US Labs Switches Chief Executive, Works on Finances
By VITA REED
US Labs Inc., a venture-backed Irvine medical testing company, is seeking a permanent chief executive after the recent stepping aside of its founder.
Chairman R. Judd Jessup, who has some 30 years of healthcare experience, is serving as US Labs’ interim chief executive. Jessup replaced Michael Danzi, US Labs’ founder, who remains on the board as vice chairman.
“The board began to look at the financial results of the company and decided that it was time to put in more of an operating person at the CEO level,” Jessup said.
Danzi, according to Jessup, had done a “great job in providing the vision and kind of the whole business model the company was going to use.”
Jessup said his goal is to help find a permanent chief and to shore up the 6-year-old company’s finances.
“My short-term goal is to really improve the cash flow of the company and to get in place a budget that is achievable and stabilize the whole expense control, that sort of thing,” he said.
US Labs has grown fast and “it made the most sense to have a CEO with operating capability, (who worked) at a larger organization,” said John Stobo Jr., a general partner in the San Francisco office of ABS Capital Partners and a US Labs board member.
Baltimore-based ABS led a late-stage venture capital round last October that infused $15 million into the medical testing company.
“We have started a (chief executive) search, but there’s no rush and no pressure,” Stobo said. “Judd’s done very well. We’re very positive on the company’s growth.”
US Labs specializes in genomics, or the medical application of genetic research. The company provides screening, diagnostic and prognostic cancer testing services to hospitals, doctors’ offices, surgery centers, biopharmaceutical companies and research institutions.
Impath Inc. of New York and Dianon Systems Inc. of Stratford, Conn., are competitors. Big names such as Quest Diagnostics Inc., which has a large facility in San Juan Capistrano, also are doing more genetic testing.
Jessup estimated that US Labs would do some $40 million in revenue this year, up from $16 million last year. The company is “not profitable at this point, so we are still having to be funded by our venture partners,” he said.
US Labs is some time away from a potential public offering, he said.
“To go public, a healthcare company such as ours would typically need at least, I would say, $75 million in revenue and you would need to have positive net income so that you would have positive earnings per share,” Jessup said. “We’re not at that point yet, so my main goal is to get us to a point where we might consider going public. But at this point, I would say it’s premature.”
US Labs’ employment stood around 350 at of the end of May, according to Jessup. He said “a vast majority” of those people are at its Campus Drive corporate office near John Wayne Airport. US Labs also has operations in Wichita, Kan., among other areas.
Jessup’s background includes serving seven years as president of TakeCare Inc., a health maintenance organization in California, Colorado, Illinois and Ohio. Under Jessup, TakeCare grew from 150,000 to 790,000 members, counted $1.1 billion in annual revenue and was taken public.
FHP International Corp., now part of Santa Ana-based PacifiCare Health Systems Inc., bought TakeCare in 1994. Jessup then became president of FHP’s HMO division, but left in 1996 and focused on private investments in entrepreneurial opportunities. He’s been a board member of US Labs since 1998.
