Redundancy, Redundancy, Redundancy: SeraCare purchases assets of Serologicals Celliance subsidiary

STORY UPDATE

OCEANSIDE, Calif.— January 17, 2006—SeraCare Life Sciences announced it has closed its acquisition of Celliance's product lines and Milford, Mass. diagnostic manufacturing facilities. According to SeraCare president and CEO, Michael Crowley, Jr., the company has assumed the lease on the Celliance manufacturing, storage and distribution facility, which is located near SeraCare's West Bridgewater manufacturing site. He believes that the physical proximity of the facilities will allow the company to achieve synergies in the areas of manufacturing, staffing, and distribution.

OCEANSIDE, Calif.– SeraCare Life Sciences Inc., boosted its diagnostic manufacturing capacity in November by purchasing assets from Celliance, a subsidiary of Serologicals Corp. SeraCare bought a two-building 40,000-square foot diagnostic manufacturing and distribution complex in Milford, Mass., and about 30 products under the $3.7 million transaction, which should close by mid-January 2006. SeraCare also assumes some undisclosed liabilities.

SeraCare, says board chairman Barry Plost, used the deal to gain additional capacity for manufacturing products; SeraCare's West Bridgewater, Mass., plant, about 25 minutes away, supplies many of the company's products, which include molecular diagnostic reagents, diagnostic intermediaries, and substrates. The widespread impact of recent natural disasters, including Hurricane Katrina, says Plost, was the impetus for ensuring "redundancy of opportunities so our clients can feel comfortable if we have a catastrophe in our West Bridgewater plant."

Kit manufacturers, infectious disease researchers, and clinicians are among the clients who use that facility's products. Having two plants should help to keep delivery schedules and supplies constant if a catastrophe were to occur, Plost says, and the close proximity of the two facilities enables "oversight, control, and management."

SeraCare will not discontinue new product lines that overlap with existing offerings. The new items, he says, are not patentable and run "the gamut of the various human serums, all the basic human serums that are used for further manufacturing." SeraCare and Celliance had been competing for the same customers, says Plost, and "customers were even dividing their purchases to guarantee supply redundancy."

The transaction brings new capabilities to SeraCare while relieving Celliance of "the last remnants of our human plasma business," says Bud Ingalls, CFO of Serologicals. Celliance would have eliminated the product lines anyway, and it will now focus "primarily in cell culture and diagnostic products for blood typing," says Ingalls. Celliance offerings include monoclonal antibodies and Ex-Cyte products for enhancing cell growth and protein production in mammalian cells.

The lines sold to SeraCare, says Ingalls, comprised "less than $5 million in revenue and gross profits in the 30 percent area, so this business doesn't really fit strategically with us and is certainly a drag on both our revenue and gross markets" because of relatively slow growth rates. The shifts at Celliance were not connected with announcements in summer 2005 about Serologicals' program for integrating its subsidiaries Chemicon International and Upstate Group, says Ingalls. He called the SeraCare transaction "fairly small" and says it "reinforces our commitment to our existing business lines."

Plost says that SeraCare enjoys better margins than Celliance, so the products could become more profitable while increasing SeraCare's manufacturing efficiencies.

"We've bought an insurance policy," says Plost, "We can go to our clients and say 'Don't worry.' SeraCare will now be one of the very few manufacturers of diagnostic intermediaries that has more than one manufacturing site of the same product… we feel this will give us a competitive advantage over those companies that are manufacturing in one location."