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TMFHelical (99.13)

Bioclinica - Nicusa Capital

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October 07, 2010 – Comments (0)

Here is a potentially interesting situation that I stumbled upon and may be of interest here. Don't know much about the players, but we have activist investing group Nicusa Capital with a ownership position in microcap clinical CRO Bioclinica challenging some recent moves the company has made merging imaging services and e-clinical operations.

I attended a miniconference last week related to clinical outsourcing and spoke to the Bioclinica booth, thus getting the pitch on the advantages of combining these services / having them available under one roof [Clinical trials are complex and generally involve a lead clinical contract research organization (CRO) and multiple additional subcontracted or separately contracted niche service providers]. The company also spoke in the conference on clinical planning / budgeting.

So today I notice as part of the Outsourcing Pharma news alerts I get that Bioclinica is a target of an activist investor group, looking to replace much of the senior management. There was even a nice little audio commentary with the company on the defensive.

OK, so now they are on the radar. I have a couple of investments in the larger public CROs but it is a pretty fractured industry overall (mostly private), with industry trends favoring larger service providers in my opinion, due to their ability to form strategic alliances. But it is also an arena that is seeing opportunistic M&A activity, particularly for attractive niche services. Both imaging and e-clinical services are such attractive services (though all the majors have a hand in the latter).

I also don't know anything about Nicusa Capital. It looks like a group that likes to stir things up in the microcap realm, but to what level of past success I can not say (anyone know them?). Looks like their head, Paul Johnson, has run afoul of the SEC in the past.

Here is what they have to say about BioClinica in a 13D filing.

We continue to believe that the Company’s core imaging business has the potential to create shareholder value and is worth substantially more than the current stock price. However, management’s eclinical acquisition strategy is flawed and is destroying shareholder value. Furthermore, management has failed to demonstrate that there are any synergies between the two businesses.

In the most recent quarter revenues were the second highest in the Company’s history, while operating margins were the lowest since June 2007 and 32% lower than the average of the prior three quarters, continuing a trend of deteriorating financial performance. We have formulated three scenarios to account for this: the profitability of the imaging business has been reduced; the profitability of the eclinical business has not met expectations; or the integration of the businesses has proven more difficult and less synergistic than management expected. Due to management’s unwillingness to provide a financial breakout of the two businesses, we can only make conjectures. Regardless, each of these scenarios calls into question the management of either the core imaging business or the eclinical strategy.


Not sure how much more I will look into this one, and if I do I may become quiet about it. Still thought it worth throwing up on the wall for potentially interested special opportunity investors and those who like to follow activists.

TMFHelical
Home Coverage Fool

Now back to the lab with me, as well as a few calls to the contract manufacturing organizations (CMOs) that I have oversight of.

P.S. If one is into the whole activist investor coat tailing, this looks like a handy news source that I was previously unaware of.

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