By 1991 Amgen had emerged as the largest biotech company on the West Coast, with a 61 times price earnings ratio and a $5 billion market capitalization. Genzyme had emerged as the largest biotech company on the East Coast, with $250 million in cash reserves, a 33 times price earnings ratio, and a $600 million market capitalization. TSI Corporation emerged as the fastest growing of the next generation of biotech companies. The accounting firm Ernst and Young, investment bank Merrill Lynch, and publisher Inc. Magazine offered an annual prize for Entrepreneur of the Year. TSI Corporation was a finalist for that award in 1990 and again in 1991. Imagine my sense of pride that the company I built had so quickly emerged triumphant. But rapid growth takes on a life of its own. Managers who joined for the career growth opportunities, investors who invested because of the rapid share growth, all lusted for more.
In 1991 the Worcester Business Journal ranked TSI the number #1 fastest growing public company in Massachusetts. Against my better judgment, but again feeding my ego-self, they featured me on their magazine cover wearing a magician’s white tuxedo, standing in front of a neon DNA molecule, as they described our emerging dominant position in the biotech sector. They saw our incredible growth as a kind of magic. Only in their article’s final paragraph do they acknowledge that one of the reasons TSI was the first company to focus on AIDS disease models was partly due to my older brother David’s death from AIDS. In May 1991 TSI raised another $12.5 million to complete four more acquisitions of US and international companies.
The Institutional Investor #1 ranked biotechnology analyst, at the investment bank Cowen and Company, issued his judgment in July 1991 that the three best investments in biotechnology were Amgen, Genzyme, and TSI Corporation. Our stock doubled yet again. With our soaring stock price we completed a unique R&D offering called Exemplar which funded off balance sheet the completion of our first four human disease models, including the one for AIDS. The Boston Globe, in a special Inside Business feature, championed our business strategy. We were on a rocket, following a strategy to take us to a billion dollars, completely fearless. Fortune favors the audacious! Our management team felt invincible as we cleared hurdle after hurdle and emerged a clear industry front runner. Our success drove and was driven by our rising stock price. Unfortunately the accelerating yin/yang nature of our growth was unsustainable.
Someone with a little perspective, or perhaps a little bit more maturity, probably could have seen what was coming. By the end of 1991 we had completed our international expansion, buying out a competitor’s laboratories in France, acquiring the leading pre-clinical drug testing laboratory in Germany, and opening an advanced genetic research laboratory in Japan. I was traveling over half of every week just to keep up with our expanding operations. Our stock doubled again, up 800% in less than three years. TSI raised another $28 million in a follow-on public offering in January 1992 to continue our quest to be the #1 company in our field. Doubling our staff and revenues for three years consecutively, we had created an environment of enormous corporate chaos, the integrity and coherence of our company culture was at risk, but at revenues of $45 million annually we had emerged as the fifth largest pre-clinical drug testing laboratory in the world.
According to industry sources total spending on preclinical and clinical drug testing was $12 billion in 1988 of which $2 billion was contracted out to 450 independent labs. The largest of these independent laboratories were international, could offer the latest technology for testing, and had annual revenues in excess of $100 million. Yet the average independent laboratory had only $4 million in revenues in one local laboratory. The industry was growing at 6% a year and so was forecast to reach $27 billion by 2003. As the technological sophistication required for drug testing grew pharmaceutical companies increasingly contracted work to independent labs. So our sector was forecast to reach $11 billion by 2003, and to be dominated by a number of large, technologically sophisticated, multi-national, well financed competitors. Our corporate strategy called for us to be among that small emerging group of companies.
TSI had been racing for four years, capitalizing on our transgenic technology, and my international business experience, to become one of the 3 to 5 largest competitors in this emerging field, with the expectation that if we did, we could emerge with revenues of over $1 billion when the industry completed its process of worldwide consolidation in 2003. Over a period of four years we had completed six separate financings, seven more acquisitions, and had started two operating divisions from scratch. TSI entered 1993 stronger than ever with a budgeted revenue target of $70 million, over 700 employees, a fixed cost base of $55 million, and an expectation that we would turn profitable on a worldwide basis for the very first time.