MEDICAL DEVICE INNOVATION - Medical Device Daily

MEDICAL DEVICE INNOVATION 2010
Once bankrupt SeraCare
now profitable company
By AMANDA PEDERSEN
Medical Device Daily Staff Writer
Even in a good economy turning a company around
from bankruptcy, Nasdaq delisting, and an SEC investigation
to achieving profitability is no simple task. In an economic
state as dire as the current environment – it’s nearly
impossible. Yet, one life sciences company has done just
that, and within only three years.
But despite the challenges facing SeraCare Life
Sciences (Milford, Massachusetts) three years ago, the
company’s president/CEO and its CFO tell Medical Device
Daily that SeraCare today is right where they always knew
it would be.
“I think we absolutely thought we would [achieve profitability]
and this has been the timeline in which we anticipated
turning profitable,” Sue Vogt, president/CEO told
MDD.
CFO Greg Gould added that SeraCare had to make
some changes in its plan based on the current economic
challenges, but ultimately, “We always knew that we could
get this company profitable.”
In March 2006 SeraCare reported that it had dismissed
four of its executives and made other moves that reflect
what it said were the discovery of “material weaknesses” in
its internal controls. But the company’s troubles really
began in January of that year when an investor filed suit
against SeraCare in federal court, accusing the company of
stock inflation. According to that complaint, SeraCare’s
stock price fell by as much as 62% on Dec. 20, 2005, after
the company revealed that its independent auditors had
issued a report about deceptive accounting issues. The
Nasdaq market subsequently delisted SeraCare’s shares.
The company filed for bankruptcy that spring. The company
at the time was also under investigation by the SEC.
Vogt and Gould joined SeraCare in the summer of 2006.
Under the new leadership, and within three years, the company
has emerged from bankruptcy, raised money in a
rights offering, closed the SEC investigation, and achieved
relisting on the Nasdaq.
This week SeraCare reported profitable operational
and financial results for its third quarter of fiscal year 2009
ended June 30.
The company had a net income of $0.7 million and
earnings per share on a basic and diluted basis of $0.04 for
the quarter ended June 30, compared to a net loss of $0.6
million and a loss per share on a basic and diluted basis of
$0.03 during the same period in 2008.
“In the third quarter of fiscal 2009, SeraCare met its
most significant goal for the year—achieving profitability,”
Vogt said. “The fact that SeraCare was able to turn profitable
in the midst of a significant economic downturn
119
speaks to the inherent strength of our products and services
and our position as an innovator and quality leader in
the markets we serve. We continue to see marked improvements
in sequential quarter over quarter revenues during
the fiscal year and believe our focus on introducing new,
differentiated products to the marketplace and our costcontrol
initiatives will support ongoing profitability.”
Among its recent corporate milestones, SeraCare notes
that it achieved bottom-line profitability of $0.7 million as
measured by net income for 3Q09; generated $1.8 million in
net cash flows from operating activities for 3Q09;
improved gross margin by seven percentage points, to 36%
from 29%, for 3Q09 compared to the same quarter last year;
increased Diagnostic & Biopharmaceutical Products revenue
by 5% and BioServices revenue by 18% compared to
the second quarter ended March 31; generated $0.8 million
in operating income which included non-cash expenses of
$0.3 million for depreciation and amortization and $0.3
million for stock compensation expense during the third
quarter of fiscal 2009; and launched two differentiated
products – the SeraCare Human Papillomavirus (HPV)
Genotype Performance Panel and the Accurun 632, 644 and
676 controls.
According to the company, the SeraCare HPV Genotype
Performance Panel is the first product on the market to
enable testing laboratories, researchers and diagnostic
manufacturers to validate their entire HPV testing system,
ensuring that testing systems can differentiate between
high- and low-risk HPV genotypes.
SeraCare also noted that the Accurun 632, 644 and 676
controls are the only commercially available single-vial
controls that allow researchers and IVD manufacturers to
test for all cystic fibrosis mutations currently detected by
the leading testing platforms.
On a sequential basis, revenue for 3Q09 increased by
$0.9 million to $11.8 million compared to the second quarter
of 2009. Diagnostic & Biopharmaceutical Products revenue
for the third quarter of 2009 increased by $0.4 million to
$8.7 million compared to 2Q09 and BioServices revenue
increased by $0.5 million to $3 million across the same
period.
According to the company, it had $3.7 million in cash as
of June 30.
Due to “external market” conditions, Vogt said,
SeraCare did not achieve the top line growth this year that
it had originally planned. “Without that growth we had to be
much more aggressive in terms of focusing on streamlining
the operations, finding ways to cut costs and balancing
investments with rate of return.”
Vogt said that when she and Gould joined SeraCare in
2006 their first priority was to reorganize the company,
restructure the balance sheet and to pay back all of the
creditors in full, which she said was really the first big milestone
in SeraCare’s comeback story. From there, she said,
the company was focused on integrating itself.
To subscribe, please call MEDICAL DEVICE DAILY Customer Service at (800) 888-3912; outside the U.S. and Canada, call (404) 262-5547.
Copyright © 2010 AHC Media LLC. Reproduction is strictly prohibited.