Leader from the Outback

//September 14, 2009

Leader from the Outback

//September 14, 2009

Dendrite’s latest merger nearly doubles the size of the provider of software and services to Big Pharma. It’s just the latest chapter in an incredible growth story for the Australian-born companyLast week, Morristown’s Dendrite International, a company that offers a wide range of services to the pharmaceutical industry, completed the integration of one-time rival Synavant into its worldwide system. Dendrite acquired Synavant, a major Georgia-based competitor with a strong presence in Europe, for $49 million after a bidding war with France’s Cegedim.

Voila! The deal nearly doubled Dendrite’s size, making it a company with some $400 million in annual revenue, 2,500 employees and offices in 23 countries. Its customers include all of the world’s 20 leading pharmaceutical companies.

This was a bold move for the company, and not everyone thinks the Synavant deal will be a winner. James Kumpel, who follows Dendrite for Raymond James & Associates, thinks the company “probably overpaid” for Synavant just to keep Cegedim out of the U.S. market. In the bidding war for Synavant, Dendrite had to raise its offering price from $2.50 to $3.22 per share.

Kumpel also doubts that Dendrite will be able to keep the bulk of Synavant’s $166 million in annual sales and he is skeptical about Dendrite’s ability to keep providing more and more services to pharmaceutical companies.

Making a success of the Synavant deal is the latest and perhaps toughest challenge for John Bailye, 50, Dendrite’s founder and CEO, who has survived setbacks that include the collapse of the company’s stock in the mid-1990s. The Australian-born Bailye doesn’t deny that stopping Cegedim from “dibbling in the U.S. market” was an issue, as was not allowing the French company to increase its European market power. But now with Synavant in the fold, Bailye vows to reach $1 billion in sales within five years.

Such a goal was scarcely a gleam in Bailye’s eye in 1986 when he launched Dendrite in Sydney, Australia, as a subsidiary of a market-research company. The new division’s product was salesforce-automation software for the pharmaceutical industry, which offered a promising customer base.

The early history of Dendrite was similar to that of many startups. Bailye, who was 33 at the time, took out a mortgage on his home to help fund the company and found a deep-pocket investor in ICI, the British chemical company. In its first year of operation, Dendrite had sales of 250,000 Australian dollars, or $175,000 in U.S. money.

Bailye spent a lot of time flying between Australia and the U.S. trying to sell a product that put the power of laptop computers into the hands of pharmaceutical salespeople. This was a new concept in the mid-1980s. With missionary zeal, Bailye asked pharmaceutical companies to spend $10,000 for a laptop computer and another $10,000 for specially designed Dendrite software.

He found a potential buyer at Bristol-Myers (now Bristol-Myers Squibb). But a top executive there told Bailye that while Dendrite had the best technology for salesforce automation, the company wouldn’t buy it because Australia was just too far away. Bristol-Myers wanted its vendors close at hand, especially for the crucial product-introduction stage.

Bailye heard similar remarks from other U.S. drug companies and concluded that he had to set up an American operation to win market credibility. The original plan was to move first to the U.S. and then relocate to Britain before returning to Australia. The company started its operations in the U.S. by moving 15 employees from Australia and opening an office in Warren.

Bailye still vividly remembers the date he arrived here with his wife and young child: April 1, 1987. The company’s goals were modest. Bailye figured that if he could achieve annual sales of $7 million, he would have built a solid business.

In those days, nine U.S. companies competed in the salesforce-automation field and Dendrite was the smallest. But it was the only one based in New Jersey, which gave it a good launching pad to go after pharmaceutical companies.

From the beginning, Dendrite took aim at a global market, perhaps because it came from a country with a population of just 13 million people who had to look beyond their own borders. When it moved to the U.S. in 1987, Dendrite also set up a Japanese subsidiary. It soon pushed into Europe, opening its first operation in Britain in 1988 and then adding offices in Belgium, France, Italy and Spain.

Dendrite’s U.S. business took off quickly. Its first customer was an American unit of Boehringer Ingelheim, a German pharmaceutical giant. Salesforce automation was gaining momentum and Dendrite rode the wave. The old $7 million goal was soon surpassed and sales topped $10 million in 1990.

A major company development took place that year when the Edison Venture Fund, a Lawrenceville firm, bought out ICI for $7 million and became Dendrite’s major investor. Edison managing partner John Martinson was looking for investments in salesforce automation—a field he considered rich with promise. Dendrite and ICI had conflicting views of where Dendrite should be going, so the divorce was welcomed on both sides.

Dendrite began selling services to its pharmaceutical customers in addition to leasing them software. The first service was computer support for salespeople on the road. Services provided recurring revenue and gave Dendrite the potential to become a far larger company.

Dendrite went public in 1995, raising $33.5 million. The offering price was $14.50 a share and the company’s market capitalization was $153.8 million. The stock did well in the still-early days of the tech boom. On a roll, the company was now the third largest among the dozen firms in salesforce automation.

All the dreams came to a crashing halt in late 1996. Bailye had been out on the road telling investors that things were going great, when his fortunes turned. “December [1996] was a spectacular month for all kinds of trouble,” Bailye said in an interview in early 1997. Two big projects were delayed, R&D costs came in higher than expected and the company lost money in the fourth quarter. Dendrite also laid off a dozen employees.

Wall Street doesn’t like surprises and took swift revenge. Dendrite stock that had reached a high of $35.50 in July 1996 slumped to $6.75 in January 1997. Some analysts wondered if the company could survive. After adjusting for subsequent splits, the stock currently trades near its 52-week high of $15.70.

Looking back at Dendrite’s darkest hour, Bailye says it was one of several milestones that the company had to pass along the way. One of those was when sales approached $100 million. In February 1997, Bailye had said, “Dendrite is now a different company than it was as a private company, and we must be well-engineered financially.” Today he calls the troubles “a defining moment that made us a real company.”

Bailye says one of Dendrite’s failures was to “hold on to people for too long.” “Our employees are owed good leadership,” Bailye says. With some reluctance, he explains himself by quoting a line from “The Godfather”: “It’s nothing personal; it’s just business.”

Dendrite solved its financial engineering problem in June 1997 by recruiting George T. Robson, who had been CFO at H&R Block. “We needed people who had done it before,” says Bailye, and Robson filled that prescription.

After stumbling badly at $100 million, Dendrite has grown steadily by expanding its service offerings to pharmaceutical clients. From 1998 to 2002, its software-licensing fees declined from $15 million to $13.5 million, but its revenues from services grew from $133.6 million to $212 million.

Dendrite has expanded through a combination of acquisitions and new products that have pushed it close to being an information company. At first this simply meant collecting more data for sales representatives on things like sales trends. Now the company has gotten into analyzing that information. This extends its franchise beyond the salesforce and into strategic planning and other areas.

Drug companies have been outsourcing many services previously done in-house, and Dendrite has gained business by offering those services. Tracking the distribution of product samples, which must be done carefully because of federal regulations, has traditionally been a headache for drug companies. Today it is a Dendrite profit center.

Acquisitions have played a major role in Dendrite’s strategy. It has bought eight companies since going public in 1995 and looks for firms that open a geographical market or a new product niche. “You can either buy, build or partner,” says Senior Vice President Chris French.

In 1998, Dendrite bought its way into the Benelux market by acquiring Associated Business Computing. In 2000 it bought Analytika, a Durham, North Carolina, company that was strong in data mining. Last year Dendrite acquired Software Associates International, a Mount Arlington company with expertise in salesforce management.

Another acquisition netted France’s SRCI, which provides salesforce-automation software to consumer-product companies. Today its clients include Nestlé Purina, PepsiCo and Revlon.

The SRCI deal led some analysts to believe that Dendrite would take its experience in salesforce automation into a broad range of industries beyond pharmaceuticals. But while the Dendrite board had periodically discussed doing so, it decided three years ago to keep its major focus on pharmaceuticals, where the company enjoys its strongest comparative advantage.

Dendrite has been pushing hard into the Pacific Rim. In Japan, where Dendrite had only three customers and 2% of the market after eight years of doing business, the company now has nearly half the market for its products. Last month, Britain’s AstraZeneca completed implementation of Dendrite’s sales-channel management software for its salesforce in China.

Dendrite’s toughest competition has come from companies that sell salesforce-automation and consumer-relations products to a wide range of companies. The most important of these rivals is Siebel Systems, a Silicon Valley company that last year had sales of $1.6 billion. In the third quarter of 2001, Siebel signed a major contract with New Brunswick’s Johnson & Johnson.

Dendrite hit other bumps in the road when it missed its quarterly earnings target for the fourth quarter of 2001 and missed another target in the final quarter of 2002. The shortfalls occurred when pharmaceutical companies slowed their spending plans. Wall Street knocked Dendrite’s stock down sharply both times.

Some industry watchers say the threat from Siebel has diminished. That company ran into problems of its own when the information technology bubble burst. “There’s no question that the Siebel challenge has been met and we won,” says Barry Goldsmith, the management partner of Updata Capital in Red Bank and a Dendrite -director.

Wall Street analysts like Krumpel of Raymond James are not so sure. Krumpel says Dendrite’s expansion plans could run afoul of the fact that the needs of corporate planners and research departments are very different from those of salesforces. And he doubts that the Synavant deal will help Dendrite bridge the differences. “Growth now is going to come from cost reductions and acquisitions,” Kumpel says.

Whether that proves true or not, the Synavant merger has already become a cornerstone of Dendrite’s strategy. Bail-ye defends the deal on several fronts, not the least of which is the satisfaction of buying one of Dendrite’s oldest and toughest competitors—and one with a deep knowledge of its core pharmaceutical business. Buying Synavant, he says, also allowed Dendrite to expand its European market share from 15% to 25%.

In a second-quarter earnings call with stock analysts in July, Bailye said the acquisition “brought together two good service companies and the best practices of both companies.” Bailye will have to deliver on that promise if he truly hopes to turn Dendrite into a billion-dollar company.


A business is like the monstrous plant in the Broadway musical “Little Shop of Horrors” that was always demanding, “Feed Me!” Only a business eats time. One of John Bailye’s pleasures used to be flying his own plane. His board of directors was not too happy about that and demanded that he take out plenty of key-man insurance. “Flying is a great release when you’re going 24/7 at work,” Bailye says. In addition, he used to sail 50-ft. ocean racers. He laments that he had to give up both pastimes because of the time demands of his business.

Bailye once told a friend that when he has a free night he likes to spend it at home with his family, but such pleasures are rare. He guards his family’s privacy with great care.

In 1996, Bailye became an American citizen, and four years later, his wife Lyndall and their Korean-born adopted daughter followed suit. A second daughter, who was born here, was already a U.S. citizen.

The Bailyes have been generous to the state they call home. John just started a two-year stint as chairman of the New Jersey Technology Council. He’s also on the board of Fairleigh Dickinson University and the Seton Hall School of Diplomacy and International Relations. He was previously on the board of Bloomfield College and the New Jersey Institute of Technology. Lyndall serves on the boards of New Jersey Network and the Morristown Memorial Hospital. The Dendrite Foundation and the Bailye family foundation are also major donors to various New Jersey education projects.

One passion Bailye has not given up is his love for sports cars. Like James Bond in the Ian Fleming spy novels, he drives an Aston-Martin. As one of his friends said, “John likes his toys.”


The entrepreneur who starts a company is rarely the person who can take it to $400 million in revenues, as Dendrite’s John Bailye has done. It’s not impossible: Bill Gates led Microsoft from its startup days to being a multibillion dollar company, although he has now stepped down from the CEO role. Larry Ellison at Oracle has pulled off a similar feat.

Much more common is the founding CEO who cannot grow with the company. It sometimes seems that the very qualities that make people successful entrepreneurs make them failures at running large organizations.

Bailye was a quintessential entrepreneur who in the early days went on every sales call and knew how to reboot the computers when they crashed. But today he is the company’s strategist. Says board member Barry Goldsmith: “John is more a leader than a manager. A manager gets things done; a leader sets direction.”

Bailye is known as a tough taskmaster. From October 2000 to November 2002, Dendrite had no fewer than four CFOs. Bailye sets high standards and those who report to him know they had better meet them. At 6’5” he can be intimidating, even if he does not intend to be.

Bailye hires lots of outside talent with strong résumés. COO Paul Zaffaroni had 21 years at IBM; CFO Kathleen Donovan spent 14 years at Unisys. The board, which has no inside members except Bailye, has a strong group of executives with lots of experience at big technology and pharmaceutical companies.

Bailye’s key management tool is a 7:30 revenue call every Friday morning. For 90 minutes he talks with some two dozen top managers stationed around the world, getting reports on the status of each client and each project. Bailye is not a morning person and hates the timing of the call, but it lets him hear firsthand about softness in the market or an unhappy customer.

For years Bailye used to ask himself every 18 months whether he was the right person to be CEO. “You have to know yourself and your own skill set,” he says. As the company’s largest individual shareholder, it is in his personal interest to make sure the company is well run. With Dendrite growing so fast, he’s now asking that question even more frequently. So far, the answer is still “yes.”
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