April 2008
In early March, Bostwick Laboratories moved forward with plans for an initial public offering (IPO), indicating in forms filed with the Securities and Exchange Commission (SEC) that the offering price could be as high as $100 million. The Glen Allen, Virginia-based anatomic pathology (AP) lab indicates it’s looking to expand its presence in both the urology and AP market through hiring more pathologists and sales staff, expanding existing laboratories and building new facilities, as well as acquiring laboratories and upgrading the company’s IT infrastructure.
In addition to these plans, Bostwick also needs capital to repay its current long-term debt load of $42 million, according to the SEC filing. This debt, as well as the current depressed economy, is causing some lab industry insiders who LIR spoke with to be skeptical of the IPO’s potential success.
If the lab industry keeps growing at its current rate of 6.3 percent, Washington G-2 estimates that the AP market—which comprises over 20 percent of the overall market—will grow to $11 billion in 2008 from $9 billion in 2006. Nevertheless, investors are nervous about investing in young laboratories, according to Stanley Geyer, M.D., former medical director of the Georgetown University Hospital’s Department of Laboratory Medicine (Washington, D.C.), and the founder of Geyer Pathology Services LLC (Pittsburgh).
"Bostwick is entering an IPO market that is not as healthy as it’s been in the past, and they are trying to raise money to repay debt, create infrastructure, and hire people, which will add costs without necessarily adding revenues or profits," said Geyer. He noted that Bostwick’s net income fell to $2.3 million last year from $7.1 million in 2006. "It’s in these business areas where they are likely to encounter problems in pricing their stock and how much money they will ultimately be able to raise," he added. "Repaying debt and adding information technology infrastructure and personnel also isn’t going to pay a dividend to investors."
There are also likely to be a lot more laboratories entering the AP field in the near future, explained Barry Portugal, president of Health Care Development Services Inc. (Highland Park, Ill.), a consulting firm specializing in strategic planning for laboratory services in hospitals and health systems. He believes the AP marketplace will become more competitive in the coming years, with more academic hospitals and specialty pathology practices expected to launch AP operations.
Bostwick’s IPO is good, however, for pathologists, noted Tedd Taskey, associate vice president of Slone & Associates (Erie, CO), an executive search and consulting firm specializing in the diagnostic laboratory industry. Bostwick’s expansion plans will allow for more opportunities for pathologists who want to work in a commercial setting. "It’s great to have another national player, which will increase the demand for individual pathologists," he added.
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April 2008 - Table of Contents
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