SFBC ( SFCC) investors might want to do a little math before they place any more bets on the company. Over the past two months, SFBC shares have nearly doubled off of their two-year low as newly installed leaders try to reinvent the company in the wake of a devastating expose by Bloomberg. The series raised major questions about early drug trials carried out at SFBC's clinic in Miami. Former employees, caught up in massive layoffs at the site, have since told TheStreet.com that business there has dried up in the wake of that negative publicity. Current management has attempted to downplay SFBC's operations in Miami and shift investor attention to the company's PharmaNet business instead. After all, PharmaNet leaders now run the show. And they have been quick to stress that the company's early-stage trials in Miami generate far less revenue than their own late-stage business at PharmaNet does. Specifically, they say that Miami accounts for just 15% to 20% of company revenue, as compared to 50% at PharmaNet. They have yet to show just how much the company depends on Miami for its earnings. But some short-sellers, who have combed through the company's financial reports and recent comments to investors, believe they have a clue. "Even if they lose just 25% of their business in Miami, or 5% of their total revenue, the hit to earnings would be huge," one said. SFBC itself has signaled that sales in Miami could drop by even more than that this year. So have some experts on Wall Street, who -- won over by new management -- have found themselves recommending the stock regardless. The news comes as SFBC is due to post fourth-quarter earnings after the bell Thursday. The company's media spokesman and investor relations firm both failed to answer questions for this story.
Two Cents' Worth
Without addressing the subject directly, SFBC has by now offered some hints about how valuable its early-stage trial business could be.