WORCESTER, Mass. -- TSI Corp. announced Friday a corporaterestructuring of operations, an expected deeper fourth-quarterloss and its latest -- and possibly last -- purchase in a long lineof clinical research laboratory acquisitions.
TSI (NASDAQ:TSIN) said it expects to complete a $6 million cashpurchase of Health and Sciences Research Inc. (NASDAQ:HSRI)by June 27.
The HSRI acquisition will make TSI "one of three companiesworldwide able to offer fully integrated pharmaceuticalproduct development services, from initial animal testingthrough Phase III or IV clinical trials," said James P. Sherblom,TSI's chairman and chief executive officer. He considers hismajor competition to be Corning Inc., which operates Hazletonand Besselar laboratories, and Applied Bioscience InternationalInc.
TSI has acquired seven laboratories since late 1989 and nowsells its services on three continents. The geographic reach isimportant because drug developers are increasingly looking tosimultaneously prepare drugs for launches in U.S., Europeanand Japanese markets, Sherblom said. HSRI, which performsclinical research on a contract basis, also brings to TSI neededspecialized experience in cardiovascular drug research.
"This last year was when we went international and full-service," Sherblom said. "We're entering the second stage of ourgrowth," Sherblom told BioWorld on Friday.
As TSI finishes its three-year quest to build an integrated drugtesting service business, the company is tightening the focus ofits research on transgenic animals for use as disease models indrug development. During the next two years, it hopes todevelop validation on five animal models for use in research ofAlzheimer's disease, human immunodeficiency virus, canceroustumors, high cholesterol and to assess DNA damage fromexperimental drugs.
As part of a corporate streamlining, TSI is mothballing threeresearch projects that lie outside its focus on transgenic animalresearch model, including two projects that go back to thecompany's roots.
TSI, formed in 1987 as Transgenic Sciences Inc., initially set outto develop methods for producing pharmaceutical proteins,such as human growth hormone, in the milk of transgenicrabbits. TSI has demonstrated that it can achieve high yields ofdesired proteins in the rabbits' milk, but is now dropping theproject.
A corporate partner couldn't be found to help take the projectthrough the expensive clinical and regulatory steps ofdevelopment, Sherblom said. "If someone ever shows up with a$50 million program, we could start it back up in a moment."But for now, this transgenic rabbit project lives on only asfrozen embryos.
Also suspended was a transgenic livestock project that held theprospect of lean-meat pigs, but also failed to attract a deep-pocketed corporate partner, Sherblom said. "We've shown theprogram to a number of firms, and they said they are notinterested now, partly because of the economy." Also darkeningthe outlook for transgenic livestock was the public controversystirred up a few years ago by the proposed introduction ofrecombinant BST (bovine somatotropin) as a protein to spurmilk production in cows.
The biopharmaceutical and food businesses "are no longerstrategically necessary," Sherblom said. They served TSI asbusiness hedges that are not needed now that TSI hasestablished itself in clinical testing services and looks to salesof transgenic animal test models starting around 1995.
In addition, TSI is ditching its efforts in biosensors, which TSIpicked up as part of a larger company acquisition. "After twoyears , we decided it's not for us," said Sherblom, who seesbiosensors as a potentially huge market with many sizeabletechnical hurdles in its path.
Restructuring and other one-time charges are expected to addabout $4.5 million to TSI's anticipated fourth-quarter losstotaling $6.8 million, TSI said. For the year ending June 30, thecompany anticipates a loss of $10.9 million. TSI said it expectsto report $34 million in revenues for fiscal 1992. Auditedresults are expected to be released in August. The stock closedFriday at $5, down 25 cents.
Sherblom predicted that TSI will turn a profit in the next fiscalyear, ending in June 1993. He said the expected fourth-quarterloss is "primarily the result of our underestimating the timeneeded to integrate our recent acquisitions."
In addition to trimming its core research, TSI also announcedthat it was:
-- Paring its workforce 5 percent to 522 employees, althoughSherblom acknowledged that employment will grow again withthe HSRI acquisition and with expected corporate growth laterthis year.
-- Closing one unit of its GRDU clinical testing facility in Britain,where operations will be consolidated in a remaining unit.
-- Delaying the planned expansion of its Mason Researchfacility in Massachusetts.
-- Appointing Robert Horne as a senior vice president ofoperations with responsibility for improving productivitycompanywide. Horne was most recently a vice president atDigital Equipment Corp., where he was in charge of chemical,pharmaceutical and health care markets,TSI said Friday.
-- Ray Potter Senior Editor
(c) 1997 American Health Consultants. All rights reserved.