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This article by Barbara Fox was prepared for the June 7, 2006 issue of U.S. 1 Newspaper. All rights reserved.
For Quatern, Speed Is the Special Sauce
Scott McCarty likes to start a new company in a downscale space, then move to Class A space. For his first company he had a basement office at 20 Nassau Street. That address is of course convenient to downtown Princeton, but the basement office is, well, a basement office. Think garage decor.
When he sold that company, a clinical research technology firm, for $25 million to Galen Holdings in northern Ireland, he and his partner, Dan Scanlon, split the proceeds. There was a stock option plan so that each of the 25 employees got a check ranging from $40,000 to six figures. He declines to say exactly how much. "I like to think I minted a few millionaires," he says.
He founded and sold a second company and tried to retire, but staying at home, playing drums and piano and polishing Porsches, did not sit well with the ambitious son of a Philadelphia truck driver. Now he is back with his third company, Quatern LLC, another clinical research organization that may contribute to Princeton’s reputation as one of the world centers for clinical trial support.
And though 3131 Princeton Pike is a step up from the Nassau Street basement, it is not Quatern’s final destination. As soon as he gets some traction, McCarty plans to expand to the American Metro Center. Also moving there is MedAvante, another new CRO, one that takes a new approach to the business of clinical trials. "The space is priced very well for the Princeton market, and it is close enough to draw employees from this market," says McCarty.
Quatern has interactive voice response (IVR) systems to capture data for clinical trials. Patients participating in clinical trials need to report how they feel, and doctors and nurses conducting these trials need to report the data.
The IVR part of the clinical trials industry, McCarty says, has a $500 million niche, in comparison to the overall business of capturing data for clinical trials that are totally based on the web. That is worth more than $1 billion.
Quatern supports Phase II, III, and IV clinical trials with IVR systems and also with web-based applications, and clinical support solutions. Currently it has 12 staff members plus consultants housed in a 4,500 square foot space that can accommodate up to 20 people. McCarty is hiring software developers with a focus on C#, Visual Basic, Sequel databases, and SAS.
Clinical trials software has checks and balances in place to randomize the assignment of drugs. It takes into account the number of visits the patient has, for instance, and it makes these calculations on the fly while the hospital is on the phone.
Quatern’s "special sauce" will be speed. "Our competitors take from 5 to 12 weeks to put a piece of software online. We think our process will allow us to put software up in three weeks – because we have been doing it for a while. The team I have assembled, everyone of us has been doing it for 10 years."
McCarty expects his income will meet monthly expenditures by the end of this year and by the end of 2007 he plans to be completely profitable. Until then, he is hunkering down. "When I took this space I wanted to have a feel like we had at 20 Nassau," says McCarty, "poor and hungry. I didn’t want to have the trappings of an office."
A bit of luxury is something to work for, but not too much luxury. "You don’t want to spend all your money on flash," says McCarty, who is even a little embarrassed about his hobby of luxury cars. "I never want a client to come into my office and say, `Now I know why you are the most expensive at what you do.’ I want to pass the red face test." The American Metro Center, he believes, strikes the right balance between luxury and modesty.
McCarty grew up in northeast Philadelphia and now lives in Medford with his wife and two children. "I had a paper stand at age 11, after telling my supervisor I was 16. If I wanted something, I had to get it myself."
That included his first car, a Buick Skylark bought with the proceeds from a Beef and Beer night at the local VFW hall. "I was 17 and needed a set of wheels. I knew it would take me too long to earn money by delivering pizzas. It just dawned on me, to have a benefit, a benefit for me. I rented a hall for 200 people, sold $10 tickets, hired a DJ, and made $1,700."
And what did his parents think? "My parents were always bewildered by the things I did."
Though his father did not go to college, he was a well-read man and encouraged his three sons to read. One younger brother is a printer who is going to school to learn to be a programmer and another brother is working at Quatern.
McCarty’s father encouraged him in sports (he was a linebacker at Cardinal Dougherty High School), but a chemistry teacher took a significant interest in him and steered him to pharmacy school.
He worked his way through the Philadelphia College of Pharmacy, at first unloading trucks at night for United Parcel Service and going straight to class without sleep. He credits Ron Stern, owner of a pharmacy in Tacony, with influencing his life, teaching him about customer service and also, not incidentally, lending him money at crucial points. In his third year at pharmacy school he and his wife had their first child.
Graduating in 1989, he was a clinical pharmacist for Albert Einstein Medical Center, then a medical writer for what is now GlaxoSmithKline.
After six months at Covance, he founded the first company, Interactive Clinical Technologies Inc. (ICTI) in 1995.
"The business of technology for clinical trials was in its infancy," says McCarty. "The industry is a slow adaptor, and not a lot of people understood how interactive voice response works. Covance had the idea to do it but did not aggressively pursue the business."
For ICTI McCarty did sales and marketing and managed the clinical research, while his partner was in charge of IT. "He hired the programmers, right out of school, identifying the ones with the bright look in their eyes, the ones who could learn new tricks."
As in many technology fields, young people who got in on the ground floor had the advantage. "Enthusiasm was a big piece of it," he says. "Clients would remark that they had to give me a piece of work because I was enthusiastic."
His first contract was with Genentech, the second largest biotech in the world. "We bid on it as a two-person company, and we beat out Covance and the other CROs because we were the most experienced in that department – managing the randomized enrollment of patients and the dispensing of medication in clinical trials."
In 1996 he hired his first employee from Covance, and he moved ICTI from 20 Nassau Street to Lambertville in 1999 and sold it, staying on as president for three years and moving it to Yardley in 2001. Currently ICTI has 150 employees on Stony Hill Road in Yardley and is a chief competitor.
In 2002, with about $10 million in his pocket, McCarty founded AccuLogix, a pharmaceutical packaging company in Bristol, PA. He put $1.5 million into the firm and partnered with another firm, then sold his share for $4.5 million. The combined firms worked with pioneering RFID technology for labeling drugs but were ahead of their time. Known as Clintrak Pharmaceutical Services, the company was sold for $140 million to Fischer Scientific, the biggest pharmaceutical packager. "No, I didn’t sell out too soon," says McCarty. "I still had my soul intact."
He explains his dissatisfaction several ways, ranging from "the company didn’t need two CEOs," to "at the end I owned 16 percent and didn’t want to be there any longer," and, "I love starting businesses but didn’t necessarily love that particular business. Not a lot of creativity goes into packaging drugs."
"Research from Tufts University says there is still room in our industry for another vendor," says McCarty. In addition to ICTI, Windsor Corporate Park-based Clinphone is also a competitor, but McCarty says it has broader scale of services. "We are going to do only IVR and electronic data capture (EDC). Clinphone has commercial applications that do not have anything to do with clinical trials."
Direct competitors are New York-based MediData, Pennsylvania-based DataLabs, and San Francisco-based Phase Forward.
Steve Ritner is Quatern’s attorney at Stevens & Lee. "He didn’t dismiss us when I was a snot-nosed kid, and from that day forward it was a great relationship," says McCarty. He has just hired Klatskin & Company as the firm’s accountants. Quatern was represented by Buzz Woodworth of Woodworth Realty for the move to Princeton Pike, and by Victor Murray of Cresa Partners for the space at the American Metro Center.
The downside to having your own company is that it might fall victim to the economy. "Pharmaceutical companies aren’t investing in development as fast you might have planned."
A die-hard Eagles fan, McCarty does not mind playing the role of the underdog, and that’s why he did not want to start his third company in Class A space: "I always felt good about being in second place, always having to chase something. If I don’t love my environment I work harder to not be in it."
If McCarty couldn’t stand to not work in retirement, it’s in his genes. He bought his mother and father a house in Brigantine so that, in their early 60s, they could enjoy life. But his father could not stand being idle. Until a couple of months ago he was commuting to Philadelphia as a night shift truck driver.
Quatern LLC, 3131 Princeton Pike, Building 4, Suite 209, Lawrenceville 08648; 609-844-1219; fax, 609-896-0563. Scott McCarty, CEO. www.quatern-global.com
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