Good day, ladies and gentlemen, and welcome to the PDI 2012 First Quarter Financial Results Conference Call. [Operator Instructions] Please note that today's call is being recorded. I would now like to turn the call over to Rx Communications Group.

Good morning, everyone. This is Melody Carey with Rx Communications Group. Thank you for participating in today's call. On the call this morning from PDI are Nancy Lurker, Chief Executive Officer; and Jeff Smith, Chief Financial Officer. Yesterday, after the market closed, PDI released financial and operational results for the first quarter ended March 31, 2011. If you have not received the news release or would like to be added to the company's distribution list, please call my office at (917) 322-2568. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risk and uncertainties regarding the operations and future results of PDI. I encourage you to review the company's filings with the Securities and Exchange Commission including, without limitation, the company's Forms 10-K and 10-Q, which identify risk -- specific risk factors that may cause actual results or events to materially differ from those described in the forward-looking statements. The content of this conference call contains time-sensitive information that is accurate only as of today's date, May 15, 2012. The company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, I would now like to turn the call over to Nancy Lurker.

Thank you, Melody, and welcome to everyone on the call. Let me start by addressing a few key measures of our financial performance for the quarter. As we noted in our press release, first quarter revenues were below those of the same period in 2011. That was due chiefly to the anticipated expiration and/or downsizing of certain contracts. That said, I want to also call attention to the fact that our gross profit margins improved meaningfully, rising from 18% in the first quarter of 2011 to 23% for the first quarter of 2012 and expenses were reduced significantly as a result of our continued focus on cost control. In addition, we improved our operating loss from continuing operations by 84% compared to the same period last year. First quarter adjusted EBITDA rose to $700,000 compared to essentially breakeven in the same period of 2011; and cash at March 31, 2012, totaled almost $62 million, down by $2.5 million from year end. The decrease in cash is primarily attributable to the payments of severance and closeout costs associated with the sale of our Pharmakon business unit in December of 2011, as well as the rightsizing of Group DCA. On the revenues front, we are pleased to note that during the quarter, we began to see tangible conversion of our pipeline opportunities as reflected in the recent new and renewal contract announcement. Specifically, we announced the signing of contracts that together are expected to generate total revenues of $16 million over the life of the contract and approximately $13 million in 2012. These business wins cover a wide range of promotional and communications agreement under which PDI will variously provide promotional and support services through the company's established relationship team, dedicated sales teams, clinical educators and/or talent acquisition and train services. These latest wins and renewals are indicative of PDI's strong market position and illustrate an upswing in market activity. Our new business pipeline remains robust, and we are very confident that we will find additional contracts and renewals in the coming months and quarters. Additionally, we continue to direct significant efforts towards reducing our cost basis, and we achieved substantial progress on that front. Of note, first quarter 2012 SG&A is over 20% lower than 2011 primarily due to streamlining of our organizational structure, as well as other cost drivers. We will continue to keep this a focus for the remainder of 2012 and beyond while at the same time, keeping the driving of our revenue stream as our #1 priority. Group DCA significantly improved their results relative to 2011, partially due to the lack of negative impacts of acquisition accounting. Accounting aside, however, I can tell you with confidence that Group DCA's capabilities were instrumental in some of the important wins that we have already announced and others that we expect to win in the near future. Looking forward, we remain optimistic about our potential for growth and expect 2012 to be a year of continued execution on all fronts. While our growth is dependent on continuing to win new business, the initiatives we had implemented have significantly strengthened the company, both operationally and financially, and have put the company on solid footing to achieve long-term ongoing profitability. Additionally, as previously noted, our core business and pipeline are strong, which we anticipate will result in additional key contract wins and renewals over the remainder of this year. On a final note, Frank Ryan will be retiring from our Board of Directors effective May 28. I'd like to thank Frank for his 10 years of service and important contributions to PDI. We wish him the very best in his future endeavors. With that, I'll turn the call over to Jeff who will walk you through the financial results for the quarter. Jeff?

Thank you, Nancy. As you can see from the release on a consolidated basis, while PDI's revenue for the first quarter of 2012 was almost $32 million compared to about $44 million last year, a decrease of 28%, the operating loss in 2012 was $221,000 compared to a $1.4 million loss last year, an improvement of 84%. The overall decrease in revenue is the result of lower revenue in Sales Services. In Sales Services specifically, revenue of slightly over $23 million was about $19 million lower than last year. While we did achieve new contract wins, these wins were more than offset by certain clients renewing with smaller contracts as expected and the expected expiration of certain other contracts. When evaluating Sales Services revenue, you should also note that we have chosen to show contract wins for Interpace BioPharma in the Product Commercialization segment, somewhat artificially lowering 2012 Sales Services revenue. Product Commercialization had $5.2 million of revenue from the contract signed mid last year. And Marketing Services revenue increased by $1.2 million to over $3 million for the quarter due to higher Group DCA revenue. Although revenue was lower on the first quarter by approximately 28%, total gross profit of $7.4 million decreased by only 9% or $700,000 when compared to 2011. At the same time, the company's overall gross profit percentage increased to 23% from 18% in 2011. In Sales Services, gross profit decreased roughly in line with lower revenue while the gross profit percentage increased slightly. Product Commercialization added $1.2 million to gross profit for the quarter at margins significantly above last year's overall company margin and Marketing Services gross profit of $1.2 million was an increase of $1.9 million compared to last year. The improvement in Marketing Services was a significant contributor to the overall increase in margin for PDI. Marketing Services had negative gross profit in 2011, primarily due to Group DCA acquisition accounting. Operating expenses in the 2012 quarter were $7.6 million, $2 million lower than last year. This $2 million decline is primarily due to the company's ongoing cost-reduction initiatives, vacant positions expected to be filled and savings realized by the post-acquisition rightsizing of Group DCA. Adjusted EBITDA, which is operating income plus depreciation and amortization and noncash compensation, was positive by $700,000 for the quarter and we continue to expect it to be positive for the full year of 2012. We continue to have no commercial debt and ended the quarter with approximately $62 million of cash, as Nancy said, about $2.5 million lower than last year end. The decrease in cash is primarily attributable to the payments of severance and closeout costs associated with the sale of our Pharmakon business unit, as well as the rightsizing of our Group DCA business unit. Relative to the future, we repeat our previous statements. In order to achieve our full year 2012 and longer-term goal of building a growing and sustainably profitable company, it's important to continue to note that the market must expand. Despite our recent announced wins, we will need to win additional new business and/or expand business with existing customers. We will need to tightly control our ongoing expenses while continuing to invest in expanding our capabilities to strengthen our core and continue to differentiate our offerings; and we will need to continue to find ways to add more predictable, higher-margin business like those afforded to us through the formation of Interpace BioPharma. In terms of the remainder of 2012 specifically, we reiterate our previous expectation that second half revenue should be higher than first half revenue and expect that second quarter revenue will be approximately the same or slightly less than Q1. On an overall basis, we expect our full year gross profit percentage to be about or slightly higher than last year. And relative to SG&A, we do expect to invest in our anticipated growth by filling open positions and continuing to strengthen internal capabilities and new offerings. As a result, we estimate that SG&A in the second quarter could be approximately 5% higher than in Q1 and SG&A in the third and fourth quarters to be about 10% higher than Q1. Even so, we still estimate that total SG&A will be lower for the full year compared to 2011. That completes our comments on financial results, and I'd now like to turn the call back over to Nancy.

Thank you, Jeff. Before we take questions, I would like to comment on one other aspect of our strategy and business. As we stated, we continue to pursue ways to generate more sustainable and higher-margin businesses. The formation of Interpace BioPharma was one of these steps. Interpace BioPharma continues to generate strong interest in this full Product Commercialization Service offering and is evolving as a centerpiece of our announced strategy of pursuing product opportunities with modest investments of cash. As we have discussed previously, PDI is exploring opportunities that might require relatively modest investments of cash to secure longer-term, higher-margin business tied to Interpace BioPharma's capabilities. And on a final note, our board formally considered a share buyback. After reviewing the pros and cons, the board ultimately decided not to pursue a buyback at this time in order to reserve cash for potential product opportunities. We'll now take any questions you may have. Operator?

[Operator Instructions] Your first question comes from the line of John Kreger of William Blair.

It's actually Robbie in for John today. Just a quick question on the total market opportunity. I know you guys have been saying for a while now that the pipeline has been expanding and it seems to just be taking longer for that expanded pipeline to translate into award. What's your current thinking on the timing of that sales cycle at this point?

It's very, very near. So as I mentioned in my comments, Robbie, we remain very optimistic. The pipeline is converting. As you know, it takes a while to get from even a verbal award to where you work through a contract, have a contract signed and then start implementing. And so based on where we are in the cycle right now, we are very optimistic.

Got it. And what do you think the major stumbling block is at this point? Is it the peak year of generic conversions this year and maybe it starts to convert later in 2012, or is it something else?

Well, actually, as we mentioned, the pipeline is starting to convert. We saw that in our announcement yesterday, and as I said, we are very optimistic about making announcements in the very near future. So we're starting to see that pipeline convert. And I would say in the back half of last year, and as we mentioned in our prior calls, certainly, in the first quarter of this year it was slow and that was across the board in all of our segments and that was primarily due to what you've already alluded to. The fact that there were significant downsizes going on across the industry, companies were still weighing, I think, all the generics. And as we've mentioned before, generally speaking, companies do not want to begin the contract with CSOs when they're in their midst of, or planning a downsizing. We remain through most of those downsizes, so our projection is that the market will continue to downsize slightly going forward. We're certainly through the bulk of it, at least 3 quarters of it is our expectation. And as I said, you are starting now to see some conversions starting to happen. The other driver on the positive side is that you are starting to see new product approvals occur. And generally, our pipeline, our business is dependent on a couple of things. One is, obviously, product flow from the FDA and the second one is in-licensing deals that get struck by companies. Those are what typically drives our product flow. The third, which is not yet big but growing is companies just simply saying for their more established products, they're going to outsource those products to an outside CSO. So all 3 of those remain fairly optimistic. You are starting see the FDA approve drugs. And since we're through most of the downsizings, pharma needs that extra support to get those drugs launched.

That's very helpful. And one last one on Interpace. You alluded to the fact that you might be investing in this business a little bit more in order to gain some longer-term, positive opportunities. Can you size that for us and maybe give us some sense of the timing of when you think those expenses will hit relative to the revenue ramp?

Well, let me for comment first -- generally, I'll let Jeff speak to the financials, but we do expect that the investments will be modest. We're certainly not going to do what I would call a big bet on the company, but we do expect one or more modest investments and we anticipate that we would close on something this year. You want to add anything more, Jeff? Okay.

Your next question comes from the line of Scott Henry of Roth Capital.

I'm going kind of pursue a tougher line of questioning. Just because -- I mean, for lack of a better term, these numbers are somewhat kind of awful, $23 million in Sales and Services coming off of last quarter. I mean even now you're saying that the pickup is very near, yet Q2 numbers are not going to be good either. They're going to be flat to down. I mean, how do we match up the continued talk of the pipeline, the continued talk of the hit rate with numbers that just don't match up with that?

Okay. Let me comment on that and then again, Jeff, why don't you speak up on this, as well. First of all, we did indicate on our quarterly call last quarter that we would expect this quarter to be softer and that's primarily, as I mentioned, there were contracts that were expected to come down that came down. As you know, Scott, what happens is when we get these wins, and as I already reiterated, we find that it generally takes a while before you actually start to see the revenues hit the P&L. So as an example, we may sign a contract, but then you have to do all the recruiting and the hiring and the training of the sales representatives, and the full amount of the CSO revenue doesn't start to be manifested on the P&L until generally a quarter even beyond when the contract was signed. And that sometimes, it can even go 2 quarters beyond when the contract was signed. So generally, we've got some pretty good visibility 1 to 2 quarters ahead in terms of where the business is going, which is why we are fairly clear in terms of what second quarter will look like and we're optimistic on the back half of the year because we can see this pipeline starting to convert. And I'll turn it over to Jeff.

Yes, Scott, the other way to look at it, and I know we've had this discussion, but let me say it again, that if you go back to, let's say, the end of the third quarter of last year when we were looking at a fairly sizable pipeline, effectively what's happened is that not much was awarded. Almost nothing was awarded to anyone in the fourth quarter and most of the first quarter. That's the business that would have showed up to fill the gaps in the first and second quarter of this year. So in a grossly oversimplified way, you could say that 5 to 6 months of very small awards is now showing up as the lack of new business in our results, at least, for the first and second quarter. And again, as Nancy has alluded, given what we've already announced and what we are optimistic about being able to announce in the near future, we think that corrects itself starting in the second half of this year.

Okay. Yes, I mean, I guess, I get it that business is bad. But when the talk of very near, as if something eminent comes up and then I found out Q2 is going to be equally awful, you just wonder -- and that's okay. I mean, sometimes businesses take longer to turn around than expected and the macroenvironment doesn't work. But I'm just trying to understand what you're saying and to match it up with what's happening. And I guess, along those lines, Nancy, could you talk about the risk-adjusted pipeline currently in the RFP success rate? I mean, I keep track of these numbers and hopefully, they'll play out at some point.

So our pipeline right now is running approximately around $350 million. So that's down slightly from where we were before and that's because, again, some of this has converted or has gone from what we say in the pipeline to very near term and usually at that point, we take it out of the pipeline. So we -- and there's a fairly large opportunity as well that did not get awarded to anyone and that was due to a product non-approval. That being said, the pipeline still remains substantially higher than the previous run rate, which as you may recall, was running for about 6 quarters around $150 million. So we remain, again, very optimistic, Scott. Yes, there is a lag. I will reiterate that, but I can state with a lot of confidence that we do see the pipeline starting to convert. We're optimistic about going forward. It does take time for those revenues to manifest itself into the P&L, as I mentioned. But the -- our discussions with clients and the current status of contract negotiations is very robust.

Okay. And what do you expect would be your RFP success rate?

Our RFP success rate right now -- now when you say those that we -- we call it our win rate as opposed to what's in the pipeline going out for RFP, but our current win rate is well above 30%. And we...

Okay. So I guess, that's where the disconnect. I'm looking at my model and I had an RFP success rate of 70% in third quarter 2011, 50% in fourth quarter and now well above 30%, but none of this is converting into anything.

Scott, again, I think we've been very clear since the end of the third quarter that not much got actually awarded in the third -- in the fourth quarter of last year and through, let's say, half the first quarter of this year, so...

Well, then I guess, just another question. I'm just looking at the model. Nancy, I guess because of churn, would you say your market share among CSOs has probably dipped to 17% or 18% from 20%?

No. Let me go walk -- let me go through the math on this for you, Scott, right? So don't -- the win -- we do track our win rate. Now the win rate is a function of 2 factors: One, you got to remember the volume of wins, and the volume of wins in the aggregate was low in 4Q and first Q even though our win rate was high. But they were relatively modest and in the size of the win. So the size of our wins was still relatively modest, which is why you're...

Okay. But your market share has to go down. I mean, if you revenues go down 20% unless the whole category went down 20%, your market share has to decline?

The category has gone down.

20%, quarter-to-quarter?

I'm not going to -- we don't have hard and fast numbers across the entire industry, but we know -- we keep track fairly closely of what's going on with our competitors. And in general, the market has shrunk over the last, let's say, 3 to 4 quarters and that's because of teams that have come down. Now there have been some awards, but on an aggregate basis, we remain substantially above what we call our fair share, which would be 25%.

Okay. I'm going to shift gears, if I could in the efforts of time. I guess, could you comment how low were DCA revenues in the quarter?

Scott, I think you can assume that over 90% of the Marketing Services segment is Group DCA. The only other thing that's in there is PDI Voice. That's still relatively small.

Okay. And then -- so I guess, when I look at Marketing Services margins, it really doesn't matter if it's all DCA. Was Engage -- were there any Engage revenues in the quarter?

Not in this quarter, although we did win an assignment that we -- that was part of that announcement, so we will start seeing Engage revenues in the second quarter.

We've won actually several small EngageCE contracts, and we expect more in this year because the pipeline, again, for EngageCE is starting to convert.

Okay. In the release, you mentioned rightsizing of Group DCA. Didn't you just buy that group?

We bought it a year ago.

I mean, a year ago?

Yes.

Now rightsizing, was this rightsizing that was due that you knew you had to do when you bought it, or is this subsequent to -- or post buying it?

This was, as you may recall, when we -- under the purchase agreement, we were limited in terms of our ability to go in and affect major change. And as we then bought out that purchase agreement early, that allowed us to go in and do some substantial restructuring that we felt needed to be done.

Okay. So would you say your revenue expectations for DCA when you bought it, have they matched up? I mean, is this just typical restructuring? I guess, what I'm trying to get at the end of the day, are you pleased with your purchase of DCA?

So let me say this. We -- it is below -- the revenues certainly are below what we had anticipated. And that's due to a couple of things. One, it's due to the fact that the market in general, and you can look at some of our competitors which are in the public domain, the entire sector is down because budgets continue to be cut. So it is certainly below what we had hoped. That being said, several of the recent wins that we announced, as well as others that we anticipate to announce, we can point to Group DCA as being a substantial part of the reason why we won. And it's because of our ability to begin to integrate nonpersonal promotion, particularly digital work, coupled with our live reps and create a much more efficient organization for our clients. And that is having a material impact on our CSO win rate.

Okay. I guess, kind of the final line of question I know I've asked a lot. The share buyback, I'm a little disappointed that the board wouldn't decide on a buyback based on price. I mean, to me, buying back shares, if you have extra cash as you do, should at some level be a function of the price of the stock. It shouldn't always just be a binary, yes or no. And I can get not buying back at $8, but what if it was at $4, you still wouldn't buy back? Can you talk about why the board would be inflexible to that decision and not have, at least, some contingencies based on the price of your stock?

So the Board was concerned about not -- keeping ourselves flexible for product opportunities that come our way. And as I mentioned, we are actively pursuing modest product opportunities. To your point about being flexible, though they did not formally put in place a buyback based on a particular share price, the board is certainly open to revisiting that should the share price continue at the levels that it's at.

Okay. I guess, I don't see any harm in having a buyback and then not utilizing it until so you have extra flexibility, but I guess they'll take that as it is. Final question. I know again, there's been many. Given that DCA has not performed as well as expected when looking at future acquisitions, has the board assessed how to prevent that failure to meet expectations from happening again?

Well, yes, the answer is we always have metrics in place to make sure that anything that we look at has been well vetted. And let me reiterate, making sure that we have downside protection, so we do not get ourselves in a situation where we start to lose substantial amounts of cash and a material impact on our investment. So while Group DCA hasn't met up to expectations, I don't think anyone would say at this point that we're disappointed in the acquisition. It's continued to provide a lot of, as I said, foundation for our overall strategy and offering to our clients. As we're going forward, it's to continue to look at how we put in place metrics and as a full vetting has occurred. I want to reiterate though, that what we're looking at now is a different type of investment than, obviously, a service business. And as you know, the company has some positive histories on the product side and some very negative histories on the product side. I think the one difference to note is that what we're looking at now is not full risk-shared deals. And that's a significant difference where we were fully exposed to the downside risk. So there are some differences now, where we would -- what we're certainly, looking at is claim on assets should anything happen. But there is a pretty rigorous process in place, Scott, about how we're beginning to evaluate this and the board, certainly, is being very judicious about how we approach this.

Your next question comes from the line of Nick Halen of Sidoti & Company.

So I just had a few quick follow-up questions. Just in terms of modeling the revenue recognition for the $13 million in contract awards that you said for 2012, I mean will that be pretty even across the next 3 quarters? How should we look at that?

Yes, in the announcement, Nick, we said that $2.5 million of that has already shown up in the first quarter. So if you take the remainder, $10.5 million, and just spread it over the rest of the year, that's pretty close.

Okay. So $10.5 million, okay. And now just, can you give us a sense of how many of your existing contracts are set to expire throughout the rest of 2012? I mean do you have a number on that?

We don't disclose that publicly, but what, I think, we would say right now is that essentially all of the contracts we have running today are secure for 2012. There's none that are scheduled of any significance. There's some tiny ones that are scheduled to finish this year. And just one other follow-up, as you talk about your model, the wins that we announced clearly are not incremental probably to anybody's model because the -- we went to this year anticipating a number of wins. This is a small part of what we would have expected this year. So just be careful that you're not adding this incrementally to whatever your model is.

Okay. And just in terms of the downsizing of contracts that you're seeing, I mean, can you give us a little insight into what's happening there? And I mean, is that something you're concerned about going forward?

I would not say so. No, we're not concerned about it going forward. It's not -- in most of these cases, these were contracts that were expected actually to expire, and the client continued with a contract, I'll bet though, on a smaller footprint, so that's what you're seeing.

Your next question comes from the line of Brad Evans of Heartland.

I think some very good questions have been asked on the call and I just hope the board -- I hope all the members of the board are on the call or will be able to listen to replay or transcript of the call because I think the questions have been spot on and lots of questions about appropriate capital allocation, mix track record of acquisitions obviously, mix track record of growth initiatives in terms of creating shareholder value and a balance sheet that is, obviously, highly liquid in an interest rate environment that is fairly depressed, so it is a safety net for you all. But the fact that the board, I think, hasn't deemed it -- of merit to have at your disposal of your share repurchase program despite your current liquidity position is somewhat confusing to me. So that's really a comment, not a question. Do you expect there's still to be -- in the fourth quarter call -- I think it is the first quarter call you expected to be -- you gave preliminary guidance of profitability from continuing operations at the operating income level with positive adjusted EBITDA. Is that still -- do you still hope to achieve that?

Yes.

Okay, that's good. Therein lies, I guess, even more confusion as to why share repurchase program, at least having it at your disposal makes some sense, but that's for me to wonder and to know, I guess. I'm just curious with respect to -- you talked about on the EngageCE side, I guess, modest investments. What does that mean, Nancy, in terms of size of investment?

Well, first, let me clarify it's on Interpace BioPharma.

I'm sorry, Interpace, excuse me.

So modest investments, we would be looking at anything from several million, maximum, probably, we might be looking at $10 million.

And could you quantify how many opportunities are in the pipeline of that size?

We have a handful.

A handful.

Now I do not anticipate, by any means, that we will execute on all those.

How many do you think you could do successfully?

I would say we could do 1 to 2.

And these are not company acquisitions, Brad, so don't -- it's not...

No, I understand.

[indiscernible] Group DCA. These are very specific and very focused kinds of things that are available.

I understand. Okay. And so you would hope to have been able to transact on this effort sometime this year?

That's correct. Though I'm just going to put a caveat how it goes any time you're looking at any type of structured-type deals. It usually does -- it sometimes takes longer than you anticipate. So our current plan is 2012, though, on the outside, it could drag on.

And these are be accretive out of the gate?

They would not be dilutive out of the gate, so that's -- the subtle difference is that the revenue stream could be a quarter or at 6 months out, that kind of thing. But if you look at the first year impact, it would not be dilutive, it would be accretive. That would be the expectation.

And what type of internal rates return would you be targeting on these types of investments?

That's something that we haven't disclosed publicly, but we'll consider it for, as we announced these things.

Yes, I think it would be helpful because with cash earning almost nothing, the accretion hurdle is very, very low. So the key is what the internal rate return of what you're buying as opposed to the accretion hurdle. It doesn't really -- it's not stressful obviously, with the cash earning nothing. So the internal rate of return would be of highly -- of high interest in terms of what type of return you're expecting on these investments.

Okay. I think we can probably give you some guidance as we go forward here.

Nancy, how big is the outsourced sales rep force today for the industry?

We anticipate -- I'm just trying to remember because we run these numbers about every quarter to every 6 months, but we're right around, we think 6,000 to 7,000, around 6,000 to 7,000.

Yes, right, I would say, 6,500.

I'm sorry, can -- that's for you or the industry?

That's for the industry.

I'm sorry, I didn't hear you what you said, I'm sorry.

Sorry, Brad, 6,000 to 7,000.

I'm a little confused, did you say 6,000 or 7,000?

No, 6,000 to 7,000. Somewhere in that range for the CSO industry. For the entire sales reps in the U.S. right now, we estimate it's probably around 60,000. I'm sorry, we thought you were referring to CSO reps only.

Okay. Is there an update on the Supreme Court case that's reviewing overtime pay for pharmaceutical sales reps?

They are to announce their decision in the month of June. As you know, they heard oral arguments. And so a decision is pending in June.

What are you -- I mean, not speaking specifically about any one client, but how are your clients preparing for -- or do they have contingency plans in place in the event that the court rules that pharmaceutical sales reps are indeed due overtime pay?

Yes, as do we. So we have systems in place to begin to implement should that ruling come down. Though I will say proactively, we do a lot of it now already, and our clients certainly are as well.

So those could be -- is part of the delay of the pipeline being awarded, is this also playing into some of the lethargy in terms of pipeline being awarded?

No, no. I don't think so at all. No, I don't see that as the issue. I will tell you, though, that I think should the ruling come down in favor of sales reps are exempt that it could actually accelerate the use of potentially outsourcing more just because what happens is, obviously, the constraints become very, very difficult to manage and we obviously have very good systems in place to manage time on job very closely. So -- but we don't anticipate at all that the current pipeline conversion is due to that. As I mentioned, it's primarily due to a lot of the strategic reassessment that companies are undergoing and as you may recall, a number of large pharma companies are certainly looking at spinoffs of big pieces of their businesses. In some cases acquisition, and in other cases, simply waiting for products to be approved. In other cases, we're waiting for in-licensing deals to be struck. All those are pending our pipeline converting. But as I stated, we already are starting to see that pipeline convert.

I'm sorry. When you say exempt, what do you mean by that? I'm sorry.

That is a nonexempt versus exempt. So if you are a nonexempt employee, that means that you are not subject to a lot of the labor law because you're considered to be salaried employee.

Got it. So if they were to be declared exempt, where do you think the -- what percent of the industry sales force would be outsourced in that -- under that circumstance over, say, a medium-time horizon?

Yes, Brad, I would really be speculating on that and so I'd rather not even start to speculate around that. I think there's a number of forces at work here, that certainly is one, but there's a lot of other forces at work, primarily, the biggest driver continues to be managing the cost structure and providing flexibility to the industry. Let me give you an anecdote without giving any examples or naming any particular company, but as I mentioned, I'm often out meeting with company executives and in one particular case, in a meeting I had even this week with a fairly senior executive in the industry, where they have just completed an acquisition, and they're looking at how to integrate this company. And one of the things that they are actively looking at is, do they really want to take on all the commercial field force and infrastructure associated with that? So a very viable -- a very viable pathway for them that they are evaluating is whether they don't just outsource the commercial infrastructure and then, of course, they would in-source all the other revenues and aspects of that acquisition. But that is now happening fairly regularly. Particularly, if a company does not have that infrastructure built already, they are not at all do they have an appetite anymore for building all that infrastructure. And first of all, all of the regulations are layering on increased infrastructure that has to be built. Coupled with the fact you can leverage our infrastructure across multiple companies, so that allows 2 things: One, a substantially reduced cost for them to build that infrastructure because they don't have to built it, they can -- basically they renting our infrastructure; And the second thing is increased flexibility. So as they look forward on this potential acquisition, they're trying to get a handle on whether they acquire more companies, whether they downsize, what's going to happen to the patent life of some of these products. All of which remain somewhat oblique to them, and so the ability to leverage us and provide much greater flexibility is very appealing.

I think in the past, you said that you thought that over the next couple of years, 20% to 30% of the industry, sales reps will be outsourced. Is that -- do you still feel comfortable with that?

We do.

Your final question comes from the line of Pete Enderlin of MAZ Partners.

In the fourth quarter, I think you had 3 contracts that you had hoped to receive that slipped into the first quarter. Did they actually occur in the first quarter?

Yes, that's not the way -- well, we said -- Pete, we didn't say they had slipped into the first quarter. We said that they were awarded and for various reasons, they never got executed either because of the product didn't get approved or there was a change. Actually one of them -- as we describe, some other product that the company had, had an FDA issue that had a sales force so they decided to use their sales force for that. So we said there's -- there was possibility that ultimately the ones where the product wasn't approved could come back. But that has not happened at this point.

And were there others that we had the same experience? I mean, we had sort of a theme of waiting and waiting here for things to happen. Are there similar things in the first quarter where you expected something or were hoping that you'd get a contract, and for one reason or another, it didn't occur but may still occur?

I think, as Nancy said, we are very confident that there will be contracts awarded shortly. So we'll...

And can you characterize the -- if the total pipeline is roughly $350 million, is there any way to put sort time horizons on portions of that? How much is within 6 months and how much within a year and so on?

Not that would be at all meaningful, I think, to anybody without a lot more explanation. But there's -- of that $350 million, there's still a substantial amount that could impact 2012. And that's why along with our optimism on awards and knowing when those revenues would come, we have said that we believe the second half revenue will be higher than the first.

And strategically, a simple question, but not simple to answer maybe. And that is, is the pure Sales Service business, the growth business, I mean, it hasn't been -- even though the pharma trend toward outsourcing, I think, has been in place for, at least, 2 or 3 years, but I know there's been other factors that have undermined that. But basically, is the Sales Services function itself for you guys and for the outsourcing industry a growth business? Or will it only be a growth business in conjunction with Marketing Services and Product Commercialization and the synergies that occur with those?

I think we would continue to say that Sales Services on its own is a growth business.

Yes.

Brad asked the question earlier, are we still -- do we believe that the CSO industry can become 20% of the total market in a reasonable period of time up from its current 10%? And the answer was yes.

And the -- it's 10% now and you can get to 20%, but do you think it can get to 30%?

Yes, we do. I mean, again, we would reference Europe that is already up 30% and rising and has many, if not all, of the same characteristics that the U.S. pharmaceutical industry has today.

And is it reasonable to think in terms of the 5-year time horizon for that? I mean, obviously we can't be...

Yes, 5 years is probably aggressive to get to 30%, but 20% is not unreasonable.

This concludes today's conference call. We thank you for your participation. You may now disconnect.

Thank you.