CRA » Topics » We are changing our marketing strategy for our clinical laboratory testing services, and our new strategy could harm our revenues.

This excerpt taken from the CRA 10-Q filed May 11, 2009.

We are changing our marketing strategy for our clinical laboratory testing services, and our new strategy could harm our revenues.

In the past, we focused on actively marketing our clinical laboratory testing services to accounts that referred large volumes of specimens for our services. We believe that the continued growth of our clinical laboratory services requires a change to our sales strategy, moving away from a focus on large-volume accounts and instead implementing an approach that includes developing local market territories and selling non-blood based genetic testing services to accounts on a more disbursed basis. We are currently implementing this new strategy. As a result of this change, we expect to reorganize our existing sales, marketing and clinical operations for our laboratory testing services based on market demand and our ability to implement the use of telephone and internet technology. These organizational changes may harm the business we currently receive from our existing accounts, may not be successful in generating business from new accounts and may cost more to effect than we anticipate.

Our rights under the split-off agreements we have entered into with Applied Biosystems (now Life Technologies) may be less favorable to us than if we had remained a business segment of Applied Biosystems (now Life Technologies) and the terms of our master purchase agreement we have entered into with Applied Biosystems (now Life Technologies) may be less favorable to us than if it had been negotiated with an unaffiliated third party.

The terms of the split-off agreements we have entered into with Applied Biosystems (now Life Technologies) may be less favorable to us than if we remained part of Applied Biosystems (now Life Technologies). For example, some of the intellectual property rights are being made available to us on a non-exclusive basis through the master purchase agreement, which also covers materials currently provided to us by Applied Biosystems (now Life Technologies) used in our products and services and research and development, as well as future Applied Biosystems (now Life Technologies) materials. The master purchase agreement provides for current pricing for all materials and components for the first year after the split-off, with price increases during each subsequent year of the agreement subject to a combination of the Producer Price Index and Employment Cost Index. This could result in us paying more for these products than if we remained part of Applied Biosystems (now Life Technologies). In addition, Applied Biosystems (now Life Technologies) has licensed to us specified intellectual property rights which we and Applied Biosystems (now Life Technologies) will seek to license to various third parties in the human in vitro diagnostics field. Revenues from these third-party licenses will be shared equally between us and Applied Biosystems (now Life Technologies). We currently have a limited right to license this intellectual property to third parties in the human diagnostics field and receive all revenues from these licenses. This could result in us receiving less from these licenses than if we remained part of Applied Biosystems (now Life Technologies).

 

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In addition, we have negotiated our split-off agreements, including our master purchase agreement, with Applied Biosystems (now Life Technologies). Had these agreements been negotiated with unaffiliated third parties, their terms might have been more favorable to us.

This excerpt taken from the CRA 10-Q filed Nov 12, 2008.

We are changing our marketing strategy for our clinical laboratory testing services, and our new strategy could harm our revenues.

Until recently, we have focused on actively marketing our clinical laboratory testing services solely to accounts that referred large volumes of specimens for our services. We believe that the continued growth of our clinical laboratory services requires us to change our sales strategy, moving away from our sole focus on large-volume accounts and instead developing local market territories comprised of at least one large volume account and additional lower volume accounts located near the large-volume accounts. We have already started to implement this new marketing strategy within each of our sales territories and believe that it should be implemented over the next several years. As a result of this new strategy, we expect to relocate most of our existing clinical educators and develop centrally-located sites, referred to as 4myheart Centers, for the delivery of disease management and patient education services and patient resources. These new 4myheart Centers will be developed based on market demand. Accordingly, we cannot predict the number of new 4myheart Centers that will be developed in any given year. In addition, because each new 4myheart Center is expected to have a unique service offering tailored to its particular market, and the costs of operating these centers will vary from market to market, we are unable to forecast the investment required to develop or operate these new centers. The primary duties of our clinical educators are to educate our patients in areas such as nutrition, exercise, stress reduction, and medication compliance. These marketing and organizational changes may harm the business we currently receive from our existing accounts, and under our new strategy we may not be successful in generating business from new accounts to the extent anticipated.

Our rights under the split-off agreements we have entered into with Applied Biosystems may be less favorable to us than if we had remained a business segment of Applied Biosystems and the terms of our master purchase agreement we have entered into with Applied Biosystems may be less favorable to us than if it had been negotiated with an unaffiliated third party.

The terms of the split-off agreements we have entered into with Applied Biosystems may be less favorable to us than if we remained part of Applied Biosystems. For example, some of the intellectual property rights are being made available to us on a non-exclusive basis through the master purchase agreement, which also covers materials currently provided to us by Applied Biosystems used in our products and services and research and development, as well as future Applied Biosystems materials. The master purchase agreement provides for current pricing for all materials and components for the first year after the split-off, with price increases during each subsequent year of the agreement subject to a combination of the Producer Price Index and Employment Cost Index. This could result in us paying more for these products than if we remained part of Applied Biosystems. In addition, Applied Biosystems has licensed to us specified intellectual property rights which we and Applied Biosystems will seek to license to various third parties in the human in vitro diagnostics field. Revenues from these third-party licenses would be shared equally between us and Applied Biosystems. We currently have a limited right to license this intellectual property to third parties in the human diagnostics field and receive all revenues from these licenses. This could result in us receiving less from these licenses than if we remained part of Applied Biosystems.

In addition, we have negotiated our split-off agreements, including our master purchase agreement, with Applied Biosystems. Had these agreements been negotiated with unaffiliated third parties, their terms might have been more favorable to us.

This excerpt taken from the CRA 10-K filed Sep 8, 2008.

We are changing our marketing strategy for our clinical laboratory testing services, and our new strategy could harm our revenues.

Until recently, we have focused on actively marketing our clinical laboratory testing services solely to accounts that referred large volumes of specimens for our services. We believe that the continued growth of our clinical laboratory services requires us to change our sales strategy, moving away from our sole focus on large-volume accounts and instead developing local market territories comprised of at least one large volume account and additional lower volume accounts located near the large-volume accounts. We have already started to implement this new marketing strategy within each of our sales territories and believe that it should be implemented over the next several years. As a result of this new strategy, we expect to relocate most of our existing clinical educators and develop centrally-located sites, referred to as 4myheart Centers, for the delivery of disease management and patient education services and patient resources. These new 4myheart Centers will be developed based on market demand. Accordingly, we cannot predict the number of new 4myheart Centers that will be developed in any given year. In addition, because each new 4myheart Center is expected to have a unique service offering tailored to its particular market, and the costs of operating these centers will vary from market to market, we are unable to forecast the investment required to develop or operate these new centers. The primary duties of our clinical educators are to educate our patients in areas such as nutrition, exercise, stress reduction, and medication compliance. These marketing and organizational changes may harm the business we currently receive from our existing accounts, and under our new strategy we may not be successful in generating business from new accounts to the extent anticipated.

Our rights under the split-off agreements we have entered into with Applied Biosystems may be less favorable to us than if we had remained a business segment of Applied Biosystems and the terms of our master purchase agreement we have entered into with Applied Biosystems may be less favorable to us than if it had been negotiated with an unaffiliated third party.

The terms of the split-off agreements we have entered into with Applied Biosystems may be less favorable to us than if we remained part of Applied Biosystems. For example, some of the intellectual property rights are being made available to us on a non-exclusive basis through the master purchase agreement, which also covers materials currently provided to us by Applied Biosystems used in our products and services and research and development, as well as future Applied Biosystems materials. The master purchase agreement provides for current pricing for all materials and components for the first year after the split-off, with price increases during each subsequent year of the agreement subject to a combination of the Producer Price Index and Employment Cost Index. This could result in us paying more for these products than if we remained part of Applied Biosystems. In addition, Applied Biosystems has licensed to us specified intellectual property rights which we and Applied Biosystems will seek to license to various third parties in the human in vitro diagnostics field. Revenues from these third-party licenses would be shared equally between us and Applied Biosystems. We currently have a limited right to license this intellectual property to third parties in the human diagnostics field and receive all revenues from these licenses. This could result in us receiving less from these licenses than if we remained part of Applied Biosystems.

In addition, we have negotiated our split-off agreements, including our master purchase agreement, with Applied Biosystems. Had these agreements been negotiated with unaffiliated third parties, their terms might have been more favorable to us.

 

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