Investors in BBI Holdings, a healthcare business that focuses on diagnostics and diabetes products, should be grateful that Julian Baines, chief executive, was unable to save his first business from going into liquidation.

The determination to never repeat the same mistakes has ensured the fire of determination has burnt brightly ever since. Baines set up BB Electronics - the business that went bust - in 1987 at the ripe old age of 22. It collapsed in 1992.

"I gave too much credit to a supplier and the cash flow problems caused me to panic. There were 20 people in the business but I could not save it," says Baines.

Post-collapse, Baines became a jobbing consultant who went from one biotech company to another helping them install quality management systems to improve the core processes inside their business. He spent five years doing this knowing he wanted to run a business, but determined to grow his commercial experience to give himself a stronger chance of success next time round.

Entrepreneurs are unbalanced people who never settle. Despite his past failure, Baines kept thinking how he would develop the companies he was advising if he was running them. One of these clients was BBI Holdings and he began to think more deeply about its development. "I was fascinated by the business. I believed it was not exploiting its strength in the market and wanted to ensure it did," he says.

His relationship with Dr John Chandler, the founder, was good, and they worked out a deal whereby he became sales director in November 1998. Top-line growth quickly improved and Baines waited a further two years before leading a buyout of the business. A deal was struck in November 2000 valuing the business at £4m with funding coming from a trio of venture capital firms.

Today, the core business remains the manufacture and supply of gold reagents which are used in millions of rapid diagnosis tests globally. More than 500m tests take place every year that rely on the gold reagent component. These reagents are used to bind with specific antibodies or antigens in tests to provide a positive or negative visual signal. This makes BBI an unusual biotech company as it is cash generative, operationally profitable with a blue-chip customer base.

The business also has a growing number of diabetes care products. These include GlucoTabs which are sold in Asda and Boots to boost the strength of diabetes sufferers.

When Baines took charge of BBI, it employed 11 people, generated profits of £400,000 on sales of £1.1m. Today, the business has more than 30 different products, employs 250 people and produced sales of £9.7m and profits of £1.8m in the year to March 2007. A number of factors have contributed to the success not least the effective working relationship that Baines has built up with David Evans, the chairman, who acts as part mentor and sounding board to the chief executive.

Next year, Landsbanki is forecasting sales of £25m and pre-tax profits of £6.3m. Shares in BBI have performed well since floating at 47p in April 2004. Today, they are 155.5p valuing the business at £66.7m.

In March 2007, BBI acquired Theratase, which makes enzymes used in certain diagnostic applications, for £24.1m.

Investors have described the deal as moving the overall business up a gear. Funding for that deal came from a variety of sources including Inverness Medical Innovations, the world's largest maker of pregnancy testsInverness remains a 12.2 per cent shareholder in BBI.

The investment from Inverness demonstrates there is already interest in BBI from larger companies who might one day decide to buy it. This should encourage existing shareholders to sit tight.


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