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Ventiv Health, market leader in sales,
marketing and clinical outsourced solutions, continues to see strong demand for their
service from enabling small- and medium-sized pharmaceutical companies, as well as growing
demand from larger pharmaceutical companies
Services
Business Services
(VTIV - NASDAQ)
Ventiv Health Inc.
200 Cottontail Lane – Vantage Court North
Somerset, NY 08873
Phone: 800-416-0555
Eran Broshy
Chief Executive Officer
John Emery
Chief Financial Officer
Interview conducted by:
Lynn Fosse
Senior Editor
CEOCFOinterviews.com
November 2004
BIO:
Eran Broshy, Chief Executive Officer
Eran Broshy, has been Chief Executive Officer and a
director of Ventiv since the Company went public in 1999. Prior to joining
Ventiv, Mr. Broshy served as the partner in charge of the North
American healthcare consulting practice of the Boston Consulting Group (BCG). During
his fourteen year tenure at BCG, Mr. Broshy consulted broadly with senior executives from
a number of the major global pharmaceutical leaders, managed care organizations, and
academic medical centers and advised on a range of strategic, organizational and
operational issues. From 1998-99, Mr. Broshy served as President and Chief Executive
Officer of Coelacanth Corporation, a privately-held biotechnology company. Mr.
Broshy is a graduate of the Harvard School of Business Administration (MBA), Stanford
University (MS), and Massachusetts Institute of Technology (BS).
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, Inc. (NASDAQ: VTIV) is a leading provider of clinical, sales, marketing,
and compliance solutions to the world’s largest pharmaceutical companies as well as
to emerging and specialty pharmaceutical and biotech organizations. Ventiv has established
its leadership position within the industry based on a long history of building and
managing sales teams, clinical teams and providing consultative planning and analytics
services across multiple therapeutic areas.
The Ventiv delivery model is flexible and client
focused, enabling Ventiv to rapidly respond to changing client needs and market conditions
across the full spectrum of sales and marketing support, with both integrated and
independent programs. These include: Sales and Marketing Teams (Ventiv Sales and Marketing
Teams™), Planning and Analytics (Health Products Research®), Recruitment (Ventiv
Recruitment Services™), Professional Development and Training (Ventiv Professional
Development Group™), Marketing Support (PROMOTECH), Data Solutions (Total Data
Solutions™), Clinical Support (The Therapeutics Institute™), Sample
Accountability/Patient Assistance Programs (The Franklin Group), Clinical Staffing (Smith
Hanley Consulting and MedFocus) and Permanent Placement (Smith Hanley Associates).
Ventiv is a multi-discipline company with a singular focus on providing excellence
in customized solutions to meet clients’ clinical, sales, marketing and compliance
objectives.
Ventiv’s approximately 3,800 employees support
over sixty client organizations.
CEOCFOinterviews: We
spoke about 15 months ago and you told CEOCFOinterviews the outlook for Ventiv was strong.
You were certainly correct! Mr. Broshy could you bring us up to date?
Mr. Broshy: “We’ve
had a very busy year over 2004. It’s been an incredibly strong year, particularly in
terms of winning new business. We have won new business worth roughly $160 to $170 million
on an annualized basis. We have added 1,600 representatives to our sales and marketing
business; indeed a very large amount of new business on top of our base business. This has
allowed us to continue to grow strongly in our sales and marketing business. In tandem
with that we have also substantially broadened the footprint of the organization in two
ways. Organically we’ve added and introduced a number of new offerings to our
clients, leveraging existing capabilities of the organization, such as introducing The
Therapeutic Institute, Professional Development services, Recruiting services and our
Total Data Solutions services, among others. Secondly, we’ve also made two
acquisitions that have further broadened the footprint of the organization. In June of
this year (2004) we acquired the Franklin Group, a leading player in the compliance arena
as well as in patient assistance. Most recently in September (2004) we announced the
acquisition of Smith Hanley Corporation, a leading player in the outsourced clinical
staffing business and recruiting arena. This gives us a leadership position in that part
of the market, late stage clinical, just before commercialization. So, we’ve grown
very substantially both from an organic point of view and we’ve further strengthened
the organization with a couple of key acquisitions, enabling us to further build out our
market leadership position across multiple arenas.”
CEOCFOinterviews: When you grow as much as you have, adding a
number of new services and people, how do you maintain a proper balance and the level of
excellence that Ventiv values so highly?
Mr. Broshy: “We have focused intensively on quality and
excellence, in fact we have adopted the tagline of ‘Excellence is Our Standard’.
When we refocused the business three years ago, we put particular emphasis on ensuring the
optimal infrastructure investment in the company; namely the ability to recruit, to train,
to deploy and manage a large number of new teams and to put the best automation behind
them. These processes were built in a very robust way; we put key people in place,
redesigned our processes and ensured the right database and systems. We now believe we
have an incredibly robust engine that can deploy a new sales team very rapidly and with
the highest quality. Behind all of that, there is a very strong management team; we’ve
developed talent internally as well as brought in some key people from the outside. So we
believe we have the management team and the systems in place, and the processes honed down
to the point where there is enormous leverage in the organization to deploy additional
sales teams and support those sales teams. That has been key for us in creating operating
leverage across the organization. John can elaborate on that a bit more, but it has
supported our very strong organic growth. On the acquisition front, we’ve been very
disciplined in looking for leading companies in their respective fields, companies that
have a strong management team, and companies that are already on a growth trajectory. We
can add additional value to them by giving them greater stability, generating
cross-selling opportunities and looking for additional synergies. But these are
already very healthy businesses that we believe under the Ventiv umbrella can thrive and
grow yet further.”
CEOCFOinterviews: Mr. Emery, can you elaborate on that?
Mr. Emery: “Eran has indicated that our sales have grown
substantially over the past few years. At the same time we’ve been able to hold our
gross margins relatively fixed, also we’ve decreased our fixed SG&A costs in
absolute dollar terms from roughly $32 million a few years ago to approximately $28
million estimated for this year. That has resulted in substantial operating leverage,
which is born out in the dramatic increases in earnings per share for continuing
operations that you see, looking at our financials, from roughly breakeven in 2001, to 21
cents in 2002 to 42 cents in 2003, to roughly 76 cents in 2004. We are now targeting 90
cents in 2005. The operating leverage has been very dramatic in the model and has resulted
from our ability to deploy new teams with only modest increases in fixed costs. We expect
that we will be able to grow under this model into the foreseeable future.”
CEOCFOinterviews: Do you have much repeat business?
Mr. Broshy: “A significant amount of our business is
repeat business. It varies from business unit to business unit, but in our Ventiv Pharma
Service (VPS) sales and marketing teams we have had an 80 to 90% year-over-year renewal
rate. In a number of our specialty businesses, such as the Franklin Group, Health Product
Research (HPR), as well as Smith Hanley, repeat rates are equally high. Many of these
businesses have client relationships that stretch back a number of years, in some cases up
to ten years. It all comes back to delivering excellence and outstanding value for our
clients, and as our clients continue to grow Ventiv’s offering of a broad range of
complementary services enables us to offer a high level of excellence across our
offerings. Which in turn generates high value for our clients and high repeat business for
us.”
CEOCFOinterviews: Where are you geographically?
Mr. Broshy: “We are 100% focused on the U.S market.
Some years back we did have business in several European countries, but we came to
the conclusion that there were no real synergies across countries. The sales and marketing
business is driven locally, managed at the country level. All of our European business was
divested several years back now, in order to enable us to focus all our attention and
energy on the most important market, the U.S. market. Within the U.S. market we have
focused across the whole pharmaceutical and biotechnology continuum, and in particular
have been very effective with the small to medium sized pharmaceutical companies,
specialty pharmaceutical companies and biotech companies. More than half of our business
is with smaller and mid-sized companies, many of whom don’t have significant late
stage clinical or commercial capabilities in place or the accompanying infrastructure in
place. So the notion of outsourcing to someone who can bring a whole gamut of high quality
executional services is very appealing to that client base. This segment of the market has
also been growing very nicely. More recently we have also been seeing stronger demand from
the larger pharmaceutical companies, and some very significant wins for Ventiv in that
arena as well. Many larger pharmaceutical companies are facing some tough challenges and
pressures themselves; outsourcing for them has become a very attractive alternative or
complement to internal efforts.”
CEOCFOinterviews: How do you reach potential clients?
Mr. Broshy: “We work in a three-pronged account
management approach; one is our business development team, individuals that are
geographically organized and targeted by client. This team spends its time interfacing
with a variety of folks; middle to mid-senior levels in the organization that we believe
have a likely need for our services or have a product that is coming through late stage
clinical and into the marketplace. We are continuously interacting with those
organizations to understand needs and share our range of offerings. Secondly, at the
more senior level, our senior team, Terry Herring, Lenny Vicciardo, Paul Mignon, myself
and a few others spend much of our time at the very senior levels; the CEO level, heads of
pharma level, heads of sales and marketing, building relationships and opening doors at
the top of the organization. Very large outsourced contracts do get decided at both the
senior levels and the mid level. We are proactively targeting clients at both levels via
our account management model, and believe we have been quite effective. Thirdly, we are
regular attendees at industry forums, conferences and things of that sort, to make sure
the Ventiv brand and the whole notion of excellence as our standard is forcefully brought
to the marketplace.”
CEOCFOinterviews: What sets you apart from the competition?
Mr. Emery: “We set ourselves apart in two ways. First,
we have brought a broad range of services together under one roof, and create bundled
offerings which are stronger than the sum of our individual offerings. For example, our
sales and marketing teams are an extremely strong offering, but can be strengthened
further by the ability of Health Products Research to more precisely size sales teams at
the outset, by the Franklin Group’s sales force compliance services, and by our
proprietary Total Data Solutions(TM) sales force automation suite. Secondly, our
management team has been absolutely critical in driving our success. Terry Herring,
President and Chief Operating Officer of Ventiv Pharma Services (VPS), has done an
outstanding job in building a great organization, which delivers great execution and
follow-through to our clients. We’ve built our reputation in the industry around
bringing excellence to our clients, and the best assurance of new business is strong
client referrals. Our win rate has averaged 40 to 50% over the last several periods, which
I believe shows the strength of our management team and of our model.”
CEOCFOinterviews: Is there much decision making involved in
choosing which client to approach with each of your services?
Mr. Broshy: “As a services provider we strive to have a
broad mix and a broad portfolio of clients. We operate on a fee-for-service model, so
every new client to us provides incrementally profitable business. We like clients of all
sizes, but we’ve had particular success with small to medium size clients in helping
them establish themselves, grow their business and flourish, and as they’ve been able
to evolve and grow we’ve evolved and grown with many of them. One thing we are very
strict about is regulatory compliance within our own organization, and we recently added a
chief compliance officer to ensure all of our individual reps and teams are fully trained
and deployed and compliant with OIC and PDMA guidelines, and that our clients understand
our approach in this critical area.”
CEOCFOinterviews: Why is this a good time to be
interested in Ventiv Health and what should investors realize that they may when looking
at Ventiv?
Mr. Emery: “As we’ve indicated, we’ve been
very successful in building out a very robust business model in our core business. We
expect to continue to win our share of the business that is out there. The FDA (Food and
Drug Administration) approval environment is stronger now than it has been, we expect that
to continue and we expect to benefit from that trend in our core business. In addition,
the businesses that we have now added to our portfolio further strengthen our overall
company in terms of broadening our client base and reducing our customer concentration.
About a year ago our top three contracts comprised nearly 50% of our revenues; currently
that number stands at about 30%. We believe that this reduced concentration strengthens
our revenue and earnings base as we move into 2005 and beyond.”
CEOCFOinterviews: How are you positioned so that events like
the withdrawal of FDA approval for a specific drug do not affect Ventiv?
Mr. Broshy: “Certainly anytime clients go through
challenges it has a ripple effect. But we have built a broad portfolio of clients,
as John has said, and we continue to reduce our level of client concentration. This means
that if an individual pharmaceutical company encounters challenges, whether it is a
product withdrawal or an FDA roadblock that has less impact on our business today than it
ever would have had in the past. That does not mean that in our business we will not have
clients that wind down activities with us over time, because that clearly does and will
happen. That’s the nature of outsourcing; we will always have clients that are coming
and we will always have clients that are going when their strategic needs and priorities
shift.
But what we’ve been able to demonstrate very well over the last 2 to 3 years is that
in spite of that, we have been able to manage very effectively our portfolio and the ups
and downs of this business, and that we can win a lot more business than business that
does wind down naturally or otherwise over time. Further, we expect that we will continue
to do so even better as we go forward given that our portfolio, both of clients and of the
services that we work with those clients on, continues to grow. So the model should be
more stable going forward than it has been in the past as we continue to grow, and we
believe that has been demonstrated very well over the past several years.”
CEOCFOinterviews: Final thoughts for our readers?
Mr. Broshy: “We are very bullish about our outlook; 2004
has been a great year, the best year Ventiv has ever had. We raised our 2004 guidance
recently for the fifth time. We also issued initial 2005 guidance not that long ago
of 80 to 85 cents, and with the recent acquisition of Smith Hanley we’ve now
increased that to 87 to 92 cents. We continue to believe that our market space is a very
attractive one and that we are particularly well positioned. John mentioned that the FDA
approval environment has improved and we expect it to continue to stay positive. At the
same time outsourcing has only penetrated a fairly modest level of the pharmaceutical
demand. Under 10% of sales representatives are currently outsourced in the U.S., which is
less than half the level of outsourcing we see in related sectors such as CROs and
outsourced sales forces in more mature countries such as the U.K. Given the
compelling value proposition we bring our clients, we expect to continue to see increased
demand for our services and further outsourcing penetration. Ventiv is the U.S. market
leader, and medium to long term we continue to be bullish about the outlook for our
business.”
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