PDI, Inc. History

Company Perspectives:

PDI is a sales and marketing partner to the pharmaceutical and health care industries. Leveraging the expertise gained from fifteen years of delivering sales results, we have established the sales and marketing infrastructure to assume total brand responsibility. Our expertise in sales, brand management and product marketing, marketing research, medical education, managed markets and trade relations, and medical affairs enables us to maximize brand growth potential from prelaunch to patent expiration. Our strong financial position allows for innovative financial models at all stages of a product's lifecycle to best meet the brand's overall sales and marketing objectives.

Key Dates:

1987:

Professional Detailing, Inc. is founded by Pat Dugan as a division of Dugan/Farley Communications.

1990:

Professional Detailing, Inc. (PDI) becomes independent of Dugan/Farley Communications, under the sole ownership of Pat Dugan; Charles T. "Chuck" Saldarini assumes leadership of PDI.

1991:

PDI converts to "vertically dedicated" program management with a dedicated sales team for each client.

1998:

PDI goes public, trading on the NASDAQ under the symbol PDII.

2000:

PDI forms LifeCycle Ventures and enters into a strategic relationship with iPhysician.net.

2001:

Professional Detailing, Inc. officially changes its name to PDI, Inc.

Company History:

PDI, Inc., formerly Professional Detailing, Inc., was the first company to offer product detailing services to the pharmaceutical industry on a fee-for-service basis. Founded by Pat Dugan in 1987, PDI first established itself as a leader in the Contract Sales Organization (CSO) business by designing customized, dedicated sales teams to represent individual products. While the new industry took off, PDI maintained its leadership position by continually innovating to diversify and specialize the range of services it provided, from product marketing and brand management to marketing research and medical education. PDI has represented such pharmaceutical giants as Pfizer, GlaxoSmithKline, AstraZeneca, Bayer, Eli Lilly, and Johnson & Johnson.

Developing the Industry's First Part-Time Contract Sales Model: 1986-95

PDI, Inc. was founded in 1987 by pharmaceutical marketing entrepreneur John P. Dugan under the name Professional Detailing. PDI was originally a division of Dugan/Farley Communications, a medical advertising agency that Dugan had founded in 1972. With PDI, Dugan wanted to create a high-quality outsourcing service for the pharmaceutical industry. The service, called product detailing, comprised all facets of customized representation for both prescription and over-the-counter drugs to the medical community: sales representatives met face-to-face with doctors and other healthcare decision makers to present technical reviews of the products they promoted; these reviews outlined everything from the legal issues surrounding the drug, to its role in disease treatment, to dosages, side effects, and cost.

With drug companies expanding their product portfolios at a rapid rate and an increasing number of new pharmaceutical products awaiting FDA approval, Dugan foresaw a growing need for these companies to develop new marketing strategies. By outsourcing their marketing needs to PDI, pharmaceutical companies could reap the benefits of customized, industry standard sales teams without having to build the teams themselves, or invest in that sales force as permanent employees. If PDI could deliver premium quality marketing services while enabling pharmaceutical companies to cut costs and conserve in-house resources, the company could attract some of the biggest names in the pharmaceutical industry.

In 1990, Professional Detailing broke off from Dugan/Farley Communications to become the first contract sales organization (CSO) in the business. Later that year, Charles T. Saldarini was promoted from general manager to president and chief operating officer of PDI. Saldarini had come on board at PDI in 1987. He had begun as a sales manager but rose quickly to leadership positions, first as director of marketing services and then as general manager. With the 1990 transition, Pat Dugan retained the title of chief executive officer, but Saldarini assumed full responsibility for the daily operations of the company.

A couple of early innovations to the business model were critical to PDI's success. First, in 1991, the company converted to vertically dedicated program management. This meant that PDI designed and implemented a product's marketing program to account for every phase of that product's lifecycle, from prelaunch to FDA approval and through patent expiration. Further, PDI developed a dedicated sales team for each client. Customized to fit the individual client's needs, the team did not represent the products of any other drug manufacturers. So identified was the team with their particular client that they often carried that client's business cards.

In another visionary move, PDI revolutionized the medical sales industry during 1992 and 1993 by converting its sales people from contract employees who received compensation on a per-call basis to salaried employees. In part by offering this kind of security and commitment to its salespeople, PDI managed to grow its team of full- and part-time sales representatives from 130 to 930 people in four years.

Building Infrastructure for the Transition to Full-Time Contract Sales: 1995-2000

In 1995, PDI entered into a relationship with Pfizer, Inc., a leading pharmaceutical company with broad global reach. Pfizer signed PDI to provide product detailing for two drugs: Glucotrol XL, a diabetes medication, and Cardura, a heart disease medication. This agreement gave PDI a pivotal boost in credibility by distinguishing it as a CSO qualified to represent the top tier pharmaceutical companies in the world.

The year 1995 also marked the beginning of a deluge of FDA approvals for new drugs. PDI recognized that many of its clients now wanted and needed full-time representation to launch and maximize the profitability of their new products, so the company entered a new period of transition to accommodate this need. In 1996, PDI built its first large scale, full-time sales force for pharmaceutical giant GlaxoWellcome (later renamed GlaxoSmithKline). The 300-representative team was deployed to support Ceftin, an antibiotic; Wellbutrin, an antidepressant; and Imitrex, a migraine medication.

In 1997, PDI's revenues leaped 65 percent to $54.5 million, and it seemed clear that the company was becoming a dominant force in contract sales. In April 1998, PDI made its initial public offering of 2.8 million shares on the NASDAQ stock exchange under the symbol PDII, with proceeds designated for investments in growth, infrastructure, and future acquisitions. Later that year, the company launched a web site. The site was designed to be a "one-stop-shopping" destination where visitors (potential clients, employees, and investors) could research information about the current state of the pharmaceutical industry, as well as the nature of the contract sales service that PDI offered.

In 1999, PDI made two key acquisitions. In the second quarter they acquired TVG, Inc. Based in Fort Washington, Pennsylvania, TVG had grossed $18.4 million in revenue in the preceding year. TVG was a provider of communications programs and sophisticated marketing research and consulting services whose client base included 18 of the top 20 pharmaceutical companies in the world. The Education/Communications division of TVG focused on facilitating contact with and providing product education to doctors via every avenue from dinner meetings to teleconferencing. Meanwhile, the marketing research and consulting division of TVG worked on brand profiling and positioning, as well as marketing and message development strategies. Like PDI, TVG worked with a product over the span of its lifecycle, though TVG specialized in the important prelaunch phase. PDI acquired all of TVG's outstanding stock in exchange for over a million shares of its own common stock. The transaction was estimated to be worth about $31 million, given the price of PDI stock at the time. The acquisition of TVG enabled PDI to greatly diversify the range of vertically integrated services it could provide for its clients.

In the third quarter of 1999, PDI acquired ProtoCall, LLC. Based in Cincinnati, Ohio, and having recorded more than $8 million in revenue in the preceding year, ProtoCall provided syndicated contract sales services to the pharmaceutical industry. PDI purchased ProtoCall for $4.5 million in cash, with the agreement to make contingent payments up to $3 million in 2000, depending upon whether its new subsidiary performed up to projected levels. The acquisition of ProtoCall, which later became known as the PDI Shared Sales Team, enabled PDI to offer their services as a face-to-face selling resource for companies that could not afford to contract a full, dedicated sales team. Shared teams sold multiple, non-competitive brands from a variety of pharmaceutical companies within targeted geographic areas. The benefit of this acquisition was to make PDI's services accessible and attractive to a wider range of clients.

From Contract Sales to Commercial Partner: 2000-2002

As PDI entered the 21st century, the company was poised again for major transition. Preliminarily, the company experienced a shift in its senior management: Steven K. Budd succeeded Charles T. Saldarini as president. Budd had been hired as PDI's vice-president in 1995 and later promoted to executive vice-president and chief operating officer. Saldarini retained the position of CEO, in addition to assuming the position of vice-chairman of the board of directors.

At a more fundamental level, the company was seeking to modify its business model. There were many limitations inherent in the fee-for-service model PDI had long embraced. The optimum outcome of any discrete contract relationship was renewal of the contract; conversely, the CSO was faced with the ever present risk of contract termination. Moreover, PDI's leadership believed that even the consistent achievement of renewed contracts would not, in and of itself, provide PDI with the stability or profits necessary to maximize the value of the company. Having succeeded in becoming a dominant contract sales force, then, PDI was now turning its ambition toward developing fuller commercial partnerships with the companies it represented. Though commercial partnership would bring increased risk to PDI, as the company would be investing its own capital in the brands it promoted, it would also bring greater rewards, including longer-term relationships, increased profits as a result of revenue sharing, greater visibility within the industry, and a critical level of control over its brand commercialization strategies. All of these outcomes would translate to greater stability for PDI, whose ultimate goal was to become the sales and marketing partner of choice to the U.S. pharmaceutical industry.

In order to persuade its clients to enter into more substantial partnerships, PDI needed to target its new business model at an unmet need within the industry. In 2000, the pharmaceutical market was still being flooded with new FDA approvals. It was imperative for drug manufacturers to devote the bulk of their marketing resources to the launch and promotion of their new blockbuster drugs in order to achieve maximum exposure and sales of these products in the critical early stages of their lifecycles. However, as a result, these companies often lacked the additional marketing resources to continue pushing the sales of products in the more mature phases of their lifecycles. PDI recognized that with the proper promotion, the older, more established drugs in a company's portfolio could continue to bring in substantial revenues. As a solution to the problem of funding these sales efforts, PDI established a wholly owned subsidiary called LifeCycle Ventures. When contracted, LifeCycle Ventures (LCV) would assume completely, or in conjunction with the client, the burden of financing and overseeing the marketing program for these more established drugs, in exchange for a percentage of that drug's sales revenue. By adding LCV to its repertoire of contract service options, PDI created the infrastructure to support its desired role as a commercial partner and increased the depth of its value to drug manufacturers.

PDI experienced the first major endorsement of its LCV innovation in the third quarter of 2000, when GlaxoWellcome signed a five-year LifeCycle Extension agreement giving PDI the exclusive U.S. rights to market, sell, and distribute Ceftin, the top-selling antibiotic for respiratory infections. Ceftin had already been on the market for 12 years but was considered one of the core brands in GlaxoWellcome's portfolio, delivering more than $332 million in U.S. sales in 1999. PDI had been providing product detailing services to GlaxoWellcome for seven years and promoting Ceftin specifically for three. By the terms of the new agreement, LCV would actually buy certain minimum quantities of Ceftin every quarter and commence marketing, sales, and distribution efforts from there. This agreement represented a significant breakthrough for PDI as the company's first true at-risk venture.

In the fourth quarter of 2000, PDI got its first big opportunity to prove that the marketing capabilities of LifeCycle Ventures could be as successful in bringing a product to market as they had been in fostering a product's growth and maximizing its lifecycle. PDI signed a five-year agreement with United Therapeutics Corporation, a pharmaceutical company with operations in Maryland, North Carolina, and Illinois, to handle the commercialization of beraprost, a drug for peripheral cardiovascular disease that was still under development and pending FDA approval. PDI was contracted on a regular fee-for-service basis to handle the prelaunch and launch phases of beraprost's lifecycle, with the possibility of developing a revenue sharing relationship with United Therapeutics in the future.

Even while PDI was engaged in modifying its business model with the strategic mission of transitioning from a service-based to a product-driven company, PDI continued to expand its operations in other ways. A key development of 2000 was the signing of an exclusive three-year agreement between PDI and iPhysician.net, a company that had pioneered an Internet-based product detailing service application called e-Detailing to facilitate communication between doctors and the sales representatives of pharmaceutical companies. Using a computer-based videoconferencing system, sales representatives could gain "entrance" to the private offices of physicians and interact with them in real time. iPhysician.net also offered an e-Meeting application whereby doctors could meet electronically with their colleagues as well as salespeople to participate in educational symposia, focus groups, and other marketing research. Thus, an important strategic partnership was formed when PDI invested $2.5 million in i.Physician.net to become the company's only CSO affiliate in the United States. Herewith, PDI secured a $1 million service agreement whereby i.Physician.net would tap PDI's ProtoCall sales force to recruit video sales representatives for its e-Detailing network. In addition to supplying them with personnel, PDI would become the sole provider of video call center facilities to i.Physician.net. Further, PDI gained the right to extend iPhysician.net's e-Detailing technology to all of its current and future clients. The agreement solidified an exclusive partnership through which PDI would harness the latest technology to maintain its position at the forefront of the CSO business.

Not only did PDI extend its technological reach, it extended its geographic reach in the fourth quarter of 2000 as well when it invested about $760,000 in a United Kingdom CSO called In2Focus Sales Development Services, Limited. This was PDI's first step toward a strategic alliance that would expand PDI's capabilities into Europe.

Having moved shrewdly to increase market penetration for pharmaceutical products, PDI decided in 2001 to expand the range of products it marketed as well. That year, PDI established a new business unit to begin to exploit opportunities in the Medical Devices and Diagnostics (MD&D) market. PDI brought on a new team of experienced MD&D managers, intending to combine their expertise with the solid foundation and proven sales and marketing strategies it had already applied to pharmaceuticals. In September 2001, PDI solidified its commitment to entering the MD&D market when it acquired InServe Support Solutions, a company that provided clinical education, after-sales support, and in-hospital sales efforts for medical device and diagnostic products. In purchasing InServe, PDI paid $8.5 million in cash to former stockholders, with the agreement to make contingent payments up to $3 million in 2002, depending upon whether its new subsidiary performed up to projected levels.

Also in 2001, PDI officially changed its name from Product Detailing, Inc. to PDI, Inc. By this time it was offering four different partnership options to its clients: PDI Copromotion, whereby PDI shared the risks and rewards of the sales and marketing effort based on prearranged percentages; PDI LifeCycle Extension, whereby PDI assumed brand responsibility for products nearing patent expiration; PDI Product Commercialization Services, available on a fee-for-service or partnership basis, for products in the prelaunch phase of their lifecycle; and PDI Contract Sales.

PDI leveraged these specialized applications to forge a number of important deals in 2001. In the second quarter, PDI signed a long-term copromotion agreement with Santen Pharmaceuticals Co., Ltd. for the marketing, sales, and distribution rights to Quixin, a topical treatment for bacterial conjunctivitis. Also in the second quarter, PDI signed a key agreement with Novartis Pharmaceuticals Corporation: PDI gained the U.S. rights to market, sell, and distribute Lotensin and Lotensin HCT through its LifeCycle Extension application, as well as co-promotion rights to Lotrel, one of Novartis's fastest-growing brands. Finally, in the fourth quarter of 2001, PDI signed a deal with Eli Lilly and Company to copromote Evista, a high-profile drug for the prevention and treatment of osteoporosis.

PDI suffered some disappointments at the beginning of 2002, including Bayer's termination without cause of its contract with PDI, disappointing sales figures for Evista, and, most notably, the early termination of the Ceftin agreement with GlaxoSmithKline (GSK, formerly GlaxoWellcome). Despite year-end assurances of stronger than expected Ceftin sales in 2001, PDI's sales were not strong enough to meet sufficient earnings benchmarks relative to the minimum purchase requirements of Ceftin put forth in the GSK contract. The Ceftin termination, less than two years into the five-year term, resulted in losses of tens of millions of dollars for the fourth quarter of 2001 and a significant earnings void at the outset of 2002. Still, despite these setbacks, PDI persisted with aggressive moves to position itself as a commercial partner to pharmaceutical companies. The company's revision of its business model was proving to be visionary, as FDA approvals had slowed considerably, and the contract sales market had begun to falter.

Principal Subsidiaries: LifeCycle Ventures, Inc.; TVG, Inc.; ProtoCall, Inc.; InServe Support Solutions, Inc.; PDI Investment Company, Inc.

Principal Competitors: Boron, LePore & Associates, Inc.; Nelson Communications Inc.; Ventiv Health, Inc.

Further Reading:

• Lacey, Stephen, "Professional Detailing: 'Initial' Public Offering," IPO Reporter, April 20, 1998.
• "PDI's LifeCycle Ventures Selected by GlaxoWellcome Inc. for Exclusive U.S. Marketing, Sales and Distribution Rights for Ceftin," Business Wire, October 2, 2000.

Source: International Directory of Company Histories, Vol. 52. St. James Press, 2003.

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