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Struggling Bioanalytical Systems adds outsider to board

November 7, 2009

Shareholders are starting to make inroads in their effort to turn struggling West Lafayette-based Bioanalytical Systems Inc. in a new direction.

In his quest to right the ship, Wisconsin stockbroker Thomas Harenburg this spring formally requested the addition of new blood to Bioanalytical Systems’ five-member board. A few days later, company co-founders Pete and Candace Kissinger filed a similar petition with the U.S. Securities and Exchange Commission.

Harenburg and his clients own about one-fifth of the contract-research firm’s stock. On Oct. 14, Bioanalytical Systems announced that its board had voted to add Harenburg’s nominee, David Omachinski.

The company has not yet acted on the Kissingers’ request to replace three other board members with their nominees. Together, the Kissingers, who stepped down under pressure from Bioanalytical Systems’ management team in 2007, own about one-quarter of the company’s stock.

“What Dave brings to the table is a great deal of financial expertise,” Harenburg said. “I think he can be very, very valuable there and should be able to help work through their financial problems.”

Founded in 1974, Bioanalytical Systems has struggled for several years. The company last turned a modest profit in the fiscal year that ended in September 2007, earning $926,000 on $45.2 million in revenue. Last year, it lost $1.5 million on $41.7 million in revenue. During the next three quarters, the 281-employee company lost more than $4 million on just $23.3 million in revenue.



Bioanalytical Systems CEO Richard Shepperd did not respond to IBJ’s request for an interview. Peter Kissinger, the company’s former CEO, declined IBJ’s request for comment, citing SEC regulations over his pending board-restructuring request.

The company’s shares have tumbled as performance has declined and economic conditions have worsened. The stock slid from nearly $9 a share two years ago to just over $1 now.

On Sept. 22, Bioanalytical Systems disclosed that it had received a warning from NASDAQ that it could be delisted unless it can maintain a minimum market value of $5 million. The market value now is $5.11 million.

Harenburg described Omachinski, a CPA, as a turnaround specialist. His career includes a stint as president of children’s apparel-maker Oshkosh B’Gosh Inc., during which he engineered the company’s $312 million sale to Carter’s Inc. Today, Omachinski is chairman of Anchor BanCorp of Wisconsin.

A similar merger deal eventually may be in store for Bioanalytical Systems.

“Ultimately, my goal is for myself and my clients to make money in this situation,” Harenburg said. “I’d certainly be open to any and all ways we can enhance shareholder value, be it running the company and taking it forward, or through an ultimate sale at some point.”

There’s no shortage of potential suitors. The contract-research industry has hundreds of businesses, with combined annual sales of $20 billion, according to the Washington, D.C.-based Association of Clinical Research Organizations.

John Lewis, the association’s vice president of public affairs, said the recession and the specter of health care reform make it difficult to predict whether industry consolidation is on the horizon.

One clear trend, he said, is globalization. Contract researchers have always had to tie their fortunes to big companies, such as major pharmaceutical firms. But in the future, they’ll increasingly have to share their work with scientists in foreign nations, such as India and China.

To thrive, firms like Bioanalytical Systems will need to embrace that trend.

“What we’re seeing emerging is that having full-service global capabilities are what is driving the business,” Lewis said.•

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