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 (Medical Device Daily, March 16, 2006). 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 (MDD, Jan. 9, 2006). The company filed for bankruptcy that spring (MDD, March 24, 2006). The company at the time was also under investigation by the SEC (MDD, April 10, 2006).

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 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 cost-control 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 3Q09 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.

In April 2006 SeraCare unveiled plans to consolidate its facilities and streamline operations (MDD, April 28, 2006). The company moved its Oceanside operations into its Milford plant.

"Going forward with the market beginning to improve, we're very set on making sure that we're well-positioned to get back into a growth path and take advantage of growth in the market as that begins to open up of the next couple of quarters," Vogt said. She noted that SeraCare introduced new products in each of the last three quarters and said the company will "continue to do that."

"We've also managed to gain a number of new customers, especially in our services business for clinical trial support work," Vogt added. "We're acquiring new customers and expanding what we're doing with existing customers, that is key to future growth."

Despite the economic downturn, Vogt says SeraCare believes there is positive momentum for its business, as well as some positive momentum in the market.

"A lot of our customers with the tough economy have been reducing inventories and that drove down the demand for product ... we believe that is leveling out now and becoming more normalized," she said.

Amanda Pedersen, 229-471-4212; amanda.pedersen@ahcmedia.com