UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the fiscal year ended September 30, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ___________ to
_____________.
Commission File Number 0-23357
BIOANALYTICAL SYSTEMS, INC.
(Exact name of the registrant as specified in its charter)
INDIANA 35-1345024
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2701 KENT AVENUE
WEST LAFAYETTE, IN 47906
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(Address of principal executive offices) (Zip code)
(765) 463-4527
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Common Shares
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.045 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
Based on the closing price on the NASDAQ exchange, the aggregate market value of
the voting and non-voting common equity held by non-affiliates of the registrant
is $18,686,833. As of November 30, 2001, 4,569,416 shares of registrant's common
shares were outstanding. No shares of registrant's Preferred Stock were
outstanding as of November 30, 2001.
Portions of the following documents have been incorporated by reference into
this report:
Registrant's Document Parts Into Which Incorporated
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Bioanalytical Systems, Inc.
2001 Annual Report Parts II and IV
Proxy Statement Part III
TABLE OF CONTENTS
Page
----
Part I
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Part II
Item 5. Market for Registrant's Common Equity and
` Related Stockholder Matters 11
Item 6. Selected Consolidated Financial Data 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 12
Part III
Item 10. Directors and Executive Officers of the Registrant 13
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management 14
Item 13. Certain Relationships and Related Transactions 15
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 16
Part I
THIS REPORT CONTAINS CERTAIN STATEMENTS THAT ARE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. READERS OF THIS
REPORT ARE CAUTIONED THAT RELIANCE ON ANY FORWARD-LOOKING STATEMENT INVOLVES
RISKS AND UNCERTAINTIES. ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS ON
WHICH THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE BASED ARE REASONABLE,
ANY OF THOSE ASSUMPTIONS COULD PROVE TO BE INACCURATE GIVEN THE INHERENT
UNCERTAINTIES AS TO THE OCCURRENCE OR NONOCCURRENCE OF FUTURE EVENTS. THERE CAN
BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT
WILL PROVE TO BE ACCURATE. THE INCLUSION OF A FORWARD-LOOKING STATEMENT HEREIN
SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY THAT THE COMPANY'S
OBJECTIVES WILL BE ACHIEVED.
Item 1. Business
General
The Company provides contract development services and research equipment
to many of the leading, global pharmaceutical, medical device and biotechnology
companies. The Company concentrates on services and tools to improve the speed
and efficiency of preclinical development. It has played a significant role in
understanding the underlying causes of central nervous system disorders,
diabetes, osteoporosis and other diseases. Our clients have realized more than
$15 billion in revenue from technologies and services provided by the Company.
The Company offers an efficient, variable-cost alternative to its clients'
internal product development, compliance and quality control programs. To reduce
overhead and speed drug approvals through the Food and Drug Administration
(FDA), pharmaceutical companies are contracting increasing amounts of their
development work to outside firms such as the Company. As a result, the Company
now derives its revenues from both the sale of its research services and drug
development tools. The Company provides a range of value-added services and
products focused on chemical analysis and preclinical metabolism, allowing its
clients to perform their research and development either in house or at the
Company
The Company's services and products combine basic research with diagnostic
and therapeutic experience. The Company is capable of supporting the clinical
development (formulations and clinical trials) and preclinical needs of
researchers and clinicians, for small molecule drugs and hormones through large
biomolecules. The Company believes their scientists have the skills necessary in
instrumentation, chemistry, computer software, physiology, pathology and the
global presence to make the services and products it provides increasingly
valuable to the worldwide pharmaceutical, medical device and biotechnological
industries.
Over the past five years, the Company has regularly provided its services
and/or products to most of the top 25 pharmaceutical companies in the world, as
ranked by 2000 research and development spending. In fiscal 2001, the Company
estimates that more than 40% of its total revenue was derived from these
companies. A growing pool of clients among smaller drug developers is viewed as
favorable. The Company has stated that it intends to become a strategic partner
to that tier of clients rather than simply a tactical services provider to the
largest companies.
The Company's services groups provide screening and pharmacological
testing, preclinical/safety testing, formulation development, regulatory
compliance and quality control testing. The Pharmaceutical Research and
Manufacturing Association (PhRMA) estimates that pharmaceutical and
biotechnology companies spent approximately $30.5 billion worldwide on research
and development in 2001. Analysts estimate that outsourced services will grow
from 20% of research and development expenditures in 2000 to more than 40% by
2004. The Company believes that this outsourcing trend will continue. Several
factors are driving pharmaceutical companies toward improving shareholder value.
The Company agrees that the trend toward outsourcing will grow.
The Company designs, manufactures and markets a range of products that
collect, separate, detect and quantify chemicals in biological samples. These
tools and the Vetronics line of veterinary physiological monitors are used to
track complex chemical, physiological and behavioral effects in laboratory
animal models. The Company is focusing its products business on expediting
preclinical screening of developmental drugs.
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The Company competes in niches of the $20 billion (2001) analytical
instrument industry. The Company leverages its talented personnel in these
instruments businesses to provide solutions to highly challenging problems,
adding significant value. The Company develops and manufactures state-of-the-art
robotic blood sampling, in vivo microdialysis collection systems and physiology
monitoring tools. Complementing these, the Company's liquid chromatography and
electrochemistry instrument platform, epsilon, is used to separate and quantify
drugs, xenobiotics, metabolites and other chemicals in blood, cerebrospinal
fluid and other biological media.
Scientists engaged in drug metabolism studies, pharmacokinetics and basic
neuroscience research at pharmaceutical research organizations are the Company's
principal clients.
Changing Nature of the Pharmaceutical Industry
The Company provides services and products globally to pharmaceutical,
medical device and biotechnology companies, academic institutions and
governments to facilitate research and development. The Company's services are
generally marketed to pharmaceutical and biotech companies engaged in early
stages of drug development. The Company's products are generally marketed to
both public and private research organizations. The research services industry
is highly fragmented among hundreds of niche vendors and a small number of
larger companies focused on an ever-growing portfolio of cradle-to-grave
pharmaceutical development services.
While the markets for the Company's services and products have distinct
customers (often separate divisions in a single large pharmaceutical company)
and requirements, the Company believes that both are facing increased pressure
to outsource facets of their research and development activities. The Company
believes that the following factors will increase outsourcing by its customers.
Accelerated Drug Development
End users continue to demand faster, more efficient drug development.
Pharmaceutical developers are relying on external service providers for testing
and analysis in all phases of development. Clients demand fast, quality service
in order to make immediate informed decisions to quickly exclude poor candidates
and speed development of successful ones.
Cost Containment
Pharmaceutical companies are developing more efficient operating strategies
due to the increased purchasing power of large buyer groups and government
initiatives designed to reduce drug prices. The need for additional development
capacity to speed new product development, maximize market exclusivity and
increase profitability drives the need for outsourced services.
Patent Expiration
Patents on all pharmaceuticals age and expire. Drug companies are
developing new products or modifying existing products to maintain market share
against generic competition. The Company believes that the pressure to develop
new products and to modify or reformulate existing products, combined with
internal capacity constraints, will lead clients to outsource development.
Strategic Alliances
Strategic alliances allow pharmaceutical companies to share research
know-how and to develop and market new drugs faster in more diverse, global
markets. The Company believes that alliances will lead to a greater number of
potential drugs in testing, many under study by new companies lacking broad
technical resources.
Mergers and Acquisitions
Consolidation in the pharmaceutical industry is becoming commonplace. As
firms blend personnel, resources and business activities, the Company believes
they will continue to streamline operations, optimizing staffing which will lead
to more outsourcing. This may result in short-term disruption in placement of,
or progress on, drug development programs as merging companies rationalize their
respective pipelines.
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Biotechnology Industry and Virtual Drug Company Growth
The biotechnology industry has grown rapidly over the last 10 years and has
introduced many new developmental drugs. Biotechnology companies do not have the
in-house resources to conduct development and testing. Also, several new
companies have pronounced a business strategy to develop a product sufficiently
to attract a strategic partner who will manufacture and market the drug. Many of
these virtual drug development companies with little or no internal resources
must outsource drug development and testing.
Need for Unique Technical Expertise
The increasing complexity of new drugs requires highly specialized quality
and innovative, solution-driven research not available in the clients' labs. The
Company believes that this need for unique technical expertise will increasingly
lead to outsourcing of research activity.
Need for Data Management Expertise
The FDA is requiring more regulatory data and greater access to that data
and is encouraging the use of computer-assisted filings in an effort to expedite
approval. The Company is able to provide clients with remote access to Company
computer systems while at the same time protecting client data from unauthorized
access. The Company has also developed proprietary validated online data entry
software enabling direct publication of data in unique client formats.
Globalization of the Marketplace
Foreign firms are relying on independent development companies with
experience in the United States to provide integrated services through all
phases of product development and to assist in preparing complex regulatory
submissions. Domestic drug firms are broadening product availability globally,
demanding local regulatory approval. The Company believes that domestic service
providers with global reach, established regulatory expertise and a broad range
of integrated development services will benefit from this trend. The Company has
a significant European presence and domestic skills in foreign operations.
The Company's Role in the Drug Development Process
Process Overview
The Company has 27 years of experience in developing analytical methods to
support drug discovery. Under the United States regulatory system, the
development process for new pharmaceutical products can be divided into three
distinct phases.
1) The preclinical phase includes discovery, characterization, formulation and
safety testing to prepare an Investigational New Drug (IND) exemption for
submission to the FDA. The IND must be accepted by the FDA before the drug
can be tested in humans.
2) The second, clinical phase follows a successful IND submission and further
explores the safety, tolerability, efficacy and dosage of the substance in
humans. Early manufacturing demonstrates production of the substance in
accordance with the FDA's cGMP guidelines. Data from these activities are
compiled in a New Drug Application (NDA), or for biotechnology products a
Product License Application (PLA), for submission to the FDA requesting
approval to market the drug.
3) The third phase follows FDA approval of the NDA or PLA. This includes
production and continued analytical and clinical monitoring of the drug.
The post-approval phase also involves the development and regulatory
approval of product modifications and line extensions, including improved
dosage forms.
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The Company's Role
The Preclinical Phase. New molecules are screened for pharmacological
activity using various models. Once the pharmacologically active molecule is
fully characterized, it is analyzed to confirm its integrity. Development of the
initial dosage form for clinical trials is completed, with analytical chemistry
protocols to determine its stability. Upon successful completion of preclinical
safety and efficacy studies in in vitro and in vivo, an IND submission is
prepared and provided to the FDA for review prior to human clinical trials.
Clients work with the Company's Preclinical Services division to establish
pharmacokinetic and safety testing protocols. These studies range from acute
safety monitoring on drugs and medical devices to chronic, multi-year
oncogenicity studies. Bioanalyses of blood sampled under these protocols by the
Company's bioanalytical services group provide kinetic, metabolism and dose
ranging data.
Many of the Company's products are designed for use in preclinical
development. For example:
1) The Culex(R) ABS, a robotic automated blood sampler, enables researchers to
develop pharmacokinetic profiles of drugs in early screening in rodents
quickly and cost effectively. Several variations on this technology are in
development.
2) Company scientists have been recognized by their peers for their
contributions to technology of drugs for central nervous system (CNS)
disorders such as depression, Parkinson's disease, schizophrenia and
Alzheimer's disease.
3) Company technology is the basis for most of the glucose sensors currently
sold to diabetics and the majority of firms in this market are Company
clients.
4) The Company's bioanalytical services group used the Company's
chromatography products to develop a single, quick, proprietary method to
screen up to ten therapeutic HIV drugs in the same blood sample with the
cooperation of several major therapeutic drug developers. The method
enables researchers to quantify each component in a drug cocktail or to
monitor HIV treatments.
The Company's ability to solve client problems combining its knowledge
base, services and products has been a factor in the Company's selection by
major pharmaceutical companies to assist in several preclinical and Phase I, II
and III clinical trials.
The Clinical Phase. After successful submission of an IND application, the
sponsor conducts Phase I human clinical trials in a limited number of healthy
individuals to determine safety and tolerability. This work requires
bioanalytical assays to determine the availability and metabolism of the active
ingredient following administration. Expertise in method development and
validation is essential for this phase, particularly for new chemical entities.
When further safety, tolerability and dosing regimens have been established in
Phase II, Phase III clinical trials are conducted to verify efficacy and safety.
After the successful completion of Phase III clinical trials, the sponsor of the
new drug submits an NDA or PLA to the FDA requesting that the product be
approved for marketing.
The Company's bioanalytical work per patient grows rapidly from Phase I
through III. As the number of patients grows the number of samples per patient
declines. Phase II and III studies take several years, practicing well proven
analytical protocols. It is unusual for a sponsor to change laboratories unless
there are problems in the quality or timely delivery of results.
Many patients are receiving multiple drug therapy. The influence of each
drug on the effectiveness of the other drugs must be monitored. These drug
interaction studies often extend clinical trials. A CRO such as the Company can
provide services to several different manufacturers of complementary drugs
simultaneously in cases of potential synergy (e.g. the "cocktail" approach to
HIV therapy). Multi-client studies frequently lead to cost sharing and contacts
with new clients.
The Post-approval Phase. Following approval, the drug manufacturer must
comply with quality assurance and quality control requirements throughout
production and must continue analytical and stability studies of the drug during
commercial production in order to continue to validate production processes and
confirm product shelf life. Samples from each manufactured batch must be tested
prior to release of the batch for distribution to the public. The Company also
provides services in all areas during the post-approval phase, concentrating on
bio-equivalence studies of new formulations, line extensions, new disease
indications and drug interaction studies.
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Company Services and Products
Overview
The Company provides bioanalytical services, preclinical services and
methods development. The Company has, for 27 years, developed expertise in a
number of core technologies, which evolved into state-of-the-art equipment and
procedures designed to quantify trace chemicals in complex materials. The
Company also uses its expertise in analytical chemistry to provide a wide range
of bioanalytical services to drug developers. Preclinical services provide basic
safety and dosage information to researchers and are a source of samples for
bioanalytical analyses.
Services
The Company's customers draw on the Company's knowledge in bioanalytical
chemistry and preclinical services to solve complex problems:
o Method Development and Validation. Analytical methods are developed to
demonstrate potency, purity, stability or physical attributes. These
methods are validated to ensure that the data generated are accurate,
precise, reproducible and reliable and are used throughout the drug
development process and in product support testing
o Product Characterization. Characterization analysis identifies the
chemical composition, structure and physical properties of a compound.
Characterization data is a significant portion of a regulatory
application. The Company uses several techniques to characterize the
compound.
o Stability Testing. The Company provides required stability testing and
secure storage facilities necessary to establish and confirm product
purity, potency and shelflife. The Company has multiple ICH
(International Conference on Harmonization) validated controlled
climate GMP systems.
o Bioanalytical Testing. The Company's bioanalytical testing group
analyzes biological samples to measure drug concentration and monitor
the rate of absorption and elimination.
o Preclinical and Pathology Services. BAS Evansville is the core for the
Company's preclinical services group which provides pharmacokinetic
and safety testing protocols in studies ranging from acute safety
monitoring on drugs and medical devices to chronic, multi-year
oncogenicity studies.
o In Vivo Sampling. The Company pioneered and has commercialized
miniaturized in vivo sampling products and services for the continuous
monitoring of chemical changes in life.
Products
The Company designs, manufactures and markets a range of products and
related scientific procedures that detect and quantify the presence of chemicals
in certain substances. The Company's products utilize state-of-the-art
scientific technology including liquid chromatography, electrochemistry and in
vivo sampling instrumentation. Presently, the Company's products and procedures
include:
o The Culex(R) ABS robotic automatic rodent blood sampling system is
used by pharmaceutical researchers to monitor drug concentrations as a
function of time (pharmacokinetics). The Culex provides exceptional
cost savings, significant reduction in stress and shorter screening
times to drug researchers. Culex is one of the fastest-growing, most
significant products for the Company in a decade.
o Bioanalytical separation instrumentation (liquid chromatography) and
Windows(R) software detect and quantify low concentrations of
substances in biological fluids and tissues.
o A wide-range of chemical analyzers that use electrochemistry, liquid
chromatography and enzymology analyze trace levels of organic
chemicals such as neurotransmitters in biological samples.
o Diagnostic kits and procedures are designed to add value to the
Company's instrumentation and enable clinical laboratories and
pharmaceutical researchers to determine the presence of multiple drugs
in blood plasma and to measure neurotransmitters and their metabolites
in plasma and urine.
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o A line of miniaturized in vivo sampling devices, marketed to
veterinary research centers, pharmaceutical companies and medical
research centers, assist in the study of a number of medical
conditions including stroke, depression, Parkinson's disease, diabetes
and osteoporosis.
Clients
Over the past five years, the Company regularly has provided services and
products to most of the top 25 pharmaceutical companies in the world, as ranked
by 2000 research and development spending. In fiscal 2001, the Company estimates
that more than 40% of its total revenue was derived from these companies.
Approximately 20% of the Company's revenues are generated from customers outside
the United States.
The Company redirected its sales team in the middle of fiscal 2000, to
target pharmaceutical companies with annual revenues less than $1 billion, with
the belief that risk of client concentration could be reduced if distributed
over a broader account base. The company also believes that companies of this
size are less likely to have resources comparable to the Company's and will
consequently be more inclined to establish a consistent, long-term relationship.
Sales and Marketing
Although early client relationships grew primarily through direct, internal
recommendations among major pharmaceutical manufacturers, the current sales and
marketing plan focuses on key account development among the top 200 global
pharmaceutical companies. The Company recognizes that its growth and continued
customer satisfaction depend upon its ability to continually improve its sales
and marketing functions. The key account development program is succeeding.
In North America, the Company's products are sold directly to the end user.
The Company has 20 sales personnel and an equal number providing technical and
development support. The Company also has created a collection of catalogs,
training and technical support literature, video tapes, CD-Rom presentations,
web sites, workshops and academic publications.
Sales, marketing and technical support are based in the Company's main
office located in West Lafayette, Indiana. The Company also maintains offices in
Evansville, Indiana, New Jersey, and Warwickshire and Congleton, UK, each with a
sales and technical staff, enabling the Company to present the Company in close
proximity to its largest concentration of key customers. The Company also
maintains sales and technical support capabilities in North Carolina,
Massachusetts, New York, Ohio, Texas, Pennsylvania, New Jersey and Kansas.
The Company's primary marketing and sales strategy is to be more client
focused and to further strengthen communications with its markets. The Company
will build on its long history of innovation and technical excellence.
BAS Analytics, Ltd., a wholly-owned subsidiary of the Company, provides
direct liaison with research service clients in the United Kingdom and maintains
a laboratory to provide those services. BAS Instruments, Ltd., also a
wholly-owned subsidiary of the Company, manages most product sales in Europe. In
addition, the Company has a network of more than 20 established distributors
covering Japan, the Pacific Basin, South America, the Middle East, India, South
Africa and Eastern Europe. All of the Company's distributor relationships are
managed from the Company's headquarters in West Lafayette, Indiana.
International growth is planned through acquisitions, stronger local promotion
and significant expansion of the Company's distributor network.
Contractual Arrangements
The Company's service contracts typically establish an estimated fee for
identified services. In most cases, some percentage of the contract costs are
paid in advance. While the Company is performing a contract, clients often
adjust the scope of services to be provided by the Company in light of interim
project results, at which time the fee is adjusted accordingly. Generally, the
Company's fee-for-service contracts are terminable by the client upon written
notice of 30 days or less. Contracts may be terminated for a variety of reasons,
including the client's decision to forego a particular study, the failure of
product prototypes to satisfy safety requirements and unexpected or undesired
results of product testing. The loss of a large contract or the loss of multiple
contracts could adversely affect the Company's future revenue and profitability.
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Backlog
Considering that the arrangements, pursuant to which the Company provides
its services, are terminable upon written notice of 30 days or less, the Company
does not calculate backlog for the services it provides and does not believe
that determining such amount would provide a meaningful indicator of the future
performance of its services unit. Backlog for the Company's products consists of
booked purchase orders for products which have not been shipped. The Company
rarely has a backlog for its products of more than one month of sales. Many
products are shipped within 24 hours of receipt of order.
Competition
With respect to its services, the Company competes primarily with in-house
research, development, quality control and other support service departments of
pharmaceutical and biotechnology companies. There are also full-service CRO's
that compete in this industry. The largest CRO competitors offering similar
research services include Covance, Inc., Pharmaceutical Product Development,
Inc., AAIpharma, Inc. and MDS Health Group Ltd. CROs generally compete on the
basis of previous experience and medical and scientific expertise in specific
therapeutic areas, quality of contract research, ability to organize and manage
large-scale trials on a global basis, medical database management capabilities,
ability to provide statistical and regulatory services, ability to recruit
investigators, ability to integrate information technology with systems to
improve the efficiency of contract research, existence of an international
presence with strategically located facilities, financial viability and price.
With respect to its products, the Company competes with several large
equipment manufacturers, including Agilent, Waters Corporation and Perkin Elmer
Corporation. Competitive factors include product quality, reliability and price.
The Company believes it competes favorably in its niche target markets because
of its ability to combine quality products with technical assistance and service
to meet customer needs.
Many of the Company's competitors are much larger and have greater
resources than the Company, which makes it difficult for the Company to capture
share from clients other than those who need the Company's unique capabilities.
Government Regulation
The services performed by the Company are subject to various regulatory
requirements designed to ensure the quality and integrity of pharmaceutical and
diagnostic products. These regulations are governed primarily under the Federal
Food, Drug and Cosmetic Act, as well as associated GLP and GMP regulations which
are administered by the FDA in accordance with current industry standards.
Noncompliance by the Company with GLP and GMP regulations could result in
disqualification of data collected by the Company in a particular project.
Material violation of GLP or GMP requirements could result in additional
regulatory sanctions and, in severe cases, could also result in a discontinuance
of selected Company operations. Such discontinuance could have a material
adverse effect on the Company's business, financial condition and results of
operations.
To help assure compliance with applicable regulations, the Company has
established quality assurance controls at its facilities that monitor ongoing
compliance by auditing test data and regularly inspecting facilities, procedures
and other GMP compliance parameters. In addition, FDA regulations and guidelines
serve as a basis for the Company's standard operating procedures where
applicable. Some of the Company's development and testing activities are subject
to the Controlled Substances Act administered by the Drug Enforcement Agency
(DEA), which strictly regulates all narcotic and habit-forming substances. The
Company maintains restricted-access facilities and heightened control procedures
for projects involving such substances due to the level of security and other
controls required by the DEA. In addition to FDA regulations, the Company is
subject to other federal and state regulations concerning such matters as
occupational safety and health and protection of the environment.
The Company's activities involve the controlled use of hazardous materials
and chemicals. The Company is subject to foreign, federal, state and local laws
and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. The risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that result.
Such damages could have a material adverse effect on the Company's business and
results of operations.
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Product Liability and Insurance
The Company maintains product liability and professional errors and
omissions liability insurance, providing approximately $6.0 million in coverage
on a claims-made basis. Additionally, in certain circumstances the Company seeks
to manage its liability risk through contractual provisions with clients
requiring the Company to be indemnified by the client or covered by clients'
product liability insurance policies. Also, in certain types of engagements the
Company seeks to limit its contractual liability to clients to the amount of
fees received by the Company. The contractual arrangements are subject to
negotiation with clients and the terms and scope of such indemnification,
liability limitation and insurance coverage vary based upon client and project.
Although most of the Company's clients are large, well-capitalized companies,
the financial performance of these indemnities is not secured. Therefore, the
Company bears the risk that the indemnifying party may not have the financial
ability to fulfill its indemnification obligations or that liability would
exceed the amount of applicable insurance. Furthermore, the Company could be
held liable for errors and omissions in connection with the services it
performs. There can be no assurance that the Company's insurance coverage will
be adequate, or that insurance coverage will continue to be available on terms
acceptable to the Company, or that the Company can obtain indemnification
arrangements or otherwise be able to limit its liability risk.
Employees
At September 30, 2001, the Company had 260 full-time employees, 152 of
which hold college degrees, including 35 at the doctoral level. All employees
enter into confidentiality agreements intended to protect the Company's
proprietary information. The Company believes that its relations with its
employees are good. None of the Company's employees are represented by a union.
The Company's performance depends on its ability to attract and retain qualified
professional, scientific and technical staff. The level of competition among
employers for skilled personnel is high. The Company believes that its employee
benefit plans enhance employee morale, professional commitment and work
productivity and provide an incentive for employees to remain with the Company.
While the Company has not experienced any unusual problems in attracting or
retaining qualified personnel, there can be no assurance that the Company will
be able to avoid these problems in the future.
Item 2. Properties
The Company's principal executive offices are located at 2701 Kent Avenue,
West Lafayette, Indiana, 47906, and constitute approximately 100,000 square feet
of operational and administrative space. The BAS Evansville facility consists of
seven buildings with 50,000 square feet of operational and administrative space
on 52 acres. The Company also maintains offices which provide sales and
technical support services in New Jersey and the United Kingdom, and employs
sales and technical support service representatives in North Carolina, Texas,
Massachusetts, Pennsylvania and New Jersey. The Company believes that its
facilities are adequate for the Company's operations and that suitable
additional space will be available when needed.
Item 3. Legal Proceedings
In April, 1997, CMA Microdialysis Holding A.B. (CMA) filed an action
against the Company in the United States District Court for the District of New
Jersey in which CMA alleged that the Company's microdialysis probes infringe
U.S. Patent No. 4,694,832. During the quarter ended December 31, 2000, the
Company settled this case for an immaterial amount.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
[Remainder of page intentionally left blank.]
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Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market for Registrant's Common Equity and Related Stockholder Matters on
the last page of our 2001 Annual Report is incorporated by reference.
[Remainder of page intentionally left blank.]
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Item 6. Selected Financial Data
You can find Selected Financial Data for each of our five most recent
fiscal years on the first page of our 2001 Annual Report under "Selected
Consolidated Financial Data". That information is incorporated in this Report by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
You can find Management's Discussion and Analysis of Results of Financial
Condition and Operations on pages 10-13 of our 2001 Annual Report. This
information is incorporated in this Report by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 8. Financial Statements and Supplementary Data
You can find the consolidated financial statements of the Company and its
subsidiaries in our 2001 Annual Report at pages 14-17 (Consolidated Balance
Sheets, Consolidated Statements of Operations, Consolidated Statements of
Shareholders' Equity and Consolidated Statements of Cash Flows) and pages 18-27
(Notes to Consolidated Financial Statements). You can find the Report of
Independent Auditors at page 28 of our 2001 Annual Report. All of the above
information is incorporated in this Report by reference.
Also incorporated by reference is information on quarterly results of
operations, which can be found in our 2001 Annual Report under "Quarterly
Financial Data (unaudited)" at page 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
[Remainder of page intentionally left blank.]
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Part III
Item 10. Directors and Executive Officers of the Registrant.
Name Age Position
- ---- --- --------
Peter T. Kissinger, Ph.D.......57..........Chairman of the Board;
President; Chief Executive Officer
Ronald E. Shoup, Ph.D..........50..........President, BAS Analytics; Director
Douglas P. Wieten..............40..........Vice President, Finance; Chief
Financial Officer; Treasurer
Candice B. Kissinger...........50..........Senior Vice President, Marketing;
Secretary and Director
Craig S. Bruntlett, Ph.D.......52..........Senior Vice President,
International Sales
Donnie A. Evans................55..........Vice President, Engineering
Stephen Geary, Ph.D............60..........Vice President, United States Sales
Lina L. Reeves-Kerner..........51..........Vice President, Human Resources
Michael P. Silvon..............54..........Vice President, Business
Development
Michelle L. Troyer.............30..........Corporate Controller
William E. Baitinger...........68..........Director
Michael K. Campbell............50..........Director
John A. Kraeutler..............56..........Director
W. Leigh Thompson..............63..........Director
PETER T. KISSINGER, PH.D. founded the Company in 1974 and has served as its
Chairman, President and Chief Executive Officer since 1974. He is also a
part-time Professor of Chemistry at Purdue University, where he has been
teaching since 1975. Dr. Kissinger has a Bachelor of Science degree in
Analytical Chemistry from Union College and a Doctorate in Analytical Chemistry
from the University of North Carolina.
RONALD E. SHOUP, PH.D. serves as President of the Company's BAS Analytics
contract services and is Managing Director of BAS Analytics, Ltd. in the UK. He
joined BAS in 1980 as an applications chemist, became Research Director in 1983
and initiated the laboratory services group within BAS in 1988. Dr. Shoup has a
Bachelor of Science degree in Mathematics and Chemistry from Purdue University
and then attended Michigan State and Purdue University for his Ph.D in
Analytical Chemistry. He serves on the Company's board of directors and is a
member of the external advisory board to the Purdue University Department of
Chemistry.
DOUGLAS P. WIETEN has been Vice President, Finance since February 1999,
Chief Financial Officer since September 1997 and Treasurer since March 1997. He
served as Corporate Controller from 1992 to February 1999. Prior to that time,
Mr. Wieten worked at Ernst & Young LLP, where he had been employed since 1984.
Mr. Wieten is a certified public accountant and has a Bachelor of Science degree
in Accounting from Butler University.
CANDICE B. KISSINGER has been Senior Vice President, Marketing since
January 2000. She served as Vice President, International Sales and Marketing
since July 1981. From 1978 to 1981, Mrs. Kissinger served as an accounts
receivable clerk. Mrs. Kissinger has a Bachelor of Science degree in
Microbiology from Ohio Wesleyan University and a Master of Science degree in
Food Science from the University of Massachusetts. Mrs. Kissinger is the wife of
Dr. Peter Kissinger.
CRAIG S. BRUNTLETT, PH.D. has been Senior Vice President of International
Sales since January 2000. From 1992 to 1999 he was Vice President,
Electrochemical Products. From 1980 to 1990, Dr. Bruntlett was Director of New
Products Development for the Company. Dr. Bruntlett has a Bachelor of Arts
degree in Chemistry and Mathematics from St. Cloud State University in Minnesota
and a Ph.D. in Chemistry from Purdue University.
DONNIE A. EVANS he has been Vice President, Engineering Services since
January of 1988. Mr. Evans was the Company's first full-time employee, beginning
as an electronics engineer in 1978.
- 13 -
STEPHEN GEARY, PH.D has been Vice President, United States Sales since
January 1992. Dr. Geary is also responsible for the sales efforts of the
Company's clinical products. Dr. Geary has a Bachelor of Science degree in
Biology and Chemistry from Tufts University, a Master of Science degree in
Biology from the University of New Hampshire and a Ph.D. in Biochemistry from
Syracuse University.
LINA L. REEVES-KERNER has been Vice President, Human Resources since 1995
and is responsible for the administrative support functions of the Company,
including shareholder relations, human resources and community relations. From
1980 to 1990, Ms. Reeves-Kerner served as an Administrative Assistant with the
Company. Ms. Reeves-Kerner has a Bachelor of Science degree in Business
Administration from Indiana Wesleyan University.
MICHAEL P. SILVON, PH.D. has been Vice President, Business Development
since March 1997. Dr. Silvon has been general manager, BAS Evansville and
Vetronics since January 2000. Prior to January 1997, Dr. Silvon was principal in
his own consulting firm and Vice President Sales & Marketing at Hi-Port, Inc. in
Houston, Texas. Before October 1993, Dr. Silvon was Regional Business
Manager-Americas for Zeneca Fine Chemical. He has a Bachelor of Science in
Chemistry from Loyola University of Chicago, a Master of Business Administration
from Sacred Heart University and a Doctorate in Chemistry from the University of
Vermont.
MICHELLE L. TROYER has been the Corporate Controller since February 1999.
Ms. Troyer joined the Company in 1994 as a Staff Accountant and became Assistant
Controller in October 1996. Ms. Troyer has a Bachelor of Science degree in
Accounting from Purdue University and is a certified public accountant.
WILLIAM E. BAITINGER has served as a director of the Company since 1979.
Mr. Baitinger was Director of Technology Transfer for the Purdue Research
Foundation from 1988 until 2000. In this capacity he was responsible for all
licensing and commercialization activities from Purdue University. He currently
serves as Special Assistant to the Vice President for Research at Purdue
University. Mr. Baitinger has a Bachelor of Science degree in Chemistry and
Physics from Marietta College and a Master of Science degree in Chemistry from
Purdue University.
MICHAEL K. CAMPBELL has served as a director of the Company since 1991. Mr.
Campbell has been the Chairman and Chief Executive Officer of Powerway, Inc., a
software company, since May 1993. From November 1989 until January 1993, he was
Chief Financial Officer of Hurco Companies, Inc. and president of Hurco
Manufacturing, its largest division. He has a Bachelor of Science degree in
Accounting from the University of Southern Indiana.
JOHN A. KRAEUTLER has served as a director of the Company since January
1997. Mr. Kraeutler has been President and Chief Operating Officer of Meridian
Bioscience, Inc. since August 1992 and is also a director. Prior to joining
Meridian Bioscience, Inc., Mr. Kraeutler held a progression of technical,
marketing and general management positions with a number of healthcare
companies, including Carter-Wallace, Becton Dickinson and Organon (Akzo Nobel).
Mr. Kraeutler has Bachelor and Master of Science degrees in biology from
Fairleigh Dickinson University and a Master of Business Administration in
marketing from Seton Hall University.
W. LEIGH THOMPSON, PH.D., M.D. has served as a director of the Company
since January 1997. Since 1995, Dr. Thompson has been Chief Executive Officer of
Profound Quality Resources, Inc., a scientific consulting firm. Prior to 1995,
Dr. Thompson held various positions at Lilly Research Laboratories, retiring as
Chief Scientific Director. Dr. Thompson has a Bachelor of Science degree in
Biology from the College of Charleston, a Master of Science, a Doctorate in
Pharmacology and a Doctorate in Science from the Medical University of South
Carolina and a Medical Doctor degree from The Johns Hopkins University. Dr.
Thompson is also a director of Chrysalis International Corporation, Corvas
International, Inc. GeneMedicine, Inc., La Jolla Pharmaceutical company,
Medarex, Inc., Ophidian Pharmaceuticals, Inc. and Orphan Medical, Inc.
Item 11. Executive Compensation.
The information included under the captions "Election of Directors -
Compensation of Directors" and "Executive Compensation" in the Proxy Statement
is incorporated herein by reference in response to this item.
- 14 -
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information contained under the captions "Share Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference in response to this item.
Item 13. Certain Relationships and Related Transactions.
The information contained under the caption "Certain Transactions" in the
Proxy Statement is incorporated herein by reference in response to this item.
[Remainder of page intentionally left blank.]
- 15 -
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this Report.
1. Financial Statements:
Included as outlined in Item 8 of Part II of this report.
Report of Independent Auditors.
Consolidated Balance Sheets as of September 30, 2001 and
September 30, 2000.
Consolidated Statements of Operations for the Years Ended
September 30, 2001, 2000 and 1999.
Consolidated Statements of Shareholders' Equity for the Years
Ended September 30, 2001, 2000 and 1999.
Consolidated Statements of Cash Flows for the Years Ended
September 30, 2001, 2000 and 1999.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules:
Schedules are not required, are not applicable, or the
information is shown in the Notes to the Consolidated Financial
Statements.
(b) Reports on Form 8-K. None.
(c) Exhibits. See Index to Exhibits.
- 16 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BIOANALYTICAL SYSTEMS, INC.
---------------------------
(Registrant)
By: /s/ Peter T. Kissinger
-----------------------------------------------
Peter T. Kissinger
President, Chairman and Chief Executive Officer
By: /s/ Douglas P. Wieten
-----------------------------------------------
Douglas P. Wieten
Chief Financial Officer, Treasurer, VP Finance
(Principal Financial and Accounting Officer)
Date: December 27, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ Peter T. Kissinger President, Chairman Chief December 27, 2001
- ---------------------------- Executive Officer and
Peter T. Kissinger Director
/s/ Douglas P. Wieten Chief Financial Officer, December 27, 2001
- ---------------------------- and Treasurer
Douglas P. Wieten
/s/ William E. Baitinger Director December 27, 2001
- ----------------------------
William E. Baitinger
/s/ Michael K. Campbell Director December 27, 2001
- ----------------------------
Michael K. Campbell
/s/ Candice B. Kissinger Director December 27, 2001
- ----------------------------
Candice B. Kissinger
/s/ John A. Kraeutler Director December 27, 2001
- ----------------------------
John A. Kraeutler
/s/ Ronald E. Shoup Director December 27, 2001
- ----------------------------
Ronald E. Shoup
/s/ W. Leigh Thompson Director December 27, 2001
- ----------------------------
W. Leigh Thompson
- 17 -
INDEX TO EXHIBITS
Sequential
Number Numbering
Assigned In System Page
Regulation S-K Number of
Item 601 Description of Exhibits Exhibit
- -------------- ----------------------- -----------
(2) No Exhibit
(3) 3.1 Second Amended and Restated Articles of
Incorporation of Bioanalytical Systems, Inc.
(Incorporated by reference to Exhibit 3.1 to
Form 10-Q for the quarter ended December 31,
1997).
3.2 Second Restated Bylaws of Bioanalytical
Systems, Inc. (Incorporated by reference to
Exhibit 3.2 to Form 10-Q for the quarter
ended December 31, 1997).
(4) 4.1 Specimen Certificate for Common Shares
(Incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-1,
Registration No. 333-36429).
4.2 See Exhibits 3.1 and 3.2
(9) No Exhibit
(10) 10.2 Bioanalytical Systems, Inc. Outside Director
Stock Option Plan (Incorporated by reference
to Exhibit 10.2 to Registration Statement on
Form S-1, Registration No. 333-36429).
10.3 Form of Bioanalytical Systems, Inc. Outside
Director Stock Option Agreement (Incorporated
by reference to Exhibit 10.3 to Registration
Statement on Form S-1, Registration No.
333-36429).
10.4 Bioanalytical Systems, Inc. 1990 Employee
Incentive Stock Option Plan (Incorporated by
reference to Exhibit 10.4 to Registration
Statement on Form S-1, Registration No.
333-36429).
10.5 Form of Bioanalytical Systems, Inc. 1990
Employee Incentive Stock Option Agreement
(Incorporated by reference to Exhibit 10.5 to
Registration Statement on Form S-1,
Registration No. 333-36429).
- 18 -
10.6 Bioanalytical Systems, Inc. 1997 Employee
Incentive Stock Option Plan (Incorporated by
reference to Exhibit 10.26 to Registration
Statement on Form S-1, Registration No.
333-36429).
10.7 Form of Bioanalytical Systems, Inc. 1997
Employee Incentive Stock Option Agreement
(Incorporated by reference to Exhibit 10.27
to Registration Statement on Form S-1,
Registration No. 333-36429).
10.8 1997 Bioanalytical Systems, Inc. Outside
Director Stock Option Plan (Incorporated by
reference to Exhibit 10.28 to Registration
Statement on Form S-1, Registration No.
333-36429).
10.9 Form of Bioanalytical Systems, Inc. 1997
Outside Director Stock Option Agreement
(Incorporated by reference to Exhibit 10.29
to Registration Statement on Form S-1,
Registration No. 333-36429).
10.10 Business Loan Agreement by and between
Bioanalytical Systems, Inc., and Bank One,
Indiana, N.A. dated April 1, 2001.
10.11 Commercial Security Agreement by and between
Bioanalytical Systems, Inc. and Bank One,
Indiana, N.A., dated March 1, 1998
(Incorporated by reference to Exhibit 10.15
to Form 10-Q for the quarter ended March 31,
1998).
10.12 Negative Pledge Agreement by and between
Bioanalytical Systems, Inc. and Bank One,
Indiana, N.A., dated March 1, 1998
(Incorporated by reference to Exhibit 10.16
to Form 10-Q for the quarter ended March 31,
1998).
10.13 Promissory Note by and between Bioanalytical
Systems, Inc. and Bank One, Indiana N.A.,
dated June 24, 1999 related to loan in the
amount of $3,500,000 (Incorporated by
reference to Exhitibit 10.18 to Form 10-Q for
the quarter ended June 30, 1999).
10.14 Promissory Note for $3,500,000 executed by
Bioanalytical Systems, Inc. in favor of Bank
One, Indiana N.A., dated April 1, 2001
(Incorporated by reference to Exhibit 10.14
to Form 10-Q for the quarter ended June 30,
2000).
(12) No Exhibit
(13) 13.1 2001 Annual Report
(16) No Exhibit
(18) No Exhibit
(21) 21.1 Subsidiaries of the Registrant
(23) 23.1 Consent of Independent Auditors
(24) No Exhibit
(27) No Exhibit
(99) 99.1 Risk Factors
- 19 -