BioSource weighs options as bid boosts stock price.

Over the past two years BioSource International Inc. has shifted its management team and redirected its business.

The moves paid off handsomely in the company's just released first quarter but not nearly as much perhaps as the boost the company has received from an unsolicited takeover bid.

In the days following April 6 when Bio-Rad Laboratories Inc. offered to acquire BioSource for $8.50 a share, BioSource's stock price has spiked as much as 50 percent, and more recently the stock is trading about 40 percent above its previous 12-month high.

Bio-Rad, which already owns close to 5 percent of BioSource's stock, said it made the offer after repeated attempts to persuade BioSource to agree to a merger.

The company also said it intended to replace the current BioSource board of directors with its own nominees.

BioSource rejected the offer, saying it believed the price was "significantly below BioSource's inherent value."

In a letter rejecting the bid, officials said that the company had not responded to previous overtures by Bio-Rad because those proposals "have been grossly inadequate."

Exploring alternatives

At the same time that it rejected the bid, BioSource announced that it retained UBS Investment Bank as a financial advisor to explore strategic alternatives,

"The alternatives being considered absolutely include a sale of the company, but they also include other options, for example pursuing growth through strategic acquisitions, or continuing to follow the organic growth plan we put into action in January, 2004," Terrance J. Bieker, BioSource's president and CEO, said in a conference call.

Bieker would not offer any more comment on its plans except to say that the company was at the very early stages of its analysis.

"There can be no assurance we will pursue a sale or any other strategic opportunity," Bieker said.

But that didn't seem to affect Wall Street.

After trading for most of the year in the $6 to $7 range, shares in Camarillo-based BioSource rose as high as $10.

As of May 5 the stock closed at $9.96.

The stock price jump is all the more dramatic in relation to the company's peer group.

Year to date through April 8, Standard & Poor's Biotech Index was down 10.5 percent, with nearly all of the companies in BioSource's peer group seeing their stock prices decline over the same period.

"We remain neutral on the sector due to continued uncertainty over pipelines and potential FDA filings, as well as high cash burn rates in relation to overall pipeline quality and productivity," Standard & Poor's wrote in a report on April 25.

Bucking the trend

If BioSource's stock price is bucking the trend, so to is its most recent financial performance.

For the first quarter of 2005 ended March 31, BioSource reported net income from continuing operations rose 14 percent to $1.1 million and sales from continuing operations increased 11 percent to $12.8 million.

Net income for the period was $691,000, or $0.07 per share, somewhat less than the comparable quarter last year when BioSource earned $708,000 or $0.07 per share.

BioSource also reported several improvements on the expense front.

General and administrative expenses decreased to 15.9 percent of sales in the period, compared with 16.4 percent of sales in the like period last year.

Sales and marketing expenses decreased to 19.8 percent of sales versus 20.3 percent in the first quarter of last year.

"We had a record quarter," said Alan Edrick, CFO at BioSource.

BioSource International Inc.

Stock Prices

May 5, 2004   $7.72
May 5, 2005   $9.96

Note: Table made from line graph.

YEAR (December 31)                   2004            2003

Revenue (millions)                  $44.4            41.3
Cost of Goods Sold (millions)        20.3            19.1
Operating Expenses (millions)        23.3            23.5
Operating Income (Loss)           800,000   (1.4 million)
Net Income (loss)               (415,000)   (1.1 million)
Earnings (Loss) Per Share         ($0.04)         ($0.11)

SUMMARY

Business: Life Sciences Headquarters: Camarillo CEO: Terrance J. Bieker Market Cap: 95.0 Dividend Yield: NA Total Liabilities: $7.1 million P/E: 488.0 Long-Term Debt: none