Talk about a colorful past. Spun out of a blood-collection business shortly after 9/11, SeraCare Life Sciences saw its fortunes skyrocket and then crash spectacularly. Now, just a few months after emerging from bankruptcy, things are a lot quieter. The biggest change at the company is a new “emphasis on quality and integrity” says CFO Greg Gould. Yes, it’s back to basics for the West Bridgewater, MA firm, which last year made startling headlines with an accounting scandal.
From the product standpoint, SeraCare’s business isn’t very eye-catching. It doesn’t make drugs or diagnostics, but it makes lots of their basic components. SeraCare staples include many biologically derived materials, such as DNA, RNA, and proteins from blood serum (hence the “Sera”). SeraCare also offers services, including biorepositories where annotated samples are stored so only authorized researchers can use them or the sensitive information linked to them.
Thus, it was somewhat surprising when the company started experiencing explosive financial growth around 2003 to 2005. The stock quadrupled in value, earning the company headlines such as “Boring Biotech, Sexy Stock” from Smartmoney.com.
It was too good to be true.
In March of 2006 SeraCare’s CEO and CFO were fired and two officers asked to resign after problems were identified in the company’s books. Soon it become clear the company was actually in deep financial trouble, and it filed for Chapter 11. Once all this started percolating, the SEC dropped SeraCare from the NASDAQ, and the company is currently traded on the pink sheets (SRLS.PK).
Looking back, SeraCare was a case study in warning signs. Independent research firm Audit Integrity had slapped a bunch of red flags on its financials: “In total the company has rated Aggressive or Very Aggressive for five consecutive quarters,” said an Audit Integrity report.
A key goal now is regaining the NASDAQ listing as quickly as possible, new CEO and President Susan Vogt recently told shareholders in a letter. Vogt was previously president of Millipore’s Biopharmaceutical Division.
Besides bringing in a new management team, a pivotal part of SeraCare’s reinvention involved leaving its Oceanside,CA, headquarters behind and consolidating on the East Coast, where the company has facilities in Massachusetts and Maryland. (SeraCare’s former management did a lot of shopping for East Coast facilities during that freak ‘boom’ period.) In January of 2008 the company headquarters will move once more, this time to Milford, MA, and a freshly built-out 60,000 square-foot research and manufacturing facility where all of the company’s 130 local employees will be based.
Other small but positive signs are emerging.
Earlier this month, the company got a nice nod from a longtime customer when the AIDS division of the National Institute of Allergy and Infectious Diseases (NIAID), one of the National Institutes of Health, awarded SeraCare a $23.7 million, seven-year contract to manage biological specimens. SeraCare will catalog, process, label, and store the samples, as well as provide some technical support and training to researchers using them for studies.
The grant is basically the renewal of a long standing contract; last year, NIAID extended the existing contract by just one more year. “They may have been nervous because the company was in bankruptcy and putting in new management,” Gould says. “This renewal was a real vote of confidence.”
So far SeraCare, which currently has a market cap of about $50 million, has revealed little about how its product line might change under the new management. One growth area will likely be biomarkers—a currently trendy field in which researchers are seeking out telltale molecules in the blood and other tissues that indicate, among other things, how drugs are working in particular patients. Pharmaceutical companies want to use biomarkers to make their laboratory and clinical trials more efficient, and diagnostic companies like to sell tests for those markers to the pharmas. SeraCare sells basics for such tests.
The biomarker business is “a good market to be in, and most people think we are the premier player within the niche market,” Gould says. And though he says he can’t provide details, Gould says, “We do have some initiatives around personalized medicine.” If personalized medicine pundits are right, biomarkers will increasingly be used beyond the laboratory as the basis of tests that doctors will use to guide prescribing.
SeraCare is probably not breaking out the champagne yet, but it’s got to be a huge relief for management to at least have the freedom to start thinking about more than bankruptcy restructuring. “I think most people would say that we are over the biggest hurdle by now,” Gould says.