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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission file number 340-23520
QUINTILES TRANSNATIONAL CORP.
(Exact name of registrant as specified in its charter)
North Carolina 56-1714315
(State of incorporation) (I.R.S. Employer
Identification Number)
4709 Creekstone Drive, Suite 200
Durham, North Carolina 27703-8411
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (919) 941-2000
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
(Title of Class)
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 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 of this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock at February
27, 1998 held by those persons deemed by the registrant to be non-affiliates was
approximately $2,873,071,061.
As of February 27, 1998 (the most recent practicable date), there were
75,001,244 shares of the registrant's Common Stock, $.01 par value per share,
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Where Incorporated
- -------- ------------------
1. Annual Report to Shareholders for the year ended
December 31, 1997 Part II
2. Proxy Statement for the Annual Meeting of Shareholders
to be held May 6, 1998 Part III
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QUINTILES TRANSNATIONAL CORP.
Form 10-K Annual Report
INDEX
Page
----
PART I............................................................................................................3
Item 1. Business..............................................................................................3
Item 2. Properties...........................................................................................14
Item 3. Legal Proceedings....................................................................................15
Item 4. Submission Of Matters To A Vote Of Security Holders..................................................15
PART II..........................................................................................................15
Item 5. Market For Registrant's Common Equity And Related Stockholder Matters................................15
Item 6. Selected Financial Data..............................................................................15
Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations................16
Item 7a. Quantitative And Qualitative Disclosures About Market Risk...........................................16
Item 8. Financial Statements And Supplementary Data..........................................................16
Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure.................16
PART III.........................................................................................................16
Item 10. Directors And Executive Officers Of The Registrant...................................................16
Item 11. Executive Compensation...............................................................................16
Item 12. Security Ownership Of Certain Beneficial Owners And Management.......................................16
Item 13. Certain Relationships And Related Transactions.......................................................16
PART IV..........................................................................................................17
Item 14. Exhibits, Financial Statement Schedules, And Reports On Form 8-K.....................................17
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PART I
ITEM 1. BUSINESS
GENERAL
Quintiles Transnational Corp. ("Quintiles" or the "Company") is a
market leader in providing full-service contract research, sales, marketing and
healthcare policy consulting and health information management services to the
global pharmaceutical, biotechnology, medical device and healthcare industries.
Supported by its extensive information technology capabilities, the Company
provides a broad range of fully-integrated contract services in order to
accelerate the time from discovery to peak market acceptance of a new therapy.
Since its inception in 1982, the Company has continued to expand the
scope of its services and its geographic presence to support the needs of its
customers on a worldwide basis. The Company has implemented a number of
strategic initiatives to broaden its array of services and create new
opportunities for growth. In February 1997, the Company acquired Debra Chapman
Consulting Group Pty Limited and the Medical Alliances Australia Pty Limited,
enabling the Company to provide contract sales and healthcare recruiting
services in Australia and New Zealand alongside the Company's existing contract
research services in those countries. In June 1997, the Company acquired Butler
Communications, Inc. and its affiliated companies, including Butler Clinical
Recruitment, Inc., based in Raleigh, North Carolina, which specialize in
communication programs to accelerate the recruitment of patients for clinical
trials. Also in June 1997, the Company acquired Action International Marketing
Services Limited and its subsidiaries, including Medical Actions Communications
Limited (collectively, "MAC"), a leading international strategic medical
communications consultancy based in Egham, United Kingdom, enabling the Company
to add strategic marketing and communications to its services. In addition, the
Company acquired substantially all of the assets of Pharmacology Data Management
Corporation, a software development company located in Murray, Utah, in June
1997. In July 1997, the Company acquired CerebroVascular Advances, Inc. ("CVA"),
a contract research organization based in San Antonio, Texas that is a leader in
stroke clinical trials. In August 1997, the Company acquired Intelligent
Imaging, Inc., an information management company based in Plymouth Meeting,
Pennsylvania that specializes in providing digital medical imaging services for
clinical trials and the healthcare industry. Also in August 1997, the Company
completed two acquisitions in South Africa, Clindepharm International (Pty)
Limited, a contract research organization based in Centurion (near Pretoria),
and the business and assets of Rapid Deployment Services and its affiliated
companies, a contract sales and healthcare recruitment organization based in
Johannesburg. In February 1998, the Company made four acquisitions: Pharma
Networks N.V., a contract sales organization based in Brussels, Belgium;
Technology Assessment Group ("TAG"), an international health outcomes-research
consultancy based in San Francisco, California specializing in patient
registries and in evaluating the economic, quality-of-life and clinical effects
of drug therapies and disease management programs; T2A S.A., a French contract
sales and marketing organization; and More Biomedical Contract Research
Organization Ltd., a contract research organization based in Taiwan.
In addition to acquisitions, the Company also has entered strategic
alliances and made strategic investments that the Company believes will position
it to explore new opportunities and areas for potential growth. In November
1997, the Company established a preferred provider relationship with the
Cleveland Clinic for drug development investigator services in a dozen
therapeutic areas, including cardiology, AIDS, cancer, and molecular genetics.
Also in November 1997, the Company acquired a minority interest in Physicians'
Online, Inc. ("POL"), the leading Internet online service designed specifically
for the use of physicians. Earlier in the year, the Company joined with Core
Healthcare Limited, an India-based medical supplier, to form a joint venture
company, Quintiles Spectral (India)
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Limited, to provide clinical trials management services to Indian pharmaceutical
companies and international customers.
The Company added, including acquisitions, 39 new offices since January
1, 1997. In September 1997, the Company opened its 171,000 square foot clinical
trials material packaging and distribution center in Bathgate, Scotland. The
Bathgate facility also houses clinical data management services.
In March 1997, the Company completed a public offering of 11,040,000
shares of its Common Stock at a price to the public of $31.4375 per share. Of
the 11,040,000 shares sold, 2,830,000 were sold by the Company. Net proceeds to
the Company, which exclude underwriting discounts and offering expenses, were
approximately $84.6 million.
In October 1997, the Company's Board of Directors authorized a
two-for-one split of the Company's Common Stock, which was effected in December
in the form of a 100% stock dividend. All share numbers throughout this report
have been adjusted to reflect the effects of the stock split, unless otherwise
indicated.
SERVICES
The Company provides globally integrated contract research, sales,
marketing and healthcare policy consulting and health information management
services to the global pharmaceutical, biotechnology, medical device and
healthcare industries.
The Company provides its customers with a continuum of services. The
Company's service offerings are described below.
CLINICAL SERVICE OFFERINGS
The Company provides a full range of drug development services focused
on regulatory success, from strategic planning and preclinical services to
regulatory submission and approval.
Clinical Trial Services.
The Company offers comprehensive clinical trial services which are the
basis for obtaining regulatory approval for drugs and medical devices. The
Company has specialized business units and extensive experience in the
therapeutic areas of the central nervous system, cardiovascular, infectious and
respiratory diseases as well as in the field of oncology. The Company also has
significant clinical trials experience in the therapeutic areas of
endocrinological, gastroenterological, genitourinary and musculoskeletal
diseases. In addition, the 1997 acquisition of CVA enabled the Company to
provide clinical trials expertise in the area of stroke. The Company is
experienced in managing large trials involving several thousand patients at
several hundred sites and in multinational trials conducted simultaneously in
the Americas, Europe, the Asia-Pacific region and South Africa.
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The Company provides its customers with one or more of the following
core clinical trial services:
Study Design. The Company serves its customers by assisting in the
preparation of the study protocol and design of case report forms ("CRFs"). The
protocol defines the medical issues to be examined, the number of patients
required to produce statistically valid results, the period of time over which
they must be tracked, the frequency and dosage of drug administration and the
study procedures. The study's success often depends on the protocol's ability to
predict correctly the requirements of the applicable regulatory authorities.
Investigator Recruitment. During clinical trials, the drug is
administered to patients by physicians, also referred to as investigators, at
hospitals, clinics or other locations, also referred to as sites. The Company
has access to several thousand investigators who have conducted clinical trials
worldwide for the Company.
Study Monitoring. The Company provides study monitoring services which
include investigational site initiation, patient enrollment assistance and data
collection and clarification. Site visits serve to assure the quality of the
data, which are gathered according to good clinical practice ("GCP"), and to
meet the sponsors' and regulatory agencies' requirements as specified in the
study protocol.
Clinical Data Management and Biostatistical Services. The Company has
extensive experience in the United States and Europe in the creation of
scientific databases for all phases of the drug development process, including
the creation of customized databases to meet customer-specific formats,
integrated databases to support New Drug Application ("NDA") submissions and
databases in accordance with the United States Food and Drug Administration
("FDA") and European specifications.
Phase I Services. The Company's Phase I services include dose ranging,
bioavailability/bioequivalence studies, pharmacokinetic/pharmacodynamic
modeling, first administration to humans, multiple dose tolerance, dose effect
relationship and metabolism studies.
In addition to the Company's core clinical trial management services,
the Company provides its customers with the following specialized services:
Centralized Clinical Trial Laboratory. In addition to
providing comprehensive safety and efficacy testing for clinical trials, the
Company's centralized clinical trial laboratory provides site-specific study
materials, customized lab report design and specimen archival and management on
behalf of a study sponsor. The centralized laboratory offers a 48-hour
turnaround time for laboratory results and is capable of providing direct
electronic integration of laboratory data into safety and efficacy reports for
NDA submissions.
Formulation, Manufacturing and Packaging Services. The Company
offers services in the design and development of pharmaceutical dose forms as
well as the manufacture of study drug materials and placebos and the appropriate
packaging of these for double blinded studies. These services can expedite the
drug development process because clinical trials are often postponed by delays
in the manufacture of study drug materials. In September 1997, the Company
opened a new 171,000 square foot facility at Bathgate, Scotland which the
Company believes is one of the largest specialist clinical trial supplies units
in the world. The facility also houses a clinical data management center.
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Preclinical Services.
The Company's preclinical unit, provides customers with a wide array of
pre-clinical and toxicology services. These services are designed to produce the
data required to identify, quantify, and evaluate the risks to humans resulting
from the manufacture or use of pharmaceutical and biotechnology products,
including developmental and reproductive toxicology, genetic toxicology,
neurotoxicology, carcinogenicity testing, pharmacology, analytical chemistry,
pathology, metabolism and pharmacokinetics.
Regulatory Affairs Services.
The Company provides comprehensive medical and regulatory services for
its pharmaceutical and biotechnology customers. The Company's medical services
include medical oversight of studies, review and interpretation of adverse
experiences, medical writing of reports and study protocols and strategic
planning of drug development programs. Regulatory services for product
registration include regulatory strategy design, document preparation,
consultation, and liaison with various regulatory agencies. The Company's
regulatory affairs professionals help to define the steps necessary to obtain
registration in the most expeditious manner. The Company is able to provide such
services in numerous countries to meet its clients' needs to launch products in
multiple countries simultaneously.
Medical Device Services.
The Company's service offerings include: review of global strategies
for device development and introduction; identifying regulatory requirements in
targeted markets; clinical study design and planning; data management;
statistical analysis of report preparations; global clinical trial management
and monitoring capabilities; consultation on quality control and quality
assurance issues; regulatory filings; compliance with United States, European
and European Union regulations relating to medical devices; long-range planning
for multinational product launches; compliance with legislative requirements for
market access; post-marketing requirements; managing relationships with national
governments and regulatory authorities; and European pricing strategies.
SALES SERVICES
The Company provides a range of services focused on commercial success,
including late-phase clinical studies, health management services, and sales and
marketing.
Sales and Marketing Services.
The Company offers a flexible range of contract sales services which
are delivered through dedicated and syndicated sales teams. Dedicated sales
teams are comprised of sales representatives recruited by the Company in
accordance with customer specifications to conduct sales efforts for a
particular customer. Dedicated sales teams can be managed by the Company or can
report directly to the customer, depending on customer preference. In certain
circumstances, the Company can transfer an entire dedicated sales team to the
customer for an additional placement fee. Syndicated sales teams promote a
number of drugs for different customers and are generally managed directly by
the Company. The Company's contract sales teams form a highly skilled network of
professionals that afford customers substantial flexibility in selecting the
extent and cost of promoting products as well as their level of involvement in
managing the sales effort.
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The Company also provides a range of specialized marketing services
specifically for pharmaceutical companies aimed at influencing the decisions of
patients and physicians and accelerating the acceptance of drugs into treatment
guidelines and formularies. Such services are typically purchased by the
marketing departments of pharmaceutical companies. The Company believes that its
commercial orientation, clinical and promotional expertise and international
experience enable it to tailor programs to specific customer needs in a wide
range of geographic markets and therapeutic areas.
Late-Phase Clinical Studies.
The Company's services, designed primarily for Phase IIIb and Phase IV
clinical trials, include post-submission studies in support of marketing claims,
post-marketing surveillance and health management support programs. Such
services are designed and implemented using clinical and health management
programs to promote a favorable environment for new product introductions in
advance of the product launch and assist in sales generation post-launch.
DISEASE MANAGEMENT AND HEALTHCARE SERVICES
The Company provides healthcare policy research, pharmacoeconomics
analysis and management consulting focused on improving the quality,
availability and cost-effectiveness of healthcare.
Disease Management Services.
The Company's disease management services focus on applying healthcare
outcomes analysis to the economic valuation of drugs and the treatment of
diseases. The Company's February 1998 acquisition of TAG adds specialization in
pharmacoeconomics, as well as expertise in developing patient registries and
designing disease management programs. Together, these services enable
regulators, healthcare providers, pharmaceutical and biotechnology companies and
third parties to assess the pricing and cost-effectiveness of new medical
therapies.
Healthcare Policy Research and Consulting.
The Company's healthcare policy research and healthcare consulting
services are designed to assist customers in evaluating healthcare programs and
policies and developing strategies for doing business in the highly regulated
and rapidly changing healthcare environment. These services include corporate
strategic planning and management, program and policy development, financial and
cost-effectiveness analysis, evaluation design, microsimulation modeling and
data analysis across five general practice areas: public health and finance
policy, healthcare organizations, economic analysis, managed care and medical
technology. The Company has access to more than 117 healthcare-related databases
and has developed the expertise to analyze such complex data to respond to its
clients' information needs. These services represent the core competencies of
The Lewin Group, a nationally-recognized healthcare consulting firm acquired by
the Company in 1996.
STRATEGIC MARKETING AND COMMUNICATIONS SERVICES
The Company provides strategic marketing and communications services to
international pharmaceutical companies beginning in the early stages of product
development and continuing through product launch and peak market penetration.
These services include communications strategy and planning, product positioning
and branding, opinion leader development, symposia organization, patient
education, and sponsored publications. As early as Phase II trials, the Company
begins providing
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marketing information to help shape data and influence opinion leader support
for a new drug. Such services represent the core competencies of MAC, a leading
strategic medical communications consultancy acquired by the Company in 1997.
INFORMATION TECHNOLOGY
The foundation for the Company's information systems is a wide area
network, which the Company continues to improve and expand. The network links
approximately 50 local networks and interconnects over 6,000 office-based and
3,500 mobile microcomputers and systems worldwide. The Company's network enables
the exchange of information among the Company's offices on a worldwide basis,
facilitating concurrent multinational clinical trials and regulatory
submissions. Customers also are able to gain direct access to key up-to-date
data related to their products in testing, such as adverse events, CRFs and
clinical laboratory testing results. Customers using the Company's sales and
marketing services can likewise access information related to sales calls and
provide feedback about the performance of the Company's sales representatives.
The Company has an ongoing program of developing advanced data capture and data
management systems designed to speed the drug development process and sales
force automation systems for planning, targeting, reporting, analysis and
communication of sales and marketing activities. These systems allow the Company
to centralize management of sales activities across a broad geographic area. The
Company also uses an advanced system for screening and tracking resumes as the
cornerstone of its recruiting of qualified sales representatives.
In 1997, the Company further expanded its information technology
capabilities, starting with far-reaching infrastructure upgrades.
FaxCollect(TM), the Company's new data capture software, uses ordinary fax
machines at study sites to transmit forms to the Company's processing centers
for automated data acquisition and storage. The Company's acquired digital
medical imaging software allows investigators to gather accurate, consistent and
precise measurements, to zoom in on images, and to adjust light and darkness for
clarity, all of which enable the compilation of an accurate record for
regulatory authorities to follow. The Company also has introduced QuERxI(TM)
(Quality Enhancement through Risk Improvement), software that enables physician
groups and health plans which are at risk for the costs of drugs to analyze
prescribing patterns and thereby improve health outcomes or identify cost
savings. The Company's minority investment in POL creates an opportunity for the
Company to explore with POL a possible extension of POL's services to the
integration of secure intranets in recruiting investigators and patients for
clinical trials, managing investigator sites, and in the transfer of clinical
trial data. In addition, the Company's relationship with POL also offers
possibilities for extending the Company's contract marketing efforts on behalf
of customers by disseminating product information to doctors.
Some of the internally developed systems which the Company uses to
facilitate its services are described below:
FaxCollect(TM) Advanced data capture system which uses faxed images and
OCR technology.
InnTrax(R) Computerized clinical trial administrative management
system.
ITMS(TM) Sales force automation (electronic territory management)
system.
QTONE(TM) Touchtone and voice response patient information system.
QSTAR(TM) Imaging technology which reduces time and minimizes
errors in data management by routing and tracking CRF
images.
QLIMS(TM) Laboratory information management system which provides
protocol-specific validity checks.
QNET(TM) System which allows online monitoring and review of
laboratory test data.
QuERxI(TM) Software for analyzing prescribing patterns to help
improve health outcomes or identify cost savings.
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Genius(TM) Digital medical imaging software which enables image
enhancement, reliable measurements and the compilation
of accurate records.
Pyramid(TM) Digital medical imaging software which enables image
enhancement, reliable measurements and the compilation
of accurate records.
The Company has appointed a Year 2000 Project Team to conduct an
assessment of the Company's operations worldwide from an internal, supplier and
customer perspective. The assessment, which is currently in progress, addresses
all computer systems, applications and any other systems that may be vulnerable
to the Year 2000 Issue. As part of the assessment, the Company is preparing
detailed plans to address Year 2000 Issues. The Company is utilizing both
internal and external resources to implement the plans. The Company currently
anticipates addressing all business critical systems during 1998 and will
address follow-up issues and all remaining systems during 1999. While the
Company currently does not believe that the costs associated with addressing
Year 2000 Issues will be material to the Company's financial statements,
business or operations, the Company's assessment of Year 2000 Issues is ongoing
and there can be no assurance that Year 2000 Issues or the costs of addressing
them will not have a material impact on the Company's financial statements,
business or operations.
CUSTOMERS AND MARKETING
The Company coordinates its business development efforts across its
service offerings through integrated business development functions, which
direct the activities of business development personnel in each of the Company's
United States locations, as well as other key locations throughout Europe,
Asia-Pacific, Canada and Latin America.
The Company is a market leader in providing full-service contract
research, sales, marketing and healthcare policy consulting and health
information management services to the global pharmaceutical, biotechnology,
medical device and healthcare industries. For the year ended December 31, 1997,
approximately 50.9% of the Company's net revenue was attributed to operations in
the Americas, 46.3 % to European and African operations and 2.8% to Asia-Pacific
operations. Refer to the Notes to the Company's Consolidated Financial
Statements incorporated by reference herein, for further details regarding the
Company's foreign and domestic operations. Approximately 52%, 59% and 63% of the
Company's net revenue was attributed to clinical and data management services in
1997, 1996 and 1995, respectively, and approximately 36%, 28% and 24% of the
Company's 1997, 1996, and 1995 net revenue, respectively, was attributed to its
sales and marketing services. Neither the Company's disease management,
healthcare consulting and strategic marketing and communications services, nor
its laboratory, formulation and packaging services accounted for more than 10%
of the Company's net revenue in any of these years.
The Company has in the past derived, and may in the future derive, a
significant portion of its net revenue from a relatively limited number of major
projects or customers. As pharmaceutical companies continue to outsource large
projects and studies to fewer full-service providers, the concentration of
business could increase. The Company may experience concentration in 1998 and in
future years. See "Risk Factors" attached hereto as Exhibit 99.01.
COMPETITION
The market for the Company's contract research services is highly
competitive, and the Company competes against traditional contract research
organizations ("CROs") and the in-house research and development departments of
pharmaceutical companies, as well as universities and teaching hospitals. Among
the traditional CROs, there are several hundred small, limited-service
providers, several medium-
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sized firms, and only a few full-service companies with global capabilities.
Consolidation among CROs likely will result in greater competition among the
larger contract research providers for customers and acquisition candidates. The
Company's primary contract research competitors include Covance Inc.,
Pharmaceutical Product Development, Inc., PAREXEL International Corp. and
ClinTrials Research, Inc. In sales and marketing services, the Company competes
against the in-house sales and marketing departments of pharmaceutical companies
and other contract sales organizations in each country in which it operates. The
Company also competes against national consulting firms offering healthcare
consulting and medical communications services, including boutique firms
specializing in the healthcare industry and the healthcare departments of large
firms.
Competitive factors for contract research services include previous
experience, medical and scientific experience in specific therapeutic areas, the
quality of contract research, the ability to organize and manage large-scale
trials on a global basis, the ability to manage large and complex medical
databases, the ability to provide statistical and regulatory services, the
ability to recruit investigators, the ability to integrate information
technology with systems to improve the efficiency of contract research, an
international presence with strategically located facilities, financial
viability, and price. The primary competitive factors affecting contract sales
and marketing services are the proven ability to quickly assemble, train and
manage large qualified sales forces to handle broad scale launches of new drugs
and price. Competitive factors affecting healthcare consulting and medical
communications services include experience, reputation and price. The Company
believes that it competes favorably in these areas. In addition, the Company
believes that the synergies arising from integrating contract research services
with contract sales and marketing services, supported by global operations and
information technology, differentiate the Company from its competitors.
EMPLOYEES
The Company has approximately 10,900 employees, comprised of
approximately 5,200 in the Americas, 5,400 in Europe and Africa and 300 in the
Asia-Pacific region, and 89 offices in 26 countries.
CONTRACT REVENUE
Most of the Company's contracts are fixed price, with some variable
components, and range in duration from a few months to several years. Generally,
a portion of the contract fee is paid at the time the project is initiated with
performance-based installments payable over the contract duration. Most
contracts are terminable upon 15-90 days' notice by the customer, and typically
provide for termination or winding down fees. Also, some customer contracts call
for the customer to reimburse the Company at cost for certain items such as
investigator payments and travel. The Company recognizes net revenue from its
contracts, which excludes reimbursed costs, on a percentage-of-completion or per
diem basis as work is performed. Consistent with prior years' practice, the
Company considers net revenue its primary measure of revenue growth.
BACKLOG
The Company reports backlog based on anticipated net revenue from
uncompleted projects which have been authorized by the customer, through a
written contract or otherwise. Once work begins on a project, net revenue is
recognized over the duration of the project. Using this method of reporting
backlog, at December 31, 1997, backlog was approximately $1.06 billion, as
compared to approximately $708 million at December 31, 1996.
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The Company believes that backlog is not a consistent indicator of
future results because backlog can be affected by a number of factors, including
the variable size and duration of projects, many of which are performed over
several years. Additionally, projects may be terminated by the customer or
delayed by regulatory authorities. Moreover, the scope of work can change during
the course of a project. See "Risk Factors -- Loss or Delay of Large Contracts;
Variability of Backlog; Fixed Price Nature of Contracts" attached hereto as
Exhibit 99.01.
POTENTIAL LIABILITY
In connection with its provision of contract research services, the
Company contracts with physicians to serve as investigators in conducting
clinical trials to test new drugs on human volunteers. Such testing creates risk
of liability for personal injury to or death of volunteers, particularly to
volunteers with life-threatening illnesses, resulting from adverse reactions to
the drugs administered. Although the Company does not believe it is legally
accountable for the medical care rendered by third party investigators, it is
possible that the Company could be held liable for the claims and expenses
arising from any professional malpractice of the investigators with whom it
contracts or in the event of personal injury to or death of persons
participating in clinical trials. In addition, as a result of its Phase I
clinical trial facilities, the Company could be liable for the general risks
associated with a Phase I facility including, but not limited to, adverse events
resulting from the administration of drugs to clinical trial participants or the
professional malpractice of Phase I medical care providers. The Company also
could be held liable for errors or omissions in connection with the services it
performs through each of its service groups. The Company believes that its risks
are reduced by contractual indemnification provisions with customers and
investigators, insurance maintained by customers and investigators and by the
Company, and various regulatory requirements, including the use of institutional
review boards and the procurement of each volunteer's informed consent to
participate in the study. The contractual indemnifications generally do not
fully protect the Company against certain of its own actions such as negligence.
The contractual arrangements are subject to negotiation with customers and the
terms and scope of such indemnification vary from customer to customer and from
trial to trial. 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. The Company
maintains professional liability insurance that covers worldwide territories in
which the Company currently does business and includes drug safety issues as
well as data processing errors and omissions. The Company could be materially
and adversely affected if it were required to pay damages or bear the costs of
defending any claim outside the scope of or in excess of a contractual
indemnification provision or beyond the level of insurance coverage or in the
event that an indemnifying party does not fulfill its indemnification
obligations.
GOVERNMENT REGULATION
The preclinical, laboratory and clinical trial supply services
performed by the Company are subject to various regulatory requirements designed
to ensure the quality and integrity of the data or products of these services.
The industry standard for conducting preclinical and laboratory testing is
embodied in the good laboratory practice ("GLP") regulations. The requirements
for facilities engaging in clinical trial supplies preparation, labeling and
distribution are set forth in the good manufacturing practice ("GMP")
regulations. GLP and GMP regulations have been mandated by the FDA and the
Department of Health in the United Kingdom, and adopted by similar regulatory
authorities in other countries. GLP and GMP stipulate requirements for
facilities, equipment, supplies and personnel engaged in the conduct of studies
to which these regulations apply. The regulations require that written,
standardized procedures are followed during the conduct of studies and for the
recording, reporting and retention of study data and records. To help assure
compliance, the Company has established Quality
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Assurance programs at its preclinical, laboratory and clinical trial supply
facilities which monitor ongoing compliance with GLP and GMP regulations by
auditing study data and conducting regular inspections of testing procedures.
The industry standard for the conduct of clinical research and
development studies is embodied in GCP regulations and guidelines. The FDA and
many other regulatory authorities require that study results and data to be
submitted to such authorities be based on studies conducted in accordance
with GCP provisions. These provisions include: (i) complying with specific
regulations governing the selection of qualified investigators; (ii) obtaining
specific written commitments from the investigators; (iii) verifying that
patient informed consent is obtained; (iv) instructing investigators to maintain
records and reports; (v) verifying drug or device accountability; and (vi)
permitting appropriate governmental authorities access to data for their review.
Records for clinical studies must be maintained for specified periods for
inspection by the FDA during audits. Non-compliance with GCP requirements can
result in the disqualification of data collected during the clinical trial.
The Company's standard operating procedures related to clinical studies
are written in accordance with regulations and guidelines appropriate to the
region where they will be used, thus ensuring compliance with GCP. Within
Europe, all work is carried out in accordance with the European Community Note
For Guidance "Good Clinical Practice for Trials on Medicinal Products in the
European Community." Studies beginning after January 17, 1997 to be submitted to
the European Medicines Evaluation Agency must meet the requirements of the
International Congress of Harmonization - GCP. In addition, FDA regulations and
guidelines serve as a basis for the Company's North American standard operating
procedures. The Company's offices in the Asia-Pacific region have developed
standard operating procedures in accordance with their local requirements and in
harmony with the Company's North American and European operations. From a
transnational perspective, the Company has implemented common standard operating
procedures across regions to assure consistency whenever it is feasible to do
so.
The Company's sales and marketing services are subject to detailed and
comprehensive regulation in each geographic market in which it operates. Such
regulation relates, among other things, to the qualifications of sales
representatives and the use of healthcare professionals in sales functions. In
the United Kingdom, the Company complies with the ABPI Code of Practice for the
Pharmaceutical Industry, which prescribes, among other things, an examination
that must be passed by sales representatives within two years of their taking up
employment, and which prevents the employment of healthcare professionals as
sales representatives. Similar guidelines are in effect in other countries where
the Company offers sales and marketing services.
The Company's United States laboratories are subject to licensing and
regulation under federal, state and local laws relating to hazard communication
and employee right-to-know regulations, the handling and disposal of medical
specimens and hazardous waste and radioactive materials, as well as the safety
and health of laboratory employees. All of the Company's laboratories are
operated in material compliance with applicable federal and state laws and
regulations relating to the storage and disposal of all laboratory specimens
including the regulations of the Environmental Protection Agency, the Nuclear
Regulatory Commission, the Department of Transportation, the National Fire
Protection Agency and the Resource Conservation and Recovery Act. The use of
controlled substances in testing for drugs of abuse is regulated by the United
States Drug Enforcement Administration (the "DEA"). All of the Company's
laboratories using controlled substances for testing purposes are licensed by
the DEA. The regulations of the United States Department of Transportation, the
Public Health Service and the Postal Service apply to the surface and air
transportation of laboratory specimens. The Company's laboratories also comply
with International Air Transport Association regulations, which govern
international shipments of
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laboratory specimens. Furthermore, when the materials are sent to a foreign
country, the transportation of such materials becomes subject to the laws, rules
and regulations of such foreign country.
In addition to its comprehensive regulation of safety in the workplace,
the United States Occupational Safety and Health Administration has established
extensive requirements relating to workplace safety for healthcare employers
whose workers may be exposed to blood-borne pathogens such as HIV and the
hepatitis B virus. These regulations, among other things, require work practice
controls, protective clothing and equipment, training, medical follow-up,
vaccinations and other measures designed to minimize exposure to chemicals, and
transmission of blood-borne and airborne pathogens. Furthermore, relevant
employees of the Company receive initial and periodic training to ensure
compliance with applicable hazardous materials regulations and health and safety
guidelines. Although the Company believes that it is currently in compliance in
all material respects with such federal, state and local laws, failure to comply
could subject the Company to denial of the right to conduct business, fines,
criminal penalties and other enforcement actions.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table provides information on the executive officers of the
Company. There are no family relationships between any of the executive officers
or directors of the Company.
Name Age Position with the Company
- ---- --- -------------------------
Dennis B. Gillings, Ph.D. 53 Chairman of the Board of Directors and Chief Executive Officer
Santo J. Costa 52 President, Chief Operating Officer and Director
Rachel R. Selisker 42 Chief Financial Officer, Executive Vice President Finance and Director
Gregory D. Porter 41 Executive Vice President, Chief Administrative and Legal Officer and
Secretary
Ludo J. Reynders, Ph.D. 44 Chief Executive Officer, Quintiles CRO, and Director
David F. White 54 Chief Executive Officer, Innovex Limited, and Director
Lawrence S. Lewin 59 Chief Executive Officer, The Lewin Group, and Director
Dennis B. Gillings, Ph.D. founded the Company in 1982 and has served as
Chief Executive Officer and Chairman of the Board of Directors since its
inception. From 1972 to 1988, Dr. Gillings served as a professor in the
Department of Biostatistics at the University of North Carolina at Chapel Hill.
During his tenure as a professor, he was active in statistical consulting for
the pharmaceutical industry. Dr. Gillings currently serves on the Board of
Directors of the University of North Carolina School of Public Health
Foundation. Dr. Gillings has been nominated for election as a director of
Triangle Pharmaceuticals, Inc. Dr. Gillings has been published widely in
scientific and medical journals. Dr. Gillings received a Diploma in Mathematical
Statistics from the University of Cambridge and a Ph.D. in Mathematics from the
University of Exeter.
Santo J. Costa became President and Chief Operating Officer of the
Company on April 1, 1994 and has been a director since April 1994. From July 1,
1993 to March 31, 1994, Mr. Costa directed the affairs of his own consulting
firm, Santo J. Costa & Associates, which focused on pharmaceutical and
biotechnology companies. Prior to June 30, 1993, Mr. Costa served seven years at
Glaxo, Inc., a pharmaceutical company, as Senior Vice President Administration
and General Counsel and a member of the Board of Directors. Mr. Costa serves as
a director of NPS Pharmaceuticals Inc. Mr. Costa received a law degree from St.
John's University.
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Rachel R. Selisker, a certified public accountant, serves as Executive
Vice President Finance and Chief Financial Officer for the Company and has been
the Company's principal financial officer since 1987. Ms. Selisker has served as
a director of the Company since November 1995. From 1981 to 1987, Ms. Selisker
was with the accounting firm of Oppenheim, Appel, Dixon & Co. in Raleigh, North
Carolina. Ms. Selisker serves on the Advisory Board for the Accounting
Curriculum at Wake Technical Community College.
Gregory D. Porter has served as Executive Vice President, Chief
Administrative and Legal Officer and Secretary since January 1997. Mr. Porter
joined the Company in September 1994 as Vice President, General Counsel and
Secretary. From 1982 to September 1994, Mr. Porter was in the private practice
of law. From 1981 to 1982, Mr. Porter clerked with the Honorable William Matthew
Byrne of the U.S. District Court for the Central District of California. Mr.
Porter received his law degree from the University of North Carolina at Chapel
Hill.
Ludo J. Reynders, Ph.D. serves as Chief Executive Officer of Quintiles
CRO. He has managed European clinical operations since joining the Company in
1988. Dr. Reynders has served as a director of the Company since January 1995.
Prior to joining the Company, Dr. Reynders managed the biostatistics and data
management department of the Bristol-Myers Co. Pharmaceutical Research and
Development Division, located in Brussels, Belgium. Dr. Reynders serves as a
director of Oxford Asymmetry International plc. Dr. Reynders received an M.S.
and Ph.D. in Applied Sciences from the University of Louvain, Louvain, Belgium.
David F. White serves as the Chief Executive Officer of Innovex
Limited. Mr. White has served as a director of the Company since November 1997.
Mr. White joined Innovex Limited as Group Chief Executive Officer in September
1994 from ICI plc, where he had a broad career principally in the international
pharmaceutical business. After successive appointments as Managing Director of
Stuart Pharmaceuticals from June 1984 to October 1985 and General Manager, ICI
Pharmaceuticals (U.K.) from November 1985 to December 1988, he was promoted to
lead the global plastics and acrylics businesses, culminating in an assignment
to steer the integration of Dupont Acrylics into ICI Acrylics.
Lawrence S. Lewin has served as the Chief Executive Officer of The
Lewin Group, Inc., a subsidiary of the Company, since May 1996. Mr. Lewin has
been a director of the Company since June 1996. Between November 1992 and May
1996, Mr. Lewin served as the Chairman and Chief Executive Officer of Lewin-VHI,
Inc., a healthcare consulting firm specializing in performing economic analyses,
product profiles, and strategic development for healthcare reform and medical
reimbursement and the establishment of medical guidelines. Mr. Lewin serves as a
director of Apache Medical Systems, Inc. and as a member of the advisory boards
of the Hambrecht & Quist Healthcare Investors Fund and the Hambrecht & Quist
Life Sciences Fund. Mr. Lewin received an M.B.A. from Harvard Business School.
ITEM 2. PROPERTIES
The Company has 89 offices located in 26 countries. The Company's
executive headquarters and one of its operating units are located adjacent to
Research Triangle Park, North Carolina. The Company also leases facilities in
Mountain View, California; San Diego, California; San Francisco, California;
Atlanta, Georgia; Smyrna, Georgia; Lenexa, Kansas; Gaithersburg, Maryland;
Rockville, Maryland; Cambridge, Massachusetts; Cranford, New Jersey; Parsippany,
New Jersey; Scotch Plains, New Jersey; Morrisville, North Carolina; Raleigh,
North Carolina; Plymouth Meeting, Pennsylvania; Austin, Texas; San Antonio,
Texas; Salt Lake City, Utah; Arlington, Virginia; Fairfax, Virginia; Buenos
Aires, Argentina; Adelaide, Australia; Melbourne, Australia; Sydney, Australia;
Vienna, Austria; Brussels, Belgium; Louvain-La-Neuve, Belgium; Mechelen,
Belgium; Sofia, Bulgaria; Montreal, Canada; Beijing, China; Hong Kong, China;
Shanghai, China; Copenhagen, Denmark; Battle, England; Bracknell, England;
Egham, England; Esher, England; Ledbury, England; London, England; Marlow,
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England; Staines, England; Espon, Finland; Neuilly sur Seine, France; Paris,
France; Strasbourg, France; Freiburg, Germany; Neu-Isenberg, Germany; Mannheim,
Germany; Munich, Germany; Weil am Rhein, Germany; Ahmedabad, India; Dublin,
Ireland; Tel Aviv, Israel; Milan, Italy; Osaka, Japan; Tokyo, Japan; Mexico
City, Mexico; Hoofddorp, The Netherlands; Schiedam, The Netherlands; Auckland,
New Zealand; Moscow, Russia; Irene, South Africa; Johannesburg, South Africa;
Tyger Valley, South Africa; Edinburgh, Scotland; Singapore; Barcelona, Spain;
Madrid, Spain; and Uppsala, Sweden. In addition, the Company owns facilities in
Ledbury, England; Lenexa, Kansas; Riccarton, Scotland; Bathgate, Scotland;
London, England; and Freiburg, Germany. Quintiles 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
No material legal proceedings are pending to which Quintiles, its
subsidiaries or any of their properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information relating to the market for the Company's Common Stock is
incorporated by reference from page 48 and page 51 of the Company's 1997
Annual Report to Shareholders included as Exhibit 13 to this report.
RECENT SALES OF UNREGISTERED SECURITIES
In November 1997, the Company issued an aggregate of 300,000 shares of
Common Stock to The Cleveland Clinic Foundation in a private placement
transaction. The issuance of such shares was made in reliance on a claim of
exemption pursuant to Section 4(2) of the Securities Act of 1933 as amended (the
"Act") as a transaction not involving any public offering and in reliance upon
Regulation D.
In 1997, options to purchase 188,970 shares of Common Stock were
exercised at an average exercise price of $2.9305 per share in reliance on Rule
701 under the Act. Such options were issued by the Company prior to becoming
subject to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, pursuant to its Nonqualified Employee Incentive Stock
Option Plan.
ITEM 6. SELECTED FINANCIAL DATA
This information is incorporated by reference from page 22,
"Selected Consolidated Financial Data", of the Company's 1997 Annual Report to
Shareholders included as Exhibit 13 to this report.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This information is incorporated by reference from pages 23-28,
"Management's Discussion and Analysis", of the Company's 1997 Annual Report to
Shareholders included as Exhibit 13 to this report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information are
incorporated by reference from pages 29-50 of the Company's 1997 Annual Report
to Shareholders included as Exhibit 13 to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the Company's directors is incorporated by reference
from the Company's definitive proxy statement to be filed with respect to the
Annual Meeting of Shareholders to be held May 6, 1998. Information on the
Company's executive officers is included under the caption "Executive Officers
of the Registrant" on page 13 of this report.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the Company's
definitive proxy statement to be filed with respect to the Annual Meeting of
Shareholders to be held May 6, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference from the Company's
definitive proxy statement to be filed with respect to the Annual Meeting of
Shareholders to be held May 6, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the Company's
definitive proxy statement to be filed with respect to the Annual Meeting of
Shareholders to be held May 6, 1998.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. The following financial statements and
supplementary data included in the 1997 Annual Report to Shareholders, filed as
Exhibit 13 hereto, are incorporated by reference in Item 8 of this report.
Annual Report to
Financial Statements Form 10-K Page Shareholders Page
-------------------- -------------- -----------------
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995 16 29
Consolidated Balance Sheets as of December 31, 1997 and 1996 16 30-31
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 16 32-33
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1997, 1996 and 1995 16 34
Notes to Consolidated Financial Statements 16 35-49
Report of Independent Auditors 16 50
(a)(2) Financial Statement Schedules. All applicable financial statement
schedules required under Regulation S-X have been included in the Notes to the
Consolidated Financial Statements.
(a)(3) Exhibits. The exhibits required by Item 601 of Regulation S-K are listed
below.
Exhibit Description
- ------- -----------
3.01(1) Amended and Restated Articles of Incorporation, as amended
3.02(2) Amended and Restated Bylaws
4.01(3) Indenture, dated as of May 17, 1996, between the Company
and Marine Midland Bank, as Trustee, with respect to the
Company's 4.25% Convertible Subordinated Notes due May
31, 2000
4.02 Amended and Restated Articles of Incorporation, as amended
(see Exhibit 3.01)
4.03 Amended and Restated Bylaws (see Exhibit 3.02)
4.04(4) Specimen certificate for Common Stock, $0.01 par value per
share
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Exhibit Description
- ------- -----------
4.05(1) Form of the Company's 4.25% Convertible Subordinated Notes
in Unrestricted Global Form
4.06(1) Form of the Company's 4.25% Convertible Subordinated Notes
in Certificated Form.
4.07(3) Registration Rights Agreement dated as of May 17, 1996,
by and among the Company, Goldman Sachs International and
Smith Barney, Inc.
10.01(4)(5) Employment Agreement, dated February 22, 1994, by and between
Dr. Dennis B. Gillings and the Company
10.02(4)(5)(6) Employment Agreement, dated February 22, 1994, by and between
Santo J. Costa and the Company, as amended on November 4,
1994
10.03(5)(6) Employment Agreement, dated January 1, 1995, by and between
Rachel R. Selisker and the Company
10.04(4)(5) Employment Agreement, dated January 15, 1988, by and between
Dr. Ludo Reynders and Quintiles (UK) Limited
10.05(5)(7) Employment Agreement, dated November 29, 1996, by and between
Barrie S. Haigh and the Company
10.06(5)(7) Deed of Non-Competition, dated November 29, 1996, by and
between Barrie S. Haigh and the Company
10.07(5)(7) Letter Agreement dated August 11, 1997 between Barrie S.
Haigh and the Company
10.08(5)(7) Employment Agreement, dated May 13, 1996, by and between
Lawrence S. Lewin and The Lewin Group, Inc. (a wholly-owned
subsidiary of the Company)
10.09(5)(7) Service Agreement, dated September 2, 1994, between Innovex
Holdings Limited and David F. White
10.10(5)(7) Deed of Non-Competition, dated November 29, 1996, between
David F. White and the Company
10.11(2)(5) Employment letter agreement, dated May 31, 1994, by and
between Gregory D. Porter and the Company
10.12(4)(5) Non-Qualified Employee Incentive Stock Option Plan
10.13(4)(5) Equity Compensation Plan
10.14(5)(6) Amended and Restated Employee Stock Ownership Plan and Trust
10.15(4)(5) Quintiles (UK) Limited Approved Profit Sharing Scheme
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Exhibit Description
- ------- -----------
10.16(5) Quintiles Transnational Corp. Deferred Compensation Plan
10.17(2)(5) Quintiles Group Executive Share Option Scheme
10.18(5)(9) Quintiles Employee Stock Purchase Plan
10.19(5)(9) Innovex Limited 1996 Unapproved Executive Share Option Scheme
10.20(5)(10) Quintiles/Lewin Stock Option Plan
10.21(5)(11) Quintiles Transnational Corp. Nonqualified Stock Option Plan
10.22(4) Lease dated January 20, 1992, by and between Durham Park,
operating as a Joint Venture, Imperial Center, and
Quintiles, Inc. as amended on April 6, 1992, April 16, 1992,
May 12, 1992, May 13, 1992, March 10, 1993, and
September 1, 1993
10.23(2)(6) Lease dated September 8, 1994, by and between Petula
Associates Ltd. and Quintiles, Inc., as amended on September
30, 1994, January 10, 1995, April 12, 1995 and August 11,
1995
10.24(4) Lease Agreement, dated December 9, 1992, by and between South
Bay/Copley Joint Venture and the Company, as amended March 3,
1993
10.25 (6) Lease, effective January 1, 1995, by and between The Norwich
Union Life Insurance Society, Earlsfort Centre and Quintiles
Ireland Limited and guaranteed by Quintiles, Inc.
10.26 (4) Leases, dated December 1, 1993, by and between The Norwich
Union Life Insurance Society, Quintiles (UK) Limited, and the
Company (as surety)
10.27(2) Lease, dated August 31, 1995, by and between California
Public Employees' Retirement System and International
Clinical Research Corp., as amended October 25, 1995
10.28(7) Lease, dated November 6, 1996, by and between Seagate
Technology, Inc. and Innovex
10.29(7) Lease, dated December 20, 1996, by and between The Norwich
Union Life Insurance Society and Quintiles (U.K.) Limited
10.30(7) Lease, dated August 14, 1996, by and between PRUBETA-3 and
Innovex, Inc.
10.31(7) Lease, dated November 30, 1995, by and between Lenexa
Industrial Park, Inc. and Innovex, Inc.
10.32(7) Sublease, dated January 18, 1996, by and between Legent
Corporation and Innovex, Inc.
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Exhibit Description
- ------- -----------
10.33 Underlease, dated November 28, 1997, by and between PDFM
Limited and Quintiles (UK) Limited and guaranteed by the
Company
10.34(12) Agreement for the Provision of Research Services and Lease
of Business Assets dated as of March 3, 1995, between Syntex
Pharmaceuticals Limited, Quintiles Scotland Limited,
Quintiles (UK) Limited, and Roche Products Limited
10.35(2)(5) Consulting Agreement dated as of March 15, 1995 between the
Company and A.M. Pappas & Associates, L.L.C.
10.36(13) Merger Agreement, dated as of September 16, 1996, by and
among the Company, BRI Acquisition Corp. and BRI
International, Inc.
10.37(14) Share Exchange Agreement, dated as of October 4, 1996, among
Innovex Limited, the Company and the shareholders of Innovex
Limited
10.38(15) Registration Rights Agreement, dated as of November 29, 1996,
by and among the Company and the shareholders of Innovex
Limited
10.39(16) Supplemental Agreement to Registration Rights Agreement
filed as Exhibit 10.38 hereto
10.40(17) Supplemental Agreement No. 2 to Registration Rights Agreement
filed as Exhibit 10.38 hereto
10.41(18) Asset Purchase Agreement, dated as of April 16, 1996, among
The Lewin Group, Inc., the Company, Lewin-VHI, Inc., Value
Health, Inc., Lawrence S. Lewin and Robert J. Rubin
10.42(7) Underwriting Agreement, dated March 6, 1997, by and
between the Company and Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated, Smith Barney Inc. and William
Blair & Company, L.L.C., as representatives of the
several underwriters named in Schedule 1 thereto
10.43(7) Underwriting Agreement (International Version), dated March
6, 1997, by and between the Company and Goldman Sachs
International, Morgan Stanley & Co. International Limited,
Smith Barney Inc. and William Blair & Company, L.L.C., as
representatives of the several underwriters named in
Schedule I thereto
10.44(19) Underwriting Agreement, dated December 4, 1997, among the
Company, the Selling Shareholders listed in Schedule I
attached thereto and Morgan Stanley & Co. Incorporated
13 Portions of the Annual Report to Shareholders for the fiscal
year ended December 31, 1997, which are incorporated herein
by reference
21 Subsidiaries of the Company
20
21
Exhibit Description
- ------- -----------
23.01 Consent of Ernst & Young LLP
23.02 Consent of Coopers & Lybrand L.L.P.
23.03 Consent of KPMG
24 Powers of Attorney (included on the signature page hereof)
27.01 Restated Financial Data Schedule (for SEC use only)
27.02 Restated Financial Data Schedule (for SEC use only)
27.03 Restated Financial Data Schedule (for SEC use only)
27.04 Restated Financial Data Schedule (for SEC use only)
27.05 Restated Financial Data Schedule (for SEC use only)
27.06 Restated Financial Data Schedule (for SEC use only)
99.01 Risk Factors relating to the Company
99.02 Report of Coopers & Lybrand L.L.P.
99.03 Report of KPMG
- -------------------------
(1) Exhibit to the Company's Registration Statement on Form S-3,
as amended, as filed with the Securities and Exchange
Commission (File No. 333-19009) effective February 21, 1997
and incorporated herein by reference.
(2) Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 as filed with the
Securities and Exchange Commission on March 25, 1996, as
amended on May 16, 1996, and incorporated herein by reference.
(3) Exhibit to the Company's Quarterly Report on Form 10-Q, as
filed with the Securities and Exchange Commission on
August 15, 1996, and incorporated herein by reference.
(4) Exhibit to the Company's Registration Statement on Form S-1,
as amended, as filed with the Securities and Exchange
Commission (File No. 33-75766) effective April 20, 1994, and
incorporated herein by reference.
(5) Executive compensation plans and arrangements.
(6) Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as filed with the
Securities and Exchange Commission on March 30, 1995, and
incorporated herein by reference.
(7) Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, as filed with the
Securities and Exchange Commission on March 25, 1997, and
incorporated herein by reference.
(8) Exhibit to the Company's Registration Statement on Form S-3,
as filed with the Securities and Exchange Commission
(File No. 333-38181) effective October 21, 1997, and
incorporated herein by reference.
(9) Exhibit to the Company's Registration Statement on Form S-8,
as filed with the Securities and Exchange Commission
(File No. 333-16553) effective November 21, 1996, and
incorporated herein by reference.
(10) Exhibit to the Company's Registration Statement on Form S-8,
as filed with the Securities and Exchange Commission
(File No. 333-03603) effective May 13, 1996, and incorporated
herein by reference.
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22
(11) Exhibit to the Company's Registration Statement on Form S-8 as
filed with the Securities and Exchange Commission (File No.
333-40493) effective November 18, 1997, and incorporated
herein by reference.
(12) Exhibit to the Company's Current Report on Form 8-K dated
March 6, 1995, as filed with the Securities and Exchange
Commission on March 20, 1995, and incorporated herein by
reference.
(13) Exhibit to the Company's Registration Statement on Form S-4,
as amended, as filed with the Securities and Exchange
Commission (File No. 333-12573) effective October 15, 1996,
and incorporated herein by reference.
(14) Exhibit to the Company's Current Report on Form 8-K dated
October 6, 1996, as filed with the Securities and Exchange
Commission on October 11, 1996, and incorporated herein by
reference.
(15) Exhibit to the Company's Current Report on Form 8-K dated
November 22, 1996, as filed with the Securities and Exchange
Commission on December 6, 1996 and amended on January 16,
1997, and incorporated herein by reference.
(16) Exhibit to the Company's Current Report on Form 8-K dated
March 5, 1997, as filed with the Securities and Exchange
Commission on March 5, 1997, and incorporated herein by
reference.
(17) Exhibit to the Company's Registration Statement on Form S-3,
as amended, as filed with the Securities and Exchange
Commission (File No. 333-28919), effective July 1, 1997, and
incorporated herein by reference.
(18) Exhibit to the Company's Current Report on Form 8-K dated
April 16, 1997, as filed with the Securities and Exchange
Commission on April 23, 1996, and incorporated herein by
reference.
(19) Exhibit to the Company's Current Report on Form 8-K dated
December 11, 1997, as filed with the Securities and Exchange
Commission on December 11, 1997, and incorporated herein by
reference.
(b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K
dated October 17, 1997, including the following supplemental
consolidated financial statements which restated certain of its
historical financial data in connection with the consummation of
certain acquisitions accounted for as poolings of interests:
Supplemental Consolidated Statements of Income for each of the
three years in the period ended December 31, 1996
Supplemental Consolidated Balance Sheets as of December 31,
1996 and 1995
Supplemental Consolidated Statements of Shareholders' Equity
for each of the three years in the period ended
December 31, 1996
Supplemental Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 1996
Unaudited Condensed Supplemental Consolidated Statements of
Income for the three and six months ended June 30,
1997 and 1996
22
23
Unaudited Condensed Supplemental Consolidated Balance Sheets
as of June 30, 1997 and December 31, 1996
Unaudited Condensed Supplemental Consolidated Statements of
Cash Flows for the six months ended June 30, 1997 and 1996
The Company filed a Current Report on Form 8-K, dated November 26,
1997, to amend certain effective registration statements of the Company to
increase the number of shares registered thereunder to include the additional
shares resulting from the application of the Company's two-for-one stock split
to the registered shares remaining unsold under such registration statements as
of December 1, 1997.
The Company filed a Current Report on Form 8-K, dated December 11,
1997, including as an exhibit an Underwriting Agreement among the Company, the
Selling Shareholders listed in Schedule 1 attached thereto and Morgan Stanley &
Co. Incorporated (the "Underwriter") with respect to certain shares to be sold
by such Selling Shareholders to the Underwriter under two effective Registration
Statements on Form S-3 previously filed by the Company.
FORWARD-LOOKING STATEMENTS
Information set forth in this Annual Report on Form 10-K contains
various "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, which statements represent the Company's judgment
concerning the future and are subject to risks and uncertainties that could
cause the Company's actual operating results and financial position to differ
materially. Such forward looking statements can be identified by the use of
forward looking terminology such as "may", "will", "expect", "anticipate",
"estimate", "believe", or "continue", or the negative thereof or other various
thereof or comparable terminology.
The Company cautions that any such forward looking statements are
further qualified by important factors that could cause the Company's actual
operating results to differ materially from those in the forward looking
statements, including without limitation, the Company's dependence on certain
industries and customers, the management of its growth, the risks associated
with acquisitions, risks relating to contract sales services, competition within
the industry, the loss or delay of large contracts, dependence on personnel and
government regulation and the other Risk Factors described in Exhibit 99.01
attached to this report.
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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, in Durham, North Carolina,
on the 25th day of March, 1998.
QUINTILES TRANSNATIONAL CORP.
By:/s/ Dennis B. Gillings, Ph.D.
-----------------------------------
Dennis B. Gillings, Ph.D.
Chairman of the Board of Directors
and Chief Executive Officer
24
25
SIGNATURES AND POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dennis B. Gillings and Rachel R. Selisker
and each of them, each with full power to act without the other, his true and
lawful attorneys-in-fact and agents, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this report, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their substitutes,
may lawfully do or cause to be done by virtue hereof.
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 in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Dennis B. Gillings Chairman of the Board of Directors March 25, 1998
- -------------------------- and Chief Executive Officer
Dennis B. Gillings, Ph.D.
/s/ Rachel R. Selisker Chief Financial Officer, March 25, 1998
- -------------------------- Executive Vice President Finance
Rachel R. Selisker and Director
/s/ Robert C. Bishop Director March 25, 1998
- --------------------------
Robert C. Bishop, Ph.D.
/s/ E. G. F. Brown Director March 25, 1998
- --------------------------
E. G. F. Brown
/s/ Vaughn D. Bryson Director March 25, 1998
- --------------------------
Vaughn D. Bryson
/s/ Santo J. Costa President, Chief Operating Officer March 25, 1998
- -------------------------- and Director
Santo J. Costa
/s/ Chester W. Douglass Director March 25, 1998
- --------------------------
Chester W. Douglass, Ph.D.
/s/ Lawrence S. Lewin Chief Executive Officer, The March 25, 1998
- -------------------------- Lewin Group, and Director
Lawrence S. Lewin
/s/ Arthur M. Pappas Director March 25, 1998
- --------------------------
Arthur M. Pappas
/s/ Ludo J. Reynders Chief Executive Officer, March 25, 1998
- -------------------------- Quintiles CRO, and Director
Ludo J. Reynders, Ph.D.
/s/ Eric J. Topol Director March 25, 1998
- --------------------------
Eric J. Topol, M.D.
/s/ Virginia V. Weldon Director March 25, 1998
- --------------------------
Virginia V. Weldon, M.D.
/s/ David F. White Chief Executive Officer, March 25, 1998
- -------------------------- Innovex Limited, and Director
David F. White
25
26
EXHIBIT INDEX
Exhibit Description
- ------- -----------
3.01(1) Amended and Restated Articles of Incorporation, as amended
3.02(2) Amended and Restated Bylaws
4.01(3) Indenture, dated as of May 17, 1996, between the Company
and Marine Midland Bank, as Trustee, with respect to the
Company's 4.25% Convertible Subordinated Notes due May
31, 2000
4.02 Amended and Restated Articles of Incorporation, as amended
(see Exhibit 3.01)
4.03 Amended and Restated Bylaws (see Exhibit 3.02)
4.04(4) Specimen certificate for Common Stock, $0.01 par value per
share
4.05(1) Form of the Company's 4.25% Convertible Subordinated Notes
in Unrestricted Global Form
4.06(1) Form of the Company's 4.25% Convertible Subordinated Notes
in Certificated Form.
4.07(3) Registration Rights Agreement dated as of May 17, 1996,
by and among the Company, Goldman Sachs International and
Smith Barney, Inc.
10.01(4)(5) Employment Agreement, dated February 22, 1994, by and between
Dr. Dennis B. Gillings and the Company
10.02(4)(5)(6) Employment Agreement, dated February 22, 1994, by and between
Santo J. Costa and the Company, as amended on November 4,
1994
10.03(5)(6) Employment Agreement, dated January 1, 1995, by and between
Rachel R. Selisker and the Company
10.04(4)(5) Employment Agreement, dated January 15, 1988, by and between
Dr. Ludo Reynders and Quintiles (UK) Limited
10.05(5)(7) Employment Agreement, dated November 29, 1996, by and between
Barrie S. Haigh and the Company
10.06(5)(7) Deed of Non-Competition, dated November 29, 1996, by and
between Barrie S. Haigh and the Company
10.07(5)(7) Letter Agreement dated August 11, 1997 between Barrie S.
Haigh and the Company
27
Exhibit Description
- ------- -----------
10.08(5)(7) Employment Agreement, dated May 13, 1996, by and between
Lawrence S. Lewin and The Lewin Group, Inc. (a wholly-owned
subsidiary of the Company)
10.09(5)(7) Service Agreement, dated September 2, 1994, between Innovex
Holdings Limited and David F. White
10.10(5)(7) Deed of Non-Competition, dated November 29, 1996, between
David F. White and the Company
10.11(2)(5) Employment letter agreement, dated May 31, 1994, by and
between Gregory D. Porter and the Company
10.12(4)(5) Non-Qualified Employee Incentive Stock Option Plan
10.13(4)(5) Equity Compensation Plan
10.14(5)(6) Amended and Restated Employee Stock Ownership Plan and Trust
10.15(4)(5) Quintiles (UK) Limited Approved Profit Sharing Scheme
10.16(5) Quintiles Transnational Corp. Deferred Compensation Plan
10.17(2)(5) Quintiles Group Executive Share Option Scheme
10.18(5)(9) Quintiles Employee Stock Purchase Plan
10.19(5)(9) Innovex Limited 1996 Unapproved Executive Share Option Scheme
10.20(5)(10) Quintiles/Lewin Stock Option Plan
10.21(5)(11) Quintiles Transnational Corp. Nonqualified Stock Option Plan
10.22(4) Lease dated January 20, 1992, by and between Durham Park,
operating as a Joint Venture, Imperial Center, and
Quintiles, Inc. as amended on April 6, 1992, April 16, 1992,
May 12, 1992, May 13, 1992, March 10, 1993, and
September 1, 1993
10.23(2)(6) Lease dated September 8, 1994, by and between Petula
Associates Ltd. and Quintiles, Inc., as amended on September
30, 1994, January 10, 1995, April 12, 1995 and August 11,
1995
10.24(4) Lease Agreement, dated December 9, 1992, by and between South
Bay/Copley Joint Venture and the Company, as amended March 3,
1993
28
Exhibit Description
- ------- -----------
10.25 (6) Lease, effective January 1, 1995, by and between The Norwich
Union Life Insurance Society, Earlsfort Centre and Quintiles
Ireland Limited and guaranteed by Quintiles, Inc.
10.26 (4) Leases, dated December 1, 1993, by and between The Norwich
Union Life Insurance Society, Quintiles (UK) Limited, and the
Company (as surety)
10.27(2) Lease, dated August 31, 1995, by and between California
Public Employees' Retirement System and International
Clinical Research Corp., as amended October 25, 1995
10.28(7) Lease, dated November 6, 1996, by and between Seagate
Technology, Inc. and Innovex
10.29(7) Lease, dated December 20, 1996, by and between The Norwich
Union Life Insurance Society and Quintiles (U.K.) Limited
10.30(7) Lease, dated August 14, 1996, by and between PRUBETA-3 and
Innovex, Inc.
10.31(7) Lease, dated November 30, 1995, by and between Lenexa
Industrial Park, Inc. and Innovex, Inc.
10.32(7) Sublease, dated January 18, 1996, by and between Legent
Corporation and Innovex, Inc.
10.33 Underlease, dated November 28, 1997, by and between PDFM
Limited and Quintiles (UK) Limited and guaranteed by the
Company
10.34(12) Agreement for the Provision of Research Services and Lease
of Business Assets dated as of March 3, 1995, between Syntex
Pharmaceuticals Limited, Quintiles Scotland Limited,
Quintiles (UK) Limited, and Roche Products Limited
10.35(2)(5) Consulting Agreement dated as of March 15, 1995 between the
Company and A.M. Pappas & Associates, L.L.C.
10.36(13) Merger Agreement, dated as of September 16, 1996, by and
among the Company, BRI Acquisition Corp. and BRI
International, Inc.
10.37(14) Share Exchange Agreement, dated as of October 4, 1996, among
Innovex Limited, the Company and the shareholders of Innovex
Limited
10.38(15) Registration Rights Agreement, dated as of November 29, 1996,
by and among the Company and the shareholders of Innovex
Limited
10.39(16) Supplemental Agreement to Registration Rights Agreement
filed as Exhibit 10.38 hereto
29
Exhibit Description
- ------- -----------
10.40(17) Supplemental Agreement No. 2 to Registration Rights Agreement
filed as Exhibit 10.38 hereto
10.41(18) Asset Purchase Agreement, dated as of April 16, 1996, among
The Lewin Group, Inc., the Company, Lewin-VHI, Inc., Value
Health, Inc., Lawrence S. Lewin and Robert J. Rubin
10.42(7) Underwriting Agreement, dated March 6, 1997, by and
between the Company and Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated, Smith Barney Inc. and William
Blair & Company, L.L.C., as representatives of the
several underwriters named in Schedule 1 thereto
10.43(7) Underwriting Agreement (International Version), dated March
6, 1997, by and between the Company and Goldman Sachs
International, Morgan Stanley & Co. International Limited,
Smith Barney Inc. and William Blair & Company, L.L.C., as
representatives of the several underwriters named in
Schedule I thereto
10.44(19) Underwriting Agreement, dated December 4, 1997, among the
Company, the Selling Shareholders listed in Schedule I
attached thereto and Morgan Stanley & Co. Incorporated
13 Portions of the Annual Report to Shareholder for the fiscal
year ended December 31, 1997, which are incorporated herein
by reference
21 Subsidiaries of the Company
23.01 Consent of Ernst & Young LLP
23.02 Consent of Coopers & Lybrand L.L.P.
23.03 Consent of KPMG
24 Power of Attorney (included on the signature page hereof)
27.01 Restated Financial Data Schedule (for SEC use only)
27.02 Restated Financial Data Schedule (for SEC use only)
27.03 Restated Financial Data Schedule (for SEC use only)
27.04 Restated Financial Data Schedule (for SEC use only)
27.05 Restated Financial Data Schedule (for SEC use only)
27.06 Restated Financial Data Schedule (for SEC use only)
99.01 Risk Factors relating to the Company
99.02 Report of Coopers & Lybrand L.L.P.
99.03 Report of KPMG
- -------------------------
(1) Exhibit to the Company's Registration Statement on Form S-3,
as amended, as filed with the Securities and Exchange
Commission (File No. 333-19009) effective February 21, 1997,
and incorporated herein by reference.
(2) Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, as filed with the
Securities and Exchange Commission on March 25, 1996, as
amended on May 16, 1996, and incorporated herein by
reference.
30
(3) Exhibit to the Company's Quarterly Report on Form 10-Q, as
filed with the Securities and Exchange Commission on
August 15, 1996, and incorporated herein by reference.
(4) Exhibit to the Company's Registration Statement on Form S-1,
as amended, as filed with the Securities and Exchange
Commission (File No. 33-75766) effective April 20, 1994, and
incorporated herein by reference.
(5) Executive compensation plans and arrangements.
(6) Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as filed with the
Securities and Exchange Commission on March 30, 1995, and
incorporated herein by reference.
(7) Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, as filed with the
Securities and Exchange Commission on March 25, 1997, and
incorporated herein by reference.
(8) Exhibit to the Company's Registration Statement on Form S-3,
as filed with the Securities and Exchange Commission
(File No. 333-38181) effective October 21, 1997, and
incorporated herein by reference.
(9) Exhibit to the Company's Registration Statement on Form S-8,
as filed with the Securities and Exchange Commission
(File No. 333-16553) effective November 21, 1996, and
incorporated herein by reference.
(10) Exhibit to the Company's Registration Statement on Form S-8,
as filed with the Securities and Exchange Commission
(File No. 333-03603) effective May 13, 1996, and incorporated
herein by reference.
(11) Exhibit to the Company's Registration Statement on Form S-8 as
filed with the Securities and Exchange Commission (File No.
333-40493) effective November 18, 1997, and incorporated
herein by reference.
(12) Exhibit to the Company's Current Report on Form 8-K dated
March 6, 1995, as filed with the Securities and Exchange
Commission on March 20, 1995, and incorporated herein by
reference.
(13) Exhibit to the Company's Registration Statement on Form S-4,
as amended, as filed with the Securities and Exchange
Commission (File No. 333-12573) effective October 15, 1996,
and incorporated herein by reference.
(14) Exhibit to the Company's Current Report on Form 8-K dated
October 6, 1996, as filed with the Securities and Exchange
Commission on October 11, 1996, and incorporated herein by
reference.
(15) Exhibit to the Company's Current Report on Form 8-K dated
November 22, 1996, as filed with the Securities and Exchange
Commission on December 6, 1996 and amended on January 16,
1997, and incorporated herein by reference.
(16) Exhibit to the Company's Current Report on Form 8-K dated
March 5, 1997, as filed with the Securities and Exchange
Commission on March 5, 1997, and incorporated herein by
reference.
(17) Exhibit to the Company's Registration Statement on Form S-3,
as amended, as filed with the Securities and Exchange
Commission (File No. 333-28919), effective July 1, 1997, and
incorporated herein by reference.
31
(18) Exhibit to the Company's Current Report on Form 8-K dated
April 16, 1997, as filed with the Securities and Exchange
Commission on April 23, 1996, and incorporated herein by
reference.
(19) Exhibit to the Company's Current Report on Form 8-K dated
December 11, 1997, as filed with the Securities and Exchange
Commission on December 11, 1997, and incorporated herein by
reference.