SFBC reports $19.7 million second quarter net loss

By Jennifer Lanning Drey

Eugene, Ore., Aug. 4 - SFBC International, Inc. reported a net loss of $19.7 million, or $1.09 per basic and diluted share for the second quarter, compared to a net loss of $7.1 million, or $0.39 per basic share and $0.38 per diluted share, in the second quarter of 2005, according to a company news release.

Net revenue for the second quarter was $96.6 million, which demonstrated a 13% increase over net revenues of $85.7 million for the comparable period of 2005, according to the release.

The company's Late Clinical Development segment had its strongest quarter in company history, contributing approximately 68% of direct revenue, said David Natan, chief financial officer of SFBC, during a company conference call held Friday.

SFBC's Clinical Pharmacology Services (CPS) unit contributed $7.9 million to second quarter earnings. However, CPS' outlook for the remainder of the year is significantly reduced because 80% of the unit's revenues were related to projects at the company's discontinued Florida operations, Natan said.

Moving forward, CPS' biostatistics capabilities will be used in conjunction with the late-stage business development team's marketing strategy, which the company believes will help restore profitability to CPS, Natan said.

"This strategy has already had some success, but given the longer lead times for the late-stage business, we do not anticipate that it will return to its historical performance levels for at least 12 months," he said.

For the remainder of 2006, SFBC will work to strengthen its core business by establishing stronger client relationships and improving business for the Early Clinical Development segment, according to Jeffrey P. McMullen, president and chief executive officer of SFBC.

"We believe initiatives undertaken to improve our operations and enhance our client relationship year to date will enable us to more effectively address our client's needs and build an even stronger presence in the marketplace," said McMullen during Friday's call.

SFBC had cash, cash equivalents and marketable securities of $60.26 million, compared with cash, cash equivalents and marketable securities $38.83 million on Dec. 31, 2005, according to the news release.

As of June 30, SFBC had approximately $143.8 million in convertible notes outstanding and $17.0 million drawn on its $45.0 million senior secured credit facility.

In order to facilitate the company's 10-Q filing with the Securities and Exchange Commission by Aug. 14, SFBC has obtained a waiver through Aug. 15 for all of its defaults related to covenants and terms under its existing credit facility.

The company is continuing discussions with banks to obtain an extension to its current waivers and is also working to finalize the terms of a new credit facility, according to John Hamill, chief financial officer of PharmaNet, SFBC's wholly owned subsidiary.

SFBC International is a drug-development services company located in Princeton, N.J.

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