The Number Cruncher Drugmakers Count On
Calculated risks are nothing new to Dennis B. Gillings. At 26, he was celebrating his doctorate in mathematics by roughing it across Africa with three friends. At a deserted river crossing, two boys canoed over and, communicating with hand signals because they spoke no English, asked for the battery from the group's Land Rover. Although unsure where he'd wind up, Gillings unhooked the battery and hopped into the canoe. In minutes, he was gratefully helping power up an outboard motor on a homemade ferry to float the Rover across the water. Says the cool, sometimes cocky Gillings: "There is opportunity in the unknown."
Nearly 20 years later, in 1988, the Cambridge University-trained Briton again plunged into the unknown, quitting a tenured professorship in biostatistics at the University of North Carolina at Chapel Hill to devote himself to a company that does contract research for drugmakers. With his Durham (N.C.)-based Quintiles Transnational Corp. likely to top $745 million in sales this year--the biggest player in a fast-growing, $3.5 billion-a-year industry--the career change was clearly the right call.
These days, Gillings, 52, is taking new chances at the forefront of an industry undergoing a shakeout. Three years ago, the contract-research business surged to more than 1,000 players worldwide, ranging from tiny shops that review data to huge companies that carry out massive international drug trials. Since then, a feeding frenzy has left perhaps 700 standing. Quintiles has been one of the more aggressive acquirers, buying 10 companies worth some $875 million since 1992. The stock market has reacted violently. The company, which went public in April, 1994, at a split-adjusted price of 9 3/4, saw its shares rise from 37 early last year to 82 by midsummer before dropping back to about 55 now. Gillings finds Wall Street's enthusiasm as excessive as its correction. "The market is not processing information efficiently," he says in a puzzled, slightly scolding tone.
By most accounts, though, Quintiles will probably survive skittish markets and industry consolidation. "The strong are getting stronger. Quintiles is well-positioned to capitalize on all the changes," says analyst James S. Patricelli of Minneapolis-based Wessels, Arnold & Henderson, an investment research firm. Since 1994, the company has quadrupled its annual net income, to nearly $33 million last year, and nearly tripled its revenue, to $577.6 million. This year, analysts expect earnings to rise 41%, to about $46.7 million, while sales increase 29%, to $745 million.
For Gillings, the shift from academic to go-go businessman has been less jarring than other life changes. Born during World War II in London's East End, Gillings, whose father was a wholesale fish merchant, grew up amid rationing and privation. After he shone on IQ tests at 10, he entered a topnotch state-funded grammar school. With financial aid, he took a bachelor's degree in mathematics at the University of Exeter, then earned a diploma in statistics at Cambridge before getting his PhD at Exeter in 1972. "I didn't know anyone as a kid who ever went to university," says Gillings. "I felt privileged."
SMITTEN. Luck and connections contributed to his success. When a professor suggested, around 1970, that Gillings consider an instructor's post at UNC, he was intrigued. He had roamed Europe, Africa, and the Mideast but had never seen the U.S. Smitten with bucolic Chapel Hill, he stayed at the school 17 years and still lives nearby. Although his 3.72 million Quintiles shares are worth some $205 million, he owns a "fairly regular" four-bedroom house. But he has his indulgences: He gets piloted around in his own Cessna Citation, and he owns a condominium in London's tony Mayfair area as well as a beach house near Wilmington, N.C.
Married to an American, Joan, Gillings has a teenage daughter and two adult stepsons, one of whom works in Quintiles' marketing group. Over the years, he has hired dozens of his former graduate students. Teaching them was like an "extended job interview," he notes, calling the loyalty that comes from such ties "just a wonderful thing."
Still, Gillings isn't overawed by academic credentials. In 1987, he hired Rachel R. Selisker as senior financial officer on the basis of a two-year degree in accounting and 11 years' experience. Selisker, who later became a CPA, is now chief financial officer and executive vice-president for finance and has coordinated all Quintiles' acquisitions.
Gillings' second career happened almost by chance. In the mid-1970s, Germany's Hoechst faced a crisis when deaths were linked to its diabetes drug, DiaBeta. Aware of Gillings' work in biostatistics--applying statistical analysis to biological data--Hoechst asked him to study the problem. He demonstrated that preexisting liver or kidney ailments caused the deaths, and DiaBeta stayed on the market.
With this franchise-saving success to his credit, Gillings was soon moonlighting, generating statistical analyses that sometimes helped speed approvals by the Food & Drug Administration or even reverse negative decisions. One strength is his ability to lay out data to show that a drug works or outperforms the alternatives. Although a dissenting statistician once suggested that Gillings simply recast data in a more favorable light, Gillings insists his work clarifies the facts. "You have to present data correctly to make a point," he explains. "It's putting complicated data about the variability of individual patients into perspective better." Says Dr. Robert Temple, associate director at the FDA'S drug-evaluation unit: "It's always legitimate to take a second look."
In the booming 1980s, when companies were putting scores of drugs through human trials, Gillings, some colleagues, and grad students, working out of a converted trailer at UNC, began taking on clients in earnest. Gillings formally founded Quintiles--Quantitative Information Technology in the Life & Economic Sciences--in 1982. In 1988, he quit teaching.
Since then, he has pushed Quintiles into designing and conducting clinical trials, and data analysis is but a small part of the business. At last count, the company had worked with 49 of the top 50 drugmakers. In the secretive, highly proprietary drug industry, it has had an unheralded hand in winning O.K.'s for innovative, sometimes controversial, treatments. In 1991, for instance, regulators concerned about safety and efficacy refused to approve Warner-Lambert Co.'s Cognex, an Alzheimer's drug. After Quintiles devised a phone-monitoring system that let 2,000 doctors easily key in safety data on 10,165 patients, the drug was approved in 1993. "They were an important partner," says James Symons, director of clinical research at Warner-Lambert's Parke-Davis Div.
BROADER VIEW. The company's reach keeps growing. In addition to buying competing contract-research organizations (CROs) and opening offices in Australia and East Asia, Quintiles last fall acquired Innovex Holdings Ltd., a British contract-sales outfit, for about $665 million in stock and debt assumption. Once a drug is approved, Gillings reasons, drugmakers can use temporary sales staff, along with their own, to blitz doctors. Even rivals concede the logic. Notes Josef H. von Rickenbach, chief of Parexcel International Corp.'s CRO: "There is much more of a continuum now in thinking, all the way from development through the regulatory stage and through market introduction."
Of course, annual growth rates of 40% and more can mean headaches. One former executive grouses that staffers occasionally are "yanked off" projects for other duties, which can irk clients. "Some people don't adapt to change too well," retorts Gillings, who shows the same prickly impatience when laymen have trouble grasping statistical issues.
Gillings thinks being an entrepreneur has given him a broader world view than being a professor. In academics, "you learn a few tricks, and you invent a couple, and you put a few nuances on a couple, and then turn it out over and over again," he says. His commitment to devising new and better tricks has made Quintiles a winner so far.