Description

Seracare Life Sciences emerged from Ch 11 in May 2007 and completed a rights offering of 4.25 million shares at $4.75 a share which was backstopped by

 Harbinger and Black Horse Capital. The $20 million infusion afforded the company the liquidity to carry out major changes to the business which I believe

 have been largely completed in the fiscal year just ended Sept 30, 2008. These changes included discontinuing lower margin product lines, consolidating

operations into a new facility, putting the old facility up for sale, writing off old obsolete inventory, rebuilding valuable inventory which was stripped by prior

 management and regaining listing on NASDAQ. I believe the numbers for 2008 are largely meaningless because of large charges for goodwill writeoffs,

 obsolete inventory, reorganization expenses and stock based compensation. Seracare operates in two segments - Diagnostic & Biopharmaceutical Products

 and BioServices. SeraCare's Diagnostic & Biopharmaceutical Products segment includes two types of products: controls and panels, which include the

manufacture of products used for quality control of infectious disease testing in hospital and clinical testing labs and blood banks, and by in vitro

 diagnostic ("IVD") manufacturers; and reagents and bioprocessing products, which include the manufacture and supply of biological materials used in the

 research, development and manufacturing of human and animal diagnostics, therapeutics and vaccines. The BioServices segment includes biobanking,

sample processing and testing services for research and clinical trials, and contract research services in molecular biology, virology, immunology and

biochemistry. What I don't know about the particulars of these businesses is voluminous.

What I do know is that the current management not been timid about refocussing this company to be profitable. Revenues for 2008 were $49 million

 versus $47 million in 2007 and would have shown greater growth were it not for the discontinuance of unacceptable margin human serum albumin products

 in 2008. Excluding these revenues Seracare's revenues increased 18% in 2008. I believe Seracare will produce positive cash flow in 2009 for a number of

reasons. The increases in inventory in 2008 which were necessary to bridge the gap from the company's move to new facilities as well as to rebuild and

rebalance inventories from prior financial shenanigans will not be repeated in 2009, the company should produce pretax profits which will be sheltered by

 $40 million of tax loss carryforwards, inefficiencies from moving will be eliminated as well reorganization expenses. I believe this company has the ability

 to earn 30 cents pretax within the next few years and will make an attractive acquisition candidate in a stable industry where acquisitions take place at 1.5

 to 2 times revenues which would equate to a price between $4 and $5 per share absent any significant revenue growth. Management options are substantial

 and have strike prices between $5 and $6 per share going back to the reorg emergence period in 2007 when the stock traded as high as $7 per share. This

 company is poised to start showing earnings and cash flow generation and is starting to introduce new products. I believe there was substantial selling by

 liquidity-seeking investors and that today's price provides an excellent entry point for a company that is very well-positioned to begin telling a compelling

story to the investment community which they are capable of backing up with results. Seracare made a presentation at the UBS Global Life Sciences conference

 in late Sept 2008. This presentation is availabe on the company's website and is a good synopsis of the opportunities that lay in store for Seracare

http://www.seracare.com/InvestorCenter/Presentations/tabid/130/Default.aspx

Catalyst

Catalyst is the major improvement in reported results I anticipate for fiscal 2009.