“Within a two-hour drive, between 75 [percent] to 80 percent of the major pharma in the country is located here,” says Weinstein, president and CEO of Bio-Imaging Technologies Inc, the world’s largest independent dedicated provider of medical image management for clinical trials. “All the large contract research organizations are [also] here so we compete for our project management resources.”
Bio-Imaging Technologies’ revenue had grown from $3 million in 1998 to nearly $30 million last year.
Last year, several large project cancellations caused revenue to be flat for the first time in seven years, but despite those numbers, Weinstein has projected a 15 percent growth rate profitability for 2006 and says the increase in signings could easily top 50 percent for 2005.
Smart Business spoke with Weinstein about how he grew his company while dealing with project losses.
How did you recover from last year’s project cancellations?
We’re in a project-based business. We really [spent 2005] rebuilding that backlog. It’s been a different set of challenges.
The majority of our business today is clinical trial medical image management. We work for pharmaceutical companies and help them get drugs approved. If you’re using medical imaging to prove your drug works, which is happening more and more, the FDA [doesn’t] want 1,000 opinions on what’s happening.
They want that centrally reviewed by an independent third party. So we do that for over 180 projects for about 60 pharmaceutical companies.
Our business had been growing an average of over 20 percent a year. We were always trying to stay a little ahead in business. So once we got hit with our cancellations, we pared our resources a little bit because we still have to provide service to our clients.
How did you manage that?
We looked across the company and asked where we could make personnel reductions that would not affect client service levels and would provide the capacity to perform on our current projects. This resulted in a headcount reduction of approximately 30 individuals.
These reductions reduced our operating expenses by about $500,000 per quarter, starting in the second quarter of 2005. I was instrumental in building the team; this was extremely tough to do but given the situation, it had to be done. If we had not done this, we could have jeopardized the overall viability of our business, and this would have affected the lives of 250 employees and their families.
The way the pharmaceutical industry works is you don’t want to be viewed as retreating. You don’t want to give low levels of service because at that point, you won’t have a business. So [the challenge was], how do we rebuild the backlog which we have now built to record levels of what we’ve ever had before in less than nine months [while] watching our expenses and doing what we need to do to provide the same quality product to our client.
How did you rebuild that backlog?
When we dug into the cancellations, we convinced ourselves it was just unlucky that we happened to be holding contracts that cancelled. None of the cancellations were due to service issues. Unfortunately, this is a reality of the clinical research business.
None of the projects that were cancelled were taken to other vendors. They just simply stopped the trials.
We felt very confident that despite the cancellations, we were addressing a strong growing market because our proposal pipeline was strong and our win rates on proposals were increasing. When we made our cuts to reduce expenses, we did not affect our sales and marketing efforts because of our belief.
When you see that our backlog is at historic highs $55 million you have to believe that we were right.
To what do you attribute the number of cancellations?
Drug discovery is a very high-risk business. It’s not unusual to have cancellations. On average, we have between 5 [percent] and 7 percent cancellation of all the contracts that we signed.
When they do cancel, unfortunately, you don’t get any notice. You basically get a phone call that says the study has stopped; it could be a serious adverse event and it could be a budget issue with a client where they put the money into another drug program.
How have you grown your company despite the cancellations?
If you’re going to stay public, you’d better grow, and that’s what we’re working very hard to do. In December 2003, we acquired CapMed, which [includes] electronic medical records.
We have to look at other ways to grow beyond just our core business organic growth and acquisitions.
How are you going to achieve your projected 15 percent growth rate profitability for 2006?
Our projected increase in revenue is coming from our record-high backlog and a very strong proposal pipeline. Based on this, we are also projecting to be profitable for the year.
HOW TO REACH: Bio-Imaging Technologies Inc., (267) 757-3000 or www.bioimaging.com