InVentiv Health (NASDAQ:VTIV) provides staffing, sales, and communications to pharmaceutical companies. Its clients include Bristol-Myers Squibb (NYSE:BMY), Gilead Sciences (NASDAQ:GILD), and Watson Pharmaceuticals (NYSE:WPI), to name a few. Analyst Stan Huber recently interviewed Eran Broshy, CEO of this January 2007 Motley Fool Hidden Gems recommendation. An excerpt from the interview appears below.
Stan Huber: Can you give our members a thumbnail sketch of inVentiv Health and who some of your large customers are?
Eran Broshy: InVentiv Health is the leading provider of customized clinical, sales, marketing, and communications solutions to the pharmaceutical, life sciences, and biotechnology industries globally, with 2006 total revenue of $766 million and expected 2007 revenue of $950 million to $970 million. Fundamentally, what we do is help health-care companies launch and commercialize their products by providing services that they may not want to, or be able to, manage in-house. We can support clients at any point in the life cycle, whether they are in early development and looking for help with their clinical trials and regulatory submissions, or they are approaching launch and needing help planning and executing a marketing strategy, or they have products on the market and are looking to maximize sales and build brand loyalty. In addition, we have the unique ability to combine these services to create customized solutions for our customers by tapping into the expertise within our three core business segments: inVentiv Clinical, inVentiv Communications, and inVentiv Commercial. Our customer base includes over 200 unique pharmaceutical, biotech, and life sciences clients, including all top-20 global pharmaceutical companies.
New opportunities
SH: The recent acquisition of AWAC seems to be a departure from your customary strategy. By adding a new customer base, do you see this as a riskier acquisition than what we are used to? Which of your current offerings might benefit this new customer base?
EB: While our core focus is on pharmaceutical customers, we have been assessing broader health-care opportunities for some time. Several of our existing offerings already have applicability with payors, including our Franklin Group patient assistance and reimbursement offerings, our Adheris patient compliance programs, our Therapeutics Institute nurse educator offerings, and various of our communications programs. The AWAC acquisition provided an ideal opportunity for us to build upon those offerings and establish a broader platform for managing outcomes in the payor arena.
We see the AWAC acquisition as a strategic move that will further enhance our growth potential and reduce our risk over time by diversifying inVentiv's earnings base beyond the pharmaceutical industry. Furthermore, AWAC's unique IT-driven platform and targeted physician-led interventions provide us with a valuable perspective on our pharma customers' customers and give us access to potentially valuable patient-level data.
SH: You have spoken in the past about wanting to add to your portfolio in technology. I assume AWAC fits this mold, albeit with new customers. Do you consider technology a major growth area for inVentiv over the next five to 10 years?
EB: Yes, we are very interested in adding technology-driven services businesses to our current mix of business, both to enhance productivity of our resources and those of our clients, as well as to enhance the scalability across our business. In addition to AWAC, we have added a number of technology-driven businesses over the past 18 months, including Adheris, which provides patient compliance education leveraging a proprietary IT-driven platform linked with over 20,000 pharmacies; MedConference, which is a leading provider of live and on-demand virtual event services to the pharmaceutical industry; DialogCoach, a specialty training organization that employs proprietary software tools and e-learning solutions to improve sales force effectiveness; and Ignite Health, which specializes in interactive communications and advertising targeting patients, caregivers, and health-care professionals.
The common pattern to these additions is that they provide differentiated services enabled by technology, rather than technology offerings per se. We expect that in the aggregate, technology-enabled services will be an important growth area for us over the next five to 10 years.
Making the sale
SH: In an effort to understand the current environment and what share you have a shot at bidding on, what approaches are small to mid-sized biotech companies taking with new drugs -- building a team in-house, partnering with a large pharmaceutical company, or using outsourced providers such as inVentiv?
EB: Over the past five years, we have focused on effectively serving small and mid-tier specialty pharma and biotechnology companies, in addition to top-20 pharmaceutical companies, and have purposefully enhanced our mix of services to support these clients more effectively. This is simply our recognition of how important this group of companies has become -- now accounting for between 60% and 75% of all new drugs being approved in the U.S. market.
In terms of the commercialization choices, many of the companies that we are working with assess all three choices in parallel. We estimate that 15% to 20% of sales forces across small and mid-tier companies are outsourced today, with the balance being promoted internally or via a co-promote or some combination of both. We also believe that outsourcing penetration is continuing to increase -- and that we are the preferred partner, given our 50%-plus win rate across all opportunities we pitch.
Fool contributor Stan Huber owns shares of inVentiv. To read the full interview with Eran Broshy, find out why inVentiv is a Hidden Gems pick, and see our scorecard and records of all past picks, you can take a 30-day free trial of Hidden Gems. The Fool has a disclosure policy.
