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Board suggested busy Evans let go of AIT

August 5, 2013

Michael Evans was juggling two companies and two newborn twins when his board of directors suggested it was time for a new CEO of AIT Laboratories.

“I was shocked first of all,” said Evans, 69, a professor of toxicology who founded AIT 23 years ago and led it for all but six months of those years. “The entire board came to me and said, ‘Mike, we think Matt [Neff] should be the president.”

Neff, a local venture capitalist who has been chairman of AIT since October, became its CEO and president Monday, taking Evans’ place.

Between the board’s suggestion and the leadership handoff, Evans had many discussions with Neff. Over time, Evans said, he grew more comfortable with the idea.

“I said to myself, ‘Mike, you were a lab rat trying to run a business. And this is a business that has a lab,’” Evans said. “Matt, he’s a business guy.”

Evans also acknowledged Friday he has not been giving AIT Labs his full-time attention. Evans and his wife have four-month-old twin daughters, and he is also CEO of AIT Bioscience, a 26-person contract research laboratory that turned profitable this year as its revenue runs at double the pace of a year ago.

“AIT’s got a tremendous future. It just needs some good leadership at the top,” Evans said. “It needs a full-time leader and I can’t run it full-time.”

Evans will remain chairman emeritus. But he said he’s “trying” to stay out of Neff’s way, something that he ultimately could not do the last time he handed AIT’s reins to someone else.

In early 2012, Evans stepped down as CEO in place of Ron Thieme, who had been vice president of information technology.

At the time, AIT was just beginning to realize it was suffering a body blow from a reimbursement cut instituted by the federal Medicare program.

On Jan. 1, 2011, the federal Medicare program cut reimbursement 47 percent for basic drug screening tests. Over the following year, most private health insurance plans followed with similarly drastic cuts.

Those cuts affect the urine-drug-analysis tests that make up 90 percent of AIT's revenue. Doctors use such tests to make sure patients suffering from chronic pain are taking the narcotic painkillers at the prescribed dose—not taking too much of them and not diverting them to friends or for sale on the black market.

In late summer of 2012, Evans decided AIT was not turning around fast enough, so he returned as CEO and Thieme left the company.

Evans said he expects this succession to work better because he vetted the decision with many counselors.

“Last time, I made the decision in a vacuum,” Evans said, adding, “I don’t blame Ron, but the financials were not coming around.”

Around the same time as Evans’ return, AIT started forming its first independent board. Neff came on as chairman, along with Dr. Ben Park, CEO of American Health Network, and local venture capitalists David Mann and Carrie Bates.

AIT’s losses in 2011 forced it to restructure its debt with BMO Harris. The bank insisted that AIT bring on Bob Bosar, a local turnaround expert. Bosar led a round of layoffs and cost-cutting moves.

In January, Bosar said the company employed about 350 people, down from nearly 500 in 2011. The company had about $55 million in revenue last year, but has been predicting strong growth this year.

Neff, in a prepared statement, said ongoing reforms to the health insurance industry continue to present difficulties for AIT, but that he likes the base Evans has built.

“I am pleased to be in a position to build upon the work of Dr. Evans, and to collaborate with him to continue the successful growth of AIT Laboratories,” Neff stated. “As health care reform takes hold, addressing the needs of the laboratory testing market will be a challenge.”

Evans had nothing but praise for Neff, who has led CHV Capital Inc. since the Indiana University Health hospital system formed it in 2007. Neff is a longtime friend of Dan Evans, the CEO of IU Health.

“He’s done a great job for Dan Evans at IU Health,” Mike Evans said of Neff. “He’s going to take AIT to the next level.”

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