Bioanalytical Systems Inc.’s new CFO won praise this month from one of the company’s institutional investors for laying out an aggressive cost-cutting plan—but not before the rest of the firm’s leaders got a tongue-lashing for past performance.
“We’re glad to see somebody aggressively attacking the cost basis, because the costs have been out of line. It almost for a while was being run as a branch of Purdue [University] as opposed to a profit-making business,” Lenny Dunn, a stock specialist at Wisconsin-based Freedom Investors Corp., told Chief Financial Officer Jacqueline Lemke during a May 11 conference call.
Lemke joined West Lafayette-based Bioanlytical Systems in April. She inherited a set of finances in which spending ran 23 percent ahead of revenue over the previous six months. The company posted a whopping $1.9 million loss in the quarter ended March 31, on revenue of $7 million.
That performance led Lemke and Bioanlytical CEO Anthony Chilton to issue multiple promises of “never again.”
“We are going to turn it around,” Lemke said. "The six months that you just saw, you’re not going to see them again.”
She said the closure of the company’s facility in Oregon and consolidation of those operations in West Lafayette would save the company $2 million per year. In addition, the firm will take several actions over the next four months to cut another $2.5 million in annual operating expenses at its facilities in West Lafayette and Evansville.
For Dunn, the pruning can’t come soon enough.
“This should have been done sooner,” he said. “These automatic raises people have been getting and people being paid to sit around in a room and show how bright they are as opposed to being productive doesn’t make sense to me. Never has.”
Bioanalytical employs 210 people who conduct preclinical research for contract research organizations, as well as pharmaceutical and biotech companies. Bioanalytical also makes and sells some instruments used in pharmaceutical analysis.
The company’s revenue was shellacked by the recession, falling from nearly $42 million in 2008 to less than $29 million in 2010. Sales bounced back up last year to more than $33 million, but are on pace again this year for just $29 million.
Lemke said Bioanalytical, which goes by the ticker symbol BASI, is taking the cost-cutting moves so it’s better positioned for downdrafts in its revenue.
“We believe that BASI is well-positioned with its customers for growth as market demand picks up for CRO services and monitoring instruments,” she said, and the company "will right-size its cost structure to allow for profitability even at low points of the revenue cycle.”