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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of Earliest Event Reported): July 16, 2001
VENTIV HEALTH, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation)
0-30318 52-2181734
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(Commission File Number) (I.R.S. Employer Identification No.)
1114 AVENUE OF THE AMERICAS 10036
NEW YORK, NEW YORK
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(Address of Principal Executive offices) (Zip Code)
(212) 768-8000
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(Registrant's Telephone Number, Including Area Code
N/A
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(Former Name or Former Address, if changed Since Last Report)
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NY2:\1014810\02\LR1602!.DOC\79008.0003
Item 5. Other Events.
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Ventiv Health, Inc. today announced that Bristol-Myers Squibb ("BMS")
has advised the Company of its plans regarding Monopril and Cefzil, the two
products currently being promoted by the Company under its existing arrangement
with BMS.
BMS plans to promote one of the brands internally as of January 2002.
In addition, BMS is planning to make a strategic decision on the future of the
other brand. As a result, services currently being provided to BMS under the
current contract with BMS will cease effective December 31, 2001.
Item 9. Regulation FD Disclosure.
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The Company announced in a conference call today that due to revenue
share performance of certain products and recent and anticipated new business
that will not begin generating revenue until late in 2001, the Company expects
full year revenue to be slightly below the guidance range provided in January
2001, and to be approximately $450-$490 million. The Company expects second
quarter 2001 revenue of approximately $103 million and third quarter 2001
revenue of approximately $105-$115 million. Given these reduced revenue
expectations, the Company is also modifying its full year EBIT expectations to
approximately $28-$31 million, and expects to record approximately $4.0-$4.5
million in the second quarter and $4.0-$5.0 million in the third quarter. While
these changes reduce expectations for 2001, the Company continues to expect that
results in 2001 (taking into account the effect of the start-up of Bristol-Myers
Squibb in 2000), 2002 and beyond will achieve previously stated targets of
annual revenue growth in the 15%-20% range and EBIT growth in the 18%-20% range.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 - A CAUTION CONCERNING
FORWARD-LOOKING STATEMENTS
Statements included in this discussion in this Report on Form 8-K
relating, but not limited, to future revenues, capital requirements, growth
rates, cash flows and operational performance are forward-looking statements
that involve certain known and unknown risks and uncertainties. Factors that may
cause results, performance or achievements expressed or implied by such
forward-looking statements to differ from actual results include, among other
thing, the availability of financing, technological, regulatory or other
developments in Ventiv's business, changes in the pharmaceutical industry,
uncertainty related to the continued growth of pharmaceutical outsourcing,
changes in the competitive climate in which Ventiv operates, Ventiv's ability to
maintain large client contracts or enter into new contracts, uncertainties
related to future incentive payments and earnings generated through revenue
sharing arrangements and the emergence of future opportunities and other factors
more fully described under the caption "Risk Factors" set forth below in this
Report on Form 8-K.
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RISK FACTORS
Dependence on Expenditures by Companies in the Life Sciences Industries
Our revenues are highly dependent on promotional, marketing and sales
expenditures by companies in the life sciences industries, including the
pharmaceutical, medical device, diagnostics and biotechnology industries.
Promotional, marketing and sales expenditures by pharmaceutical manufacturers
have in the past been, and could in the future be, negatively impacted by, among
other things, governmental reform or private market initiatives intended to
reduce the cost of pharmaceutical products or by governmental, medical
association or pharmaceutical industry initiatives designed to regulate the
manner in which pharmaceutical manufacturers promote their products.
Furthermore, the trend in the life sciences industries toward consolidation, by
merger or otherwise, may result in a reduction in the use of contract sales
providers.
Dependence on Trend Toward Outsourcing in the Life Sciences Industries
Our business and growth depend in large part on the progression of
the trend in the pharmaceutical and life sciences industries toward the
outsourcing of marketing and sales services. We can give no assurance that this
trend in outsourcing will continue, as companies may elect to perform such
services internally. A significant change in the direction of this trend
generally, or a trend in the pharmaceutical or life sciences industries, not
use, or to reduce the use of, outsourced marketing and sales services such as
those that we provide, would have a material adverse effect on our business.
Risk-based Contracts
Particularly in the U.S., Ventiv has seen an increase in demand from
clients for incentive-based and revenue sharing arrangements, Ventiv is
typically paid a fixed fee and, in addition, has an opportunity to increase its
earnings based on the market performance of the products being detailed in
relation to targeted sales volumes, salesforce performance metrics or a
combination thereof. Under revenue sharing arrangements, Ventiv's compensation
is based on the market performance of the products being detailed, usually
expressed as a percentage of products sales. Ventiv expects this trend to
continue and, as a result, revenues derived from these arrangements inherently
transfer some market risk from clients to the Company. In addition, these
arrangements can result in variability in revenue and earnings due to
seasonality of product usage, changes in market share, new product
introductions, overall promotional efforts and other market related factors.
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Risk Associated with Our International Operations and Expansion in the United
Kingdom and Continental Europe
Ventiv has a number of operations in the United Kingdom and
continental Europe. The following are the material risks inherent in conducting
our international operations:
o difficulties in complying with a variety of foreign laws,
o effects of governmental regulation on the demand for
pharmaceutical products, particularly new products,
o unexpected changes in regulatory requirements,
o difficulties in staffing and managing foreign operations,
o potentially adverse tax consequences,
o foreign currency risk, and
o the risk of economic downturn in non-U.S. locations where
Ventiv does business.
We cannot assure you that one or more of these factors will not have
a material adverse effect on our international operations and consequently on
our business, financial condition and results of operations. The U.S. dollar
value of our foreign-generated revenues varies with currency exchange rate
fluctuations. Significant increases in the value of the U.S. dollar relative to
the British Pound, French Franc, or German Mark, could have a material adverse
effect on our results of operations. We continually evaluate our exposure to
exchange rate risk but do not currently hedge this risk.
Management of Our Growth
Ventiv has grown rapidly over the past several years. Our continued
growth depends to a significant degree on our ability to successfully leverage
our existing infrastructure to perform services for new clients, as well as on
our ability to develop and successfully implement new marketing methods or
channels for new services. Our continued growth will also depend on a number of
other factors, including our ability to maintain the high quality of the
services we provide to our customers and to increase our penetration with
existing customers; to recruit, motivate and retain qualified personnel; and to
economically train existing sales representatives and recruit new sales
representatives. Our continued growth will also require us to implement enhanced
operational and financial systems and additional management resources. We cannot
assure you that we will be able to manage our expanding operations effectively
or that we will be able to maintain our growth. If we are unable to manage
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growth effectively, this could materially adversely affect our business,
financial condition and results of operations.
Reliance on Technology; Risk of Business Interruption
We have invested significantly in sophisticated and specialized
computer technology and have focused on the application of this technology to
provide customized solutions to meet many of our clients' needs. We have also
invested significantly in sophisticated end-user databases and software that
enable us to market our clients' products to targeted markets. We anticipate
that it will be necessary to continue to select, invest in and develop new and
enhanced technology and end-user databases on a timely basis in the future in
order to maintain our competitiveness. In addition, our business is dependent on
our computer equipment and software systems, and the temporary or permanent loss
of these equipment or systems, through casualty or operating malfunction, could
have a material adverse effect on our business. Our property and business
interruption insurance may not adequately compensate us for all losses that we
may incur in any such event.
Government Regulation of Handling and Distribution of Pharmaceutical Samples
In connection with the handling and distribution of samples of
pharmaceutical products, we are subject to regulation by the Prescription Drug
Marketing Act of 1987 and other applicable federal, state and local laws and
regulations in the United States and certain regulations in the United Kingdom,
France, Germany and the European Union. These laws regulate the distribution of
drug samples by mandating storage, handling and record-keeping requirements for
drug samples and by banning the purchase or sale of drug samples. In certain
jurisdictions, including the United Kingdom and France, pharmaceutical sales
representatives are subject to examination and licensing requirements under
local law and industry guidelines. Our physician education services are subject
to a variety of foreign, federal and state regulations relating to both the
education of medical professionals and the marketing and sales of
pharmaceuticals. In addition, certain ethical guidelines promulgated by the
American Medical Association govern the receipt by physicians of gifts in
connection with the marketing of healthcare products. These guidelines govern
the honoraria and other items of value which AMA physicians may receive,
directly or indirectly, from pharmaceutical companies. Ventiv follows similar
guidelines in effect in other countries where it provides services. Any changes
in these regulations and guidelines or their application could have a material
adverse effect on our business. Failure to comply with these requirements could
result in the imposition of fines, loss of licenses and other penalties and
could have a material adverse effect on Ventiv.
Government Regulation of Pharmaceutical and Life Sciences Industries
Pharmaceutical manufacturers and the healthcare industry, in general,
are subject to significant U.S. federal and state, U.K., French, Hungarian,
Austrian, German and European Union regulation. In particular, regulations
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affecting the pricing or marketing of pharmaceuticals could make it uneconomical
or infeasible for pharmaceutical companies to market their products through
medical marketing detailers. Other changes in the domestic and international
regulation of the pharmaceutical industry could also have a material adverse
effect on Ventiv.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VENTIV HEALTH, INC.
By: /s/ Joseph S. Durko
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Date: July 16, 2001 Name: Joseph S. Durko
Title: Vice President, Finance & Secretary
(Principal Accounting and Financial Officer)
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