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What’s In A Name? A Fresh Start, Maybe

Friday, February 3, 2006

A new CEO and a change of scenery are good first steps to righting the ship at SFBC. A new name could also do the embattled contract research organization some good. Something like, say, PharmaNet? Two weeks ago Jeffrey McMullen assumed the role of CEO. He joined SFBC as part of the company’s December 2004 acquisition of CRO PharmaNet for $245 million in cash. By our measures, the PharmaNet name has a lot of positive brand equity. It has been a top performer in the Thomson CenterWatch Survey of Investigative Sites in the US in 2005 and 2003. It was also top-rated in Europe in 2004. That’s high praise from our survey respondents – principal investigators and study coordinators – who are on the front lines of clinical research.

A name, of course, doesn’t resolve the litany of problems facing the company, including questions about its clinical trial patient recruitment practices; the departure of its former CEO, president and legal affairs head; a U.S. Senate Committee investigation; a revenue restatement; and an informal SEC inquiry into the pay packages for departed executives.

The company’s shares are bouncing around in the teens, a far cry from their 52-week high of $45.73 in September.

But a name change, in combination with the other steps SFBC is taking, could put some distance between the company and its ongoing turmoil. Moving the company out of Miami to Princeton, where PharmaNet was headquartered, was one positive step to this end. Promoting PharmaNet veterans into executive positions and setting up regulatory task forces were others.

We’re aware that a name change won’t make the company’s problems disappear. Aside from these, the company has to manage the normal growing pains associated with rapid expansion through acquisitions.

We also know that its customers won’t give it much time to get things right. Larger competitors such as Quintiles, Covance, PPD and Parexel are available to grab the business.

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