The test tube.

• Author: Maley, Frank
• Position: New drugs research and development help Quintiles Transnational grow

Quintiles Transnational grows into a global power by speeding new drugs down the R&D pipeline.

Ask Dennis Gillings about the importance of growth to Quintiles Transnational Corp., the drug-research company he co-founded 14 years ago, and he'll tell you Quintiles could live without it. The business isn't grow or die, he says. But the distinction he makes is pretty small. "If you're not growing and leading," he says, "you're festering."

Quintiles' recent breakneck growth certainly makes Gillings seem like a man locked in a life-or-death race to expand - or at least one who really hates to fester.

The company he started in a trailer on the UNC campus has grown into the world's second-largest contract research organization, or CRO. Based just outside Research Triangle Park, Quintiles operates 41 offices, laboratories and drug-packaging plants worldwide. If its recent acquisitions are approved as planned by year's end Virginia-based BRI International for about $130 million and Britain-based Innovex for about $800 million - it will leap ahead of the market leader, a Corning Inc. subsidiary.

Even before that, Quintiles spent an estimated $95 million to gulp down six small acquisitions since March 1995. The company hasn't been able to rest and digest long because the other beefcakes in the industry are also bulking up. Its two pending purchases would more than double payroll to 6,200 and boost revenues, projected to be $221 million in 1996, to $506 million.

Despite its shopping spree, Quintiles' stock trades at a high price-to-earnings multiple. Although in mid-November the stock had dropped about a fourth from its 52-week high, it still traded at more than six times the price of its initial public offering in 1994.

Of course, it's easier to look good in an industry that's growing an estimated 30% a year. The company has expanded its capabilities quickly to meet the demand of cost-cutting drug companies looking to farm out business. "Timing is everything, and these guys were in the right place at the right time and made the right decisions," says James Patricelli, an analyst at Boston-based Adams, Harkness & Hill.

Hoffman-La Roche, Procter & Gamble Pharmaceuticals and other major drug makers hire Quintiles to design tests for experimental drugs and to recruit doctors to test them on animals and humans. Quintiles collects, sorts and stores the data and analyzes the results. It also advises companies trying to quicken the regulatory process.

It will probably take several years to see how Quintiles' rapid growth plays out. Observers say the CRO industry is heading for a shakeout in a few years, and the biggest companies stand the best chance of survival. But there are plenty of ways for Quintiles to stray. It could bungle its acquisitions, spread its management too thin or become less responsive to customers. "We don't see it now because it's growing too fast," Patricelli says. "Everything's covered up by the numbers."

The architect of all this growth is Gillings, 52, the company's chairman and CEO. His light British accent pours out of a broad, square-jawed face. He laughs easily and quietly but jokes rarely. Born and raised in London, Gillings studied mathematical statistics at Cambridge University and earned a doctorate in mathematics at the University of Exeter.

He took a job teaching biostatistics at UNC in 1971 but wasn't...