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  • SupremeRule SupremeRule Apr 28, 2005 7:04 PM Flag

    Why ERES has fallen and can't get up

    "There is a simple answer: competition."

    So you agree with Ceocast regarding increasing competitive pressures and not with ERES management who dismisses any real threat of competition. I wonder what Blum Investment thinks of this competitve threat?

    "So the market is not slowing, ERES is."

    Again, this contrasts with management's assessment. Of course, I don't put my faith in what managment says as much as I do with the Blum investment. Would Blum invest in this company if ERES was not the premier company in this space? I think Blum sees a ERES as an undervalued growth company that is in need of expert outside counsel in helping ERES achieve its full potential.

    Stay tuned.

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    • Yes, I agree with Ceocast. ERES are the easiest firm in the business to compete with, the problem is in getting stodgy old CROs to invest heavily in advertising their ECG unit and drive name recognition and hence dealflow. Much of ERES's business is no-bid, as pharma thinks there is noone else out there (a myth that ERES's management works hard to perpetuate for precisely that reason).

      As for Blum: name me another company in which you can invest directly in this space? That aside I don't think Blum's investment is about growing ERES in the ECG space. Managment at ERES (and Premier, as it was in the 90s) has been lousy at using the platform of a high-margin, cash rich, high growth business with a bigger market cap than Covance to turn a one-trick pony (ECG lab) into a broader-based pharmaceutical services business. Look at the cash pile. The EDC business is a disaster. The CRO they bought in the 90s was sold on at a loss. What of the Siemens deal? I think that is why Blum is in.

      Either way, the one thing you didn't quote me on was my last assessment. ERES will continue to prosper, just not at the same rate. The market is not slowing, but ERES is no longer getting more than its fair share.

      And in answer to someone else's question, I see the existing business hitting $200M in the 3-5 years at lower, but still good margins. Their market share at that level will be in the 20-30% range, down from the 50% or so right now. The rate of growth will decelerate, particularly when compared to competitors, but still be very good in the absolute.

      As for Blum: expect acquisitions.

      • 2 Replies to hippityhoppityhop
      • Who do you work for? For someone who just established an identity for this board on 4/28/2005, you appear to be "gung-ho" insinuating negativity about their prospects.

        Although you write eloquently, you provide little in the way of data or facts for your opinions. For example, who do you think is their major competition that is going to get the business? And why would they get it rather than ERES?

      • Does this jive with your contention? From the Q&A...

        (Jonathan): Okay. Fair enough. Just a second question if you could talk a little bit about your � you talked about it a little bit before � but a little more detail maybe of your competitive position and if you have any insights into maybe what your, you know, the next two or three largest of your competitors are doing in this kind of paused period we�re in right now.

        44:20 �

        (Joe): I believe that from a competitive standpoint we really do stand alone. And by that I mean that our primary focus is the collection of the cardiac safety as well as the clinical data. And that�s our primary focus. We�ve built a terrific infrastructure, we have patented technology, there are formidable barriers to entry particularly in the larger programs. And so our approach is that we�re ever-present. We�re competing for all of the business in terms of new compounds that are out there as well as later-stage programs and Thorough QT activity.

        What our competitors tend to do, and they really do it quite well is � a couple of our major competitors are CRO�s � and what they seek to do is to bundle up an integrated set of services on the clinical research work that they do for clients, and in so doing, they seek to provide a one-stop shop for the routine work in the clinical trials area, whether that be routine Phase I, Phase II and even Phase III. And they tend to compete, and it�s an interesting competitive environment, and most often there�s three competitors: eResearch and two others, and we never see the same two all the time. So (chuckle) at the end of the day on the Thoroughs, there�s always competitors, but it�s not necessarily the same ones.

        45:50 -

        And where the CRO�s are challenged, is that they have their own CPU�s, their own ClinPharm units. And so those ClinPharm units generally speaking are filled with the routine work. So they have more finite capacity as it relates to doing Thorough work. So the one-off (?) Thorough business is something that again, we think we have a distinct competitive advantage, by partnering up with the ClinPharm units that have thousands of beds available. So the war is really waged from the CRO perspective in bundling services for the work that they do in industry. And remember, the top two CRO�s in terms of size and volume, probably only work with, I want to say, less than 8% of all clinical development, so that leaves really 92% out there for everybody to go after directly.

        46:55 �

        The other avenue of competition is what I call the boutique vendor, that might be logistically in a good place, meaning a good geography, or they may have a certain customer set, and they�re able to provide a good level of service at a proper value.

        So we see a complete gamut of competitors. I feel very good about the fact that the competitors are still very interested in the market, in the sense that they, too, see that this market, once the guidance is ratified, and we move to the next step, that there is a significant and potential growth.

        (Jonathan): Thank you very much.


        Ps, the Q and A is long, maybe WBR will be able to post it on his site.

    • bingo..