills is the ability to identify and source these individuals very
quickly. We have databases, with roughly 80,000 individuals in the US, which we keep
current with sales and marketing and pharmaceutical industry experienced people. We
have a large number of recruiters active across the US. We have a dedicated training
facility with a dedicated team of trainers. So we customize, recruit, train, target
and deploy these pharmaceutical sales teams on an as needed basis for our clients.
CEOCFOinterviews: Each product is different and these people need
to know what they are talking about when they call the doctors or healthcare providers.
How do you educate them?
Mr. Broshy: Absolutely right, skills and the training of our staff
is critical. That is why we have made a very significant investment in a large dedicated
training facility, a dedicated training team, and a distance learning capability so that
we can provide initial and ongoing training. We invest heavily in our people to make
sure they are very well versed in the products and selling skill before they are sent out
to call on physicians. We often and typically do work hand in hand with our clients,
which encompass some of the worlds leading pharmaceutical companies, like Eli Lilly,
Merck, Bristol Myers, and Pfizer. We also work for a range of biotech and younger
pharmaceutical companies. The standard of quality that our clients expect is very,
very high and therefore recruiting the right individuals, screening the right individuals
on an ongoing basis and training them on an ongoing basis to ensure they are delivering
quality education and promotion to physicians is the key to the success of our business,
and we believe we do that very well.
CEOCFOinterviews: Are these long-term relationships that you
have with the pharmaceutical companies?
Mr. Broshy: We have over 70 pharmaceutical and biotech clients on a
worldwide basis. We tend to have relationships that may evolve over multiple years,
with specific contracts that are typically 1 to 3 years long, and when those contracts are
finished we will typically at some point continue to work with that organization as their
needs evolve. The major value we provide for our client is high quality sales and
marketing with great flexibility and with very cost effective economics. So we tend
to have long-standing relationships, even though the nature of the particular project on a
product that we may promote on their behalf, or the particular geography we may cover or
the exact composition of teams themselves does evolve. We have clients that we have
worked with for multiple years, in some case over ten years.
CEOCFOinterviews: Where is the majority of the growth and revenue
coming from?
Mr. Broshy: Revenue growth is coming from several drivers.
First, the overall pharmaceutical industry is growing – the industry revenue base
continues to grow 10+% a year through introduction of new products, through extension of
existing products and through price increases as well. So the underlying client base in
itself is a growing sector. Second, outsourcing on the sales and marketing side is
still a relatively young industry. Approximately 10% of total sales and marketing
dollars are spent in an outsourced fashion as opposed to spent internally. We are
significantly a player in the 10% that is outsourced. This 10% level is relatively
low compared to the level of outsourcing penetration that other sectors or other countries
have reached. We believe 25% to 30% peak outsourcing is not an unreasonable number.
So, long-term we believe that outsourcing will continue to grow. The inherent flexibility
and enhanced economics it provides is very attractive to our clients. Finally, there
is currently more growth coming from our small and medium sized client base – many of
whom have approved products and limited commercialization infrastructure -- than from the
larger pharmaceutical companies, many of whom are experiencing turmoil.
CEOCFOinterviews: I think the smaller companies would be the
largest area, being that they do not have the manpower you have. They are small; they
depend on outsourcing in all areas.
Mr. Broshy: That is exactly right. Many of these companies
have not built the infrastructure internally and as they come to market with drugs that
they have spent many years developing and getting through the FDA, sales and marketing is
a fairly challenging endeavor. They are often quite happy to work with an
outsourcing partner to enhance commercialization success, without needing to build all the
infrastructure and capabilities internally.
CEOCFOinterviews: Financially, since these are smaller companies
are they able to secure your services without hurting themselves financially?
Mr. Emery: Our services are priced economically relative to the
cost that these smaller companies would have to undertake internally to put together the
same infrastructure, and with significantly greater flexibility and speed. Our
offering is also a particularly compelling alternative versus outlicensing their products
to a larger pharmaceutical company and losing control.
CEOCFOinterviews: Now, with all of the training that you have to
do, this is a constant financial strain on the company. Does the company have enough
revenue coming in to withstand the expense going out?
Mr. Emery: I believe we do. We are both profitable and cash
flow positive. We generate $15 million dollars of positive cash flow on an annual
basis. There is roughly $30 to $35 million dollars of cash on the balance sheet with
no debt. The company has a line of credit for up to $50 million, which is
undrawn. We feel that we are in good standing financially to undertake any of the
investments that we may need to make.
CEOCFOinterviews: Your company seems to be pretty much driven by
internal growth; do you see acquisitions in the future and if so what do you consider to
be a good acquisition?
Mr. Broshy: We are driven by organic growth currently. Ventiv
itself came together through a number of acquisitions that were carried out in the 1996 to
1999 time frame, when we acquired a total of 13 companies. We believe that Ventiv
now has the breath of capabilities necessary to compete successfully. Nevertheless,
we always are open to new opportunities and do keep our eyes out for the opportunities
that make sense.
CEOCFOinterviews: What would be the number one key component that
you would be looking for in an acquisition?
Mr. Broshy: Certainly we would look for the fit of the business
from a strategic and synergistic point of view with our core focus, as well as the
financial and managerial strength that goes hand in hand with that. But, our focus
is primarily on organic growth at this juncture.
CEOCFOinterviews: What would you say is compelling about this
company, as an investment?
Mr. Emery: The principal thing we think is compelling at this
time is the company’s valuation. The company’s enterprise value is
currently less than 2 times its cash flow. We think this represents good value.
We also point to the progress we have made in the past six to nine months in
stabilizing the business by strengthening the balance sheet, eliminating risk share
contracts, taking out cost and narrowing the focus of the business.
CEOCFOinterviews: What is happening in the pharmaceutical industry
today that might affect this company?
Mr. Broshy: A number of large pharmaceutical companies are
struggling to launch enough new products to satisfy their revenue growth expectations.
That is not the case with many smaller and medium-sized companies -- and indeed
much of our mix over the last 18 months has shifted toward addressing the needs of the
smaller to medium-sized companies. So for us the exposure with the large
pharmaceutical companies is significantly lower than it was in the past.
CEOCFOinterviews: In the future, would you consider offering your
services, other than the pharmaceutical companies, there are a lot of other companies out
there that are looking to outsource their sales and marketing. Would you like to
penetrate any of those other areas?
Mr. Broshy: That is an interesting question. We are looking first
and foremost at related sectors of healthcare, arenas outside of pharmaceuticals like the
device sector, the diagnostic sector, the over-the-counter sector, the dental sector and
so on, and believe those could offer some quite interesting opportunities. To move
beyond the healthcare field is not something we are looking at this juncture.
CEOCFOinterviews: What about outsourced billing?
Mr. Emery: We believe the sales and marketing space itself is a
very significant sector. Pharmaceutical companies spend on the order of $15 or $16
billion dollars a year in the US alone on sales and marketing. We are actively
expanding the portfolio we are offering in sales and marketing from what has been
historically primarily focused on contract sales forces and analytical planning and
targeting services. We also are now providing such Specialty Services as recruiting
only, training only, nurse educator teams, nurse liaison teams, tele-detailing, and back
office IT and logistic support. We believe these arenas are fairly under exploited
in terms of outsourcing and fit particularly well with the capabilities that we have
in-house.
CEOCFOinterviews: So it’s unlimited on what you are able to
provide.
Mr. Broshy: Our revenues last year in the US were around $270
million in a sector that spent $15 billion - there is a fairly large pool for our kind of
services and a broad range of services within sales and marketing alone. We think
there is a lot of synergy across those services in terms of similar decision makers and
synergistic needs.
CEOCFOinterviews: What about competition? What makes this
company uniquely positioned?
Mr. Broshy: The number of significant competitors in this arena is
very small, with only two other major players beside ourselves. The resources and
capabilities required to deploy sales teams of several hundred sales reps quickly and with
very high quality is not something that many companies can do. Furthermore, many
pharmaceutical and biotech companies won’t entrust their key brands to companies that
don’t have a strong track record of having done this. We are particularly good
at recruiting, training and managing sales -- we have been doing this for over 25 years.
There is a strong track record of delivering high quality and high service to our
clients and doing so with low turnover. We believe we run a very lean
operation. Thirdly we believe we bring value added through helping our clients target more
effectively, optimize their ROI more effectively through our Health Products Research
(HPR) division, one of the absolute leaders in targeting and ROI optimization.
CEOCFOinterviews: Any closing comments for our readers?
Mr.
Broshy:
I would note that over the past year or so we have increasingly narrowed the focus of
the business, brought our costs down, strengthened our capabilities to deliver high
quality and high service and have continued to win new business. The outsourcing sector is going through a
cyclical low at this juncture, driven by fewer FDA drugs approved. So we have been tightening our belts and
positioning ourselves to be profitable even at this low level of demand, and positioning
ourselves particularly well when growth resumes and the long term outsourcing trend picks
up as we believe it will. Additionally, we
and our competitors have in the past couple of years entered into risk share arrangements
that have turned out to be difficult -- and we have made the decision that we will no
longer enter large-scale risk share contracts with large pharmaceutical companies. We have
successfully wound down one of those arrangements with Bristol-Myers Squibb, and converted
another one with Bayer Corporation from a risk share into a fix fee arrangement. This has significantly reduced the risk exposure
in our business.
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