Serologicals Corporation History

Address:

5655 Spalding Drive
Norcross, Georgia 30092
U.S.A.

Telephone: (678) 728-2000
Fax: (678) 728-2247

Public Company
Incorporated: 1994 as Serologicals Holdings, Inc.
Employees: 677
Sales: $146.9 million (2003)
Stock Exchanges: NASDAQ
Ticker Symbol: SERO
NAIC: 325414 Biological Product (Except Diagnostic) Manufacturing

Company Perspectives:

Customers--and their consumers--count on the quality of our products. At Serologicals we've earned our customers' confidence with a long history of adhering to strict regulations and standards.

Key Dates:

1971:: The company is founded by Samuel A. Penninger, Jr., in Pensacola, Florida.
1989:: Bioscot, Ltd. is acquired.
1993:: Harold Tenoso is named CEO.
1995:: The company completes its initial public offering.
1999:: Tenoso resigns.
2003:: The company exits the therapeutic plasma business.

Company History:

Serologicals Corporation is a Norcross, Georgia, company that, on a global basis, provides biological products and enabling technologies to life sciences companies for use in the research, development, and manufacture of new drugs and other life sciences products. Originally involved in running plasma collection centers, the publicly traded company now concentrates on three growth areas: cell culture supplements, for use in producing diagnostic and therapeutic recombinant proteins; molecular reagents and assays, for use in cell biology research and molecular discovery; and diagnostic antibodies. Serologicals' products and technologies have applications in such disciplines as cardiology, hematology, infectious diseases, immunology, molecular biology, and oncology. Domestically, the company maintains facilities in Massachusetts, Illinois, and California, and internationally in Australia, Canada, Scotland, and the United Kingdom. Serologicals also maintains a global sales force, supplemented by more than 30 international distributors. Customers include life science companies as well as academic and private research institutions.

Founding the Company in 1971

Serologicals was founded by North Carolina native Samuel A. Penninger, Jr. After graduating from Catawba College, he became a helicopter pilot in the U.S. Marine Corps and then served as a legislative aide for the Secretary of State in Florida. In 1971 he established Serologicals Corporation in Pensacola, Florida, as a single plasma donor center. The company had one product, Anti-D antibodies drawn from human plasma, which since 1968 had been added to immunoglobulin to prevent the death of infants susceptible to Hemolytic Disease of Newborns. Penninger added a handful of donation centers over the next 15 years, but the company only began to grow beyond its narrow confines in the 1980s when he recognized two significant developments: the need for a range of anti-D vaccines and a rise in the blood-typing diagnostics business. Penninger began to move Serologicals into these areas.

In 1989 Serologicals took a major step in its transformation when it acquired Bioscot, Ltd., an Edinburgh, Scotland, company that could clone and produce antibodies. To help finance growth, the company turned to venture capitalists and in 1990 raised $3.5 million. Annual revenues topped $14 million in 1991 and approached $18 million a year later, but the company remained a minor player in its field, operating just eight donation centers. At this point Penninger brought in new management talent to take the company to the next level. Russ Plumb was named vice-president of finance and in March 1993 Harold Tenoso was tabbed to be the company's president and chief executive officer. Tenoso was uniquely qualified for the job. He held a doctorate in immunology and microbiology from UCLA and boasted 30 years of experience in the healthcare field, including ten years at pharmaceutical Unimed, Inc., where he became CEO and chairman before joining Serologicals.

Under Tenoso's leadership, Serologicals began to add donation centers at a steady clip, while also increasing the kinds of antibodies that each center collected. In December 1994 the company acquired assets from Acadiani Group, paying $29.5 million. Tenoso also prepared to take the company public. In preparation for this move, the company's headquarters was relocated to Clarkson, Georgia, and in November 1994 Serologicals Holdings, Inc. was incorporated in Delaware. Several weeks later this entity acquired Serologicals Inc. and Bioscot, then in May 1995 it became Serologicals Corporation, the company's current name. Underwritten by Smith Barney Inc., Lehman Brothers Inc., and Volpe, Welty & Company, Serologicals completed its public offering in June 1995, selling 2.4 million shares of common stock at $11.50 per share, which resulted in a net of $24.6 million. The money was used to pay off debt.

Acquiring Donor Centers in the Mid-1990s

Serologicals enjoyed strong growth under Tenoso, with revenues improving from $22.9 million to $30.1 million in 1994 and more than $52.1 million in 1995. During this period, net income totaled $1.2 million, $3.46 million, and $3.4 million, respectively. To fuel further growth, Tenoso aggressively pursued acquisitions in what was a highly fragmented field. There were more than 400 plasma centers in the United States, mostly mom-and-pop operations or small chains that were hard pressed to keep pace with increasing demands imposed by the Food and Drug Administration. Hence, Serologicals was presented with an opportunity to gain size quickly. In October 1995 Serologicals paid $2.5 million for Allegheny Biologicals, Inc., picking up two specialty donor centers in Jacksonville, Florida, and Pittsburgh, Pennsylvania. A few months later, in February 1996, the company added Am-Rho Laboratories at the cost of $1.7 million, gaining a specialty antibody donor center in Washington, D.C., along with other assets located in Jacksonville, Florida. A month later, Serologicals added nine nonspecialty donor centers by acquiring Southeastern Biologics, Inc., Plasma Management, Inc., and Concho Biologics, Inc. for approximately $4.75 million.

Serologicals' balance sheet at the end of 1996 reflected the company's growth in facilities. Net sales improved to $65.6 million and net income more than tripled, totaling $8.25 million. More than half of those sales were to Bayer Corporation, and about 87 percent came from just ten accounts. Moreover, two-thirds of all sales were domestic. At this stage, Serologicals maintained a network of some 40 donor centers, many of them located close to medical schools, where the company was well positioned to receive donor referrals. Gone were the days of plasma centers receiving walkup traffic of college students and winos. Now, donor recruitment was an important task, as Serologicals sought out donors who had high concentrations of certain specialty antibodies. Donor candidates were thoroughly screened and given a physical examination before being approved. To stimulate the development or increase the quantity of the specialty antibodies, accepted donors were hyperimmunized. The company also maintained a donor management program to make sure that visits were comfortable and safe, especially important because specialty donors might donate once or twice per week and retention of their services was important to profitability. A major key in retaining donors, of course, was the payment of high rates and incentive programs. Serologicals offerings were divided between specialty therapeutic products and specialty diagnostic products. The first segment included the company's first product, Anti-D Immune Globulin, as well as Anti-Rabies Immune Globulin, Anti-Hepatitis Immune Globulins, and Intravenous Immune Globulin. Specialty diagnostic products included antibodies for blood typing reagents and clinical diagnostic antibodies.

Serologicals continued its acquisition spree over the next two years. In March 1997, it bought Nations Biologics, Inc. and its affiliates, collectively the Nations Group, paying $10.2 million in cash and a $4 million convertible note. As a result, Serologicals added 16 donor centers that specialized in the collection of nonspecialty IVIG antibodies. In August 1997 the company swapped some donor centers with Los Angeles-based SeraCare Inc., exchanging facilities in Reno, Nevada, and Fort Smith, Arkansas, for three plasma collection centers in Colorado. Then, in September 1997, Serologicals paid $8.5 million to acquire Bio-Lab Inc. and Med-Lab, Inc., adding two specialty donor centers. The company added four nonspecialty donor centers and a clinical trial site in two separate transactions in 1998, paying some $5.5 million. At the close of 1998, Serologicals completed a major acquisition in picking up the Pentex Blood proteins business from Bayer Corporation at the cost of $27.5 million. Located in Kankakee, Illinois, Pentex was a leader in the area of purified blood proteins. Serologicals posted strong results in both 1997 and 1998. Revenues improved to $97.5 million in 1997 and more than $123 million in 1998, while net income during this time grew to $12 million and $16.3 million, respectively. As a result of this strong performance, Serologicals made Forbes magazine's list of America's best 200 small companies.

Suffering a Difficult 1999

The boom times for Serologicals would come to an abrupt end in 1999, caused by a number of factors. Both Serologicals and important European customers were hampered by new, tougher quality control standards, which forced the shutdown of some facilities. Thus the Europeans were unable to ship products and canceled orders of raw materials from Serologicals. To make matters worse, later in the year Serologicals discovered problems at its Atlanta testing laboratory, which caused shipping delays and recalls on products that passed through the Atlanta facility. A new director of the laboratory was ultimately installed. The company also endured accounting errors in 1999 that required a restatement of results during the first three quarters of the year, and a canceled software development project led to a write-off that adversely impacted the balance sheet. Although sales improved slightly, to $129.7 million, the company suffered a net loss of $15.5 million in 1999. In the midst of this difficult period, in September 1999, after the price of Serologicals stock fell from $30 to just $3 per share, Tenoso resigned. Director Desmond H. O'Connell, Jr., stepped in to serve as acting president and CEO. By the end of 1999 Penninger also announced that he would step down as chairman by the time the company held its annual shareholders meeting in May 2000.

At the 2000 shareholders meeting, Serologicals underwent several management changes. As promised, Penninger resigned. He was replaced as chairman by O'Connell, who was in turn to be replaced as president and chief executive officer on June 1 by David Dodd, hired away from Solvay Pharmaceuticals, where he had been president and CEO since 1995. Dodd, a Harvard Business School graduate, had 25 years of experience in the life sciences industry. In addition to his tenure at Solvay, he also held executive positions at U.S. Pharmaceuticals, Wyeth-Ayerst Laboratories, Bristol-Myers Squibb, and Abbott Laboratories. Even before Dodd officially took over, Serologicals began to make significant changes. In May 2000, the company sold its Seramed, Inc. subsidiary, which operated 47 nonspecialty donor centers, to Aventis Bio-Services, Inc. for a net cash consideration of more than $20 million. As a result, Serologicals, with its 17 specialty centers, would now concentrate on its specialty, diagnostic, and bioscience businesses. Dodd also took steps to build the company's infrastructure, establishing a global regulatory and quality compliance group, and adding steps to its quality control process as well as automating some procedures to lower the chance of human error, improve efficiency, and aid in inventory management. A new software system now linked the company's donation centers so that if a customer needed a rare antibody, it would be able to be located quickly. Dodd also began to look for ways for Serologicals to take advantage of the revolution in genomics and leverage its expertise to do upfront work for biotech companies.

Most of 2000 was devoted to restructuring operations. Because of the sell-off of its nonspecialty centers, Serologicals saw revenues recede to $45.3 million, but it returned to profitability, recording net income of $12.9 million. More important, the company was retooled for ongoing growth. In 2001 it acquired Intergen Company for $45 million in cash, a deal that not only added to Serologicals' business in purified blood proteins but also helped the company to enter the research reagent sector. Revenues grew to $53.6 million in 2001, and net income improved to $17.1 million. A year later, revenues virtually doubled, approaching $100 million, while the company recorded net income of $14 million.

Serologicals reached a significant turning point in 2003. First it completed a major acquisition, buying Chemicon International, Inc., a Temecula, California company for approximately $95 million. The addition of Chemicon was important because it added to Serologicals' product lines, in particular cell culture and molecular biology. Chemicon also created a platform that permitted Serologicals to add other acquisitions and pursue product licensing opportunities in the biotechnology market. Management believed that its interests in biotechnology were so promising, in fact, that a few months later it announced that it planned to exit the therapeutic plasma business altogether. In January 2004 Serologicals sold its ten plasma collections centers and central testing laboratory to an Australian company, Gradipore Limited. The company had now completely severed its ties to its past, the plasma business that grew out of a single Florida donor center.

Principal Subsidiaries: Chemicon International, Inc.; Serologicals Proteins, Inc.; Serologicals Discovery Products, LLC; Serologicals Research Products, Inc.

Principal Competitors: Aventis Behring L.L.C.; TECHNE Corporation.

Serologicals Corporation History

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Key Dates:

Company History:

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