Jeffrey Markin is rich-in expertise, creativity and kindness.
The president and CEO of VirtualScopics Inc. has a tireless capacity to think outside the box, those who know him well say, and the dossier of examples is heavy, dating back to the 26 years Markin spent at Eastman Kodak Co.
“He always came up with something creative,” says Candy Obourn, president and CEO of Active Healthcare, who worked with Markin at Kodak for several years, especially through most of the 1990s. “If you would say, ‘Well, Jeff, you know this is the situation, we really can’t do anything about that,’ he’d go away and he’d come back later and say, ‘Well, what about this?’
“And he’d come up with something brilliant.”
She points to when Markin helped position Kodak’s microfilm business into an archival media, coming up with ways to double the return on a small investment.
“He completely changed the business,” Obourn says. “People just weren’t thinking that way.”
Markin, 49, now applies his problem-solving approach and focus on improvement and success to VirtualScopics. He joined the medical image analysis firm in April 2006 as chief operating officer and was promoted to CEO a few months later.
VirtualScopics has technology that extracts complex information from ordinary computed tomography and magnetic resonance imaging scans. The images can provide information on the progression of diseases and information on the action of a drug.
The company-which became a publicly traded entity in November 2005-has been humming with activity. In 2006, it signed $8.5 million in new contracts, up 67 percent from the previous year. VirtualScopics said in May its year-to-date contracts for 2007 had totaled $4.1 million, a more than 100 percent increase.
“Our sales pipeline is really the highest right now that it’s ever been,” Markin says.
VirtualScopics logged a 22 percent increase in second-quarter revenues to $1.5 million. It reported a net loss of $1.02 million for the quarter, or 4 cents a share, compared with nearly $1.24 million, or 6 cents a share, a year earlier.
The University of Rochester spinoff has hired 12 staffers this year, increasing employment to 68 people at its offices at Linden Oaks. It recently moved to bigger digs in the office park-50 percent larger-to accommodate growth.
A couple of weeks ago, Markin was in Europe, examining possibilities for opening an office there and interviewing potential sales candidates. Within the next year he expects the firm to add some five salespeople to total employment.
“We’ve got four or five very important clients in Europe,” Markin says. “They’ve expressed to us that they’d like us to have a European presence and for us we would like to have a European presence as well.”
He hopes the overseas operation will support existing customers and allow the company to pursue new ones.
VirtualScopics has roughly 30 clients, including 10 of the top 15 global pharmaceutical companies. It works in areas such as oncology; inflammatory diseases, including rheumatoid arthritis and osteoarthritis; central nervous system afflictions such as multiple sclerosis and Alzheimer’s disease; and cardiovascular system conditions.
Markin declines to disclose client names but, based on past statements and disclosures, the company has worked with Pfizer Inc., GlaxoSmithKline PLC, Amgen Inc. and Johnson & Johnson. VirtualScopics is scaling operations to meet demand, Markin says. Last fall, he helped get a Lean Six Sigma initiative under way to improve processes and become operationally efficient.
The firm had good processes when it had 10 or 15 projects going through or new projects at five or six sites worldwide, he says. But as VirtualScopics aims to get bigger and land larger clinical trial projects, it needs to operate smoothly, says Markin, a Six Sigma Management Black Belt.
“The projects we’re quoting on now can have 150 sites, 200 sites,” he says. “You can’t keep using the same processes that you’ve used that aren’t scalable and you can’t just throw people at them because that’s not the right thing either.”
The company also has refined its sales process-in line with Markin’s plans.
Rosemary Shull, director of business development at VirtualScopics, says the chief executive has the right idea.
“We’re becoming sort of more customer-focused in terms of the sale,” she says. “For a long time it was the technical lead to the technical lead. Now we’re dealing with the outsourcing groups, the project management groups, more across the board … it doesn’t have to be Ph.D.s selling to Ph.D.s.”
Focus on growth
Although VirtualScopics has inked deals with some of the big names in the pharmaceutical industry and has proposals in to the five of the top 15 missing from its client base, Markin says there is ample room for growth. The firm plans to pursue second- and third-tier companies and generate leads for other projects with existing customers.
He is set on making VirtualScopics a key player in the $500 million imaging and clinical trials market. Markin estimates the market will grow to $1 billion in five years.
“We would like to be one, two or three in the different disease areas,” Markin says.
The company also eyes an even bigger, multibillion-dollar market-diagnostics. Apart from studying the progression of a disease, VirtualScopics’ technology can check if patients are responding to treatment. For example, a cancer patient being treated with an anti-angiogenic drug that attempts to inhibit tumor growth can be tracked by measuring the blood flow into a tumor.
If it has been affected, Markin says, it can show the patient has a high probability of responding to a treatment. Often oncologists wait for four to six months to measure impact. VirtualScopics’ dynamic-contrast-enhanced MRI, Markin says, can provide information in 48 hours.
“We believe that’s a very sizeable diagnostic opportunity for us that we expect to look at a year or so in the future,” he says.
VirtualScopics, however, still is finding its way to profitability. Markin voices optimism over the company’s ability to get into the black.
“The best way to build long-term shareholder value isn’t necessarily to get to profitability as fast as possible,” he says. “We’re at a level today that if profitability was our No.1 priority we could be profitable on the business we have today.”
The company, its directors and others agree it is important “to drive the revenue growth as fast as we can, which takes capital to do that and to fund really the company for where we expect to be a year or two down the road,” he says.
VirtualScopics does not provide revenue and earnings projections. The company’s pace of inking new deals is the best indication of customer interest in its technology, Markin says.
Still, VirtualScopics’ officials are slightly disappointed with the company’s stock performance. After the firm’s stock began trading on Nasdaq under the symbol VSCP some six months after it went public, shares hit a high of nearly $6. In January it hovered around $2. It now trades in the $1 to $1.50 range.
“I think we’re undervalued,” Markin says.
People may be measuring the company’s current stock performance to its high when it began trading, he says. But it is hard to justify a $125 million to $145 million market capitalization for a company like VirtualScopics. The company’s current market capitalization is nearly $28 million.
“It’s settled out and we’re working real hard to get it back up there and expect someday it will be,” he says.
Markin says the company also is working to drum up interest from professional and institutional investors.
“And as we migrate the investor base to companies like that, we’ll see the trading volume go up, it should go up, and we’ll sort of be better recognized with a good business performance,” Markin says.
VirtualScopics last month said it completed a $4.35 million private placement. The funds will be used to expand sales and marketing efforts, software and technology enhancements, and ongoing operations.
Markin, a Rochester native, says he always wanted to run a business. He had a front-row seat watching his father navigate his manufacturing company, Markin Tubing Inc., through its ups and downs. The company first was located on Buell Road but moved to Wyoming County where Markin went to high school.
“I sort of grew up there, so to speak, working summers and that kind of thing, and it was a small company, about 100 people. It is still called Markin Tubing out in Wyoming,” he says. “He sold it while I was in college or else I probably would have ended up there.”
Markin graduated from SUNY Buffalo in 1980 with a bachelor’s degree in industrial engineering. Flooded with offers from a variety of industries, from aerospace and defense to large chemical companies, he did not expect to work here. But Kodak was persistent-Markin received a scholarship given to schools with the greatest number of alums that worked at the photo giant.
“They said, ‘We gave you this scholarship, the least you could do is come in and see us,'” he recalls. “So I came in and I was hooked by the end of the day.”
His first job at Kodak was as a quality engineer. From 1980 to 1988 Markin held roles in production and engineering management at sites in Rochester and Toronto. Markin even has a patent, from his days working as a program manager in research and development, from 1989 to 1992, within Kodak’s document imaging division. In the R&D role, he led global multidisciplinary teams to develop products to meet customer needs.
Kodak then selected him for an executive MBA program at UR’s Simon Graduate School of Business. The selection had a condition-Markin would have to go on a business track after earning his degree. He was happy to comply. Markin completed his MBA in 1992.
He then assumed the role of director of worldwide marketing for media products in document imaging. His stint in that unit lasted for more than a decade, where he spent roughly two years each in a variety of positions. He ended his tenure in that unit as general manager of Imagelink products and imaging services and divisional vice president.
Obourn, who served as president of the document imaging business, watched and worked with Markin. She also was chief operating officer of the company’s health group.
“When he visited places he knew people on a first-name basis, he asked people about their families and their hobbies. He always remembered that,” Obourn says. “It was clear everybody respected him. People worked really hard for him.”
Markin’s honesty, even during tough times, inspired employees to do their best, she says.
“As long as he was honest with them and treated them fairly, people just followed Jeff,” Obourn says. “He is a true leader. With customers it was the same thing.”
James Schuster M.D., a partner in the Borg and Ide Imaging Group, attests to that. He has known Markin for roughly five years.
While at Kodak’s health group, Markin worked to establish a relationship and helped the firm-then called Borg Imaging Group LLP-create a new product for the outpatient radiology market, Schuster says. Markin quickly established a high level of trust.
“He would not say something if it wasn’t true, he wouldn’t promise something if he couldn’t deliver it and (he) stands by his commitments,” Schuster says. “And unlike so many other vendors and high-level people who I’ve dealt with where things have changed and you really had to get it in writing, literally, a handshake is all you would need with Jeff.”
Markin easily warmed to health imaging. Within the first year in that group he was asked to take on a bigger role as general manager of film capture and output and divisional vice president. He also joined the executive leadership team.
In 2002, Dan Kerpelman joined the health unit as president. Markin, who holds both Kerpelman and Obourn in high regard, says Kerpelman pushed him to take on new challenges.
“Dan just challenged you and got you out of your comfort zone,” he says. “It wasn’t until you got out of your comfort zone that you learned. It’s a difficult process but once you get through it-I probably learned more under Dan than I did under a lot of people.”
It was Kerpelman-who would later leave in 2005 for a CEO post at Swiss firm SGS SA-who pushed Markin toward health care information technology. From 2003 to 2004 Markin was general manager of health care information systems. He assisted with the unit’s acquisition and integration of Israel-based Algotec Systems Ltd., among other things.
“Probably the toughest challenge I ever had was running an IT business, and I look back on it and from a technology standpoint it positioned me very well for this job,” Markin says.
Kerpelman in 2004 selected him to become general manager of regional operations and help lead a turnaround of the $2.3 billion organization.
A year later, Markin, who was by then a corporate vice president, was among six executives who won the Chairman’s Leadership Awards.
“If there was ever a co-worker you wanted to work with, it’s Jeff,” says Michael Marsh, an attorney and former Kodaker.
As Kodak went through restructuring and the future of the health group-which was sold and is now Carestream Health Inc.-was not very clear, Markin began to consider a change and found one in VirtualScopics. His last role at Kodak was general manager of output systems and mammography solutions in the health group.
VirtualScopics chairman Robert Klimasewski says Markin was hired for the CEO post. A director, Klimasewski had stepped in as CEO after Stuart Shapiro M.D. left the firm for personal reasons. VirtualScopics was looking for an intelligent, mature individual with a good temperament and common sense, Klimasewski says. Markin fit the bill.
“He was hired as COO only on a temporary basis until the transition could occur,” he says. “I’d only been there for about 12 months, too many changes you want to be careful about. We wanted to know how he did, how he operated, and he (was) phenomenal.”
Molly Henderson, chief financial officer and vice president of finance at VirtualScopics, says she was hesitant about Markin’s arrival-an opinion that since has changed.
“I think the primary reason for that as a young and evolving company that’s trying to change an industry, you’re thinking more of the entrepreneur that would be a good leader as opposed to somebody from a very large organization such as Kodak,” says Henderson, who works very closely with Markin. “But obviously he’s done a great job.”
She appreciates Markin’s sense of humor, his ability to learn quickly and says he opened her eyes to great methods of process improvement. Like others, Henderson remarks on his genuine, caring nature.
Markin took pains to establish good relationships, Klimasewski observes. In an anonymous process, VirtualScopics staffers were able to identify issues they may have with Markin’s management style.
“Things they (were) scared I would do, things they were worried I would not do,” Markin says. “Through this process they could feed back to me in a safe way and I would respond to them what I would do about their comments.
“We stopped this process when they said from their perspective they did not have concerns and were comfortable with the situation.”
Markin says he acts as a sounding board for people and makes an effort to interact-from small lunch meets and large, all-staff meetings to Wednesday meetings with Klimasewski. He starts his day around 5:30 a.m. or 6 a.m. to be able to focus on his work and then attend to staff, customer and investor needs once employees begin to pour in.
“He does an excellent job of balancing his professional life and his personal life,” VirtualScopics’ Shull says. “He has a very set way that he schedules his time … so that he has time at the end of the day to be with his family.
“And those sorts of values are very important here and he sets a good example for everybody else of hard work without losing sight of your family.”
Markin resides with his family in Perin-ton. He is a runner-Markin squeezes in a run that can extend from 4.5 miles to 10 miles, four days a week. He also likes to travel and says he is a Buffalo Bills fan.
He wears his belief in VirtualScopics’ technology and potential with obvious pride and has no regrets about ending a long career at Kodak. Backed by VirtualScopics’ staff, he expects the company to further build on its good reputation and achieve much success.
“I really don’t look back at all,” Markin says. “I had a good experience at a really big company but one that’s going through restructuring and sort of getting smaller, and I’ve got an opportunity to work at a small company that’s getting bigger and also the fact it’s public. It’s just a lot of fun.”
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10/05/07 (C) Rochester Business Journal