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Patrick Springer, Published March 27 2012

Research firm Cetero says filing for Chapter 11 merely strategic move

FARGO – Cetero Research should emerge from bankruptcy reorganization stronger, and its center here will remain open and expects to add staff, a company spokeswoman says.

“The Fargo operations will remain intact,” April Johnson, Cetero’s vice president for business relations, said Tuesday. “We don’t anticipate laying (workers) off. In fact, we’re hiring in Fargo and the other centers.”

Cetero conducts research for drug companies. Its Fargo operations, formerly PRACS Institute, employs almost 400 and last year paid $9.5 million to 7,400 study participants, according to company figures.

The bankruptcy filing on Monday followed turmoil for the firm last year with reports that chemists in its Houston center falsified pay records.

As a precaution, the Food and Drug Administration warned drug makers that drugs tested by Cetero might have to be re-evaluated, Johnson said.

The decision to file for bankruptcy was intended to allow a buyer to step forward and take over the company “free and clear of any liens or claims,” she said. “It was a strategic decision,” Johnson added, “not a financial one.”

Cetero, based in Cary, N.C., does not have plans to spin off any of its seven research centers and is looking for a buyer to take over the entire operation.

“Cetero will have new owners in the next three to four months, but it’s not going to be in pieces,” Johnson said. “Cetero is interested in being sold in its entirety, as a whole.”

She added of the pending sale: “It actually is an opportunity to grow the business, including the Fargo site.”

Cetero, which has almost 400 employees in Fargo, last fall hired an investment bank, Jeffries & Co., to help it explore a sale and also has been dealing with “a very well-known, very successful private equity firm.”

James Carlson, a founder of PRACS Institute and a former Cetero board member, echoed Johnson’s assurances that the Fargo center’s operations and staffing levels appear bright in spite of the company’s financial difficulties.

“What I can tell you is the Fargo location is highly critical to both the industry and Cetero,” Carlson said. “I don’t think the Fargo-Moorhead community has anything to worry about and, more importantly, the staff doesn’t have anything to worry about.”

Carlson would not comment about whether he has any ventures pending. Some have speculated that he could try to assemble a group of investors to purchase Cetero.

Both Carlson and Johnson said reviews of Cetero’s testing at its Houston lab have confirmed the results.

“The science was still solid,” Carlson said, in spite of the falsified pay records. “There was no sacrifice of scientific integrity. It was strictly time clock.”

PRACS Institute was established in Fargo in 1983. It was sold in 2006 and merged with other firms to form Cetero, which has 1,140 employees in locations in seven cities in the United States and Canada.

Cetero is involved in early-stage drug testing, and last year announced that it had conducted more than 20,000 clinical pharmacology studies, more than any other contract research organization.

Its Fargo center has conducted studies for drugs to treat conditions including asthma, allergies, diabetes, arthritis and osteoporosis.

One of the thousands of study participants in Fargo is Stephanie Quernemoen, who has taken part in seven or eight studies in recent years.

“I have a full-time job, but I do Cetero studies as an extra source of income to pay for things like college loans and vacations,” she said.

“I hope Cetero does not close in Fargo,” Quernemoen added, noting she would search for another source of extra income, possibly donating plasma.

Anne Hinrichs agreed that Cetero is a good source of extra income for many in the area.

“I’ve done many studies with Cetero Research over the last several years,” she said. “Although the funds I’ve earned are more for ‘fun’ or helping pay off those extra bills, I enjoy doing a study now and then.”

Satish Chandran, director of the Center for Biopharmaceutical Research and Production at North Dakota State University, said the Cetero center is a crucial element in Fargo-Moorhead’s efforts to establish itself as a research hub.

“To lose that and reconstruct that would be a difficult challenge; it would be an immense challenge,” he said. “It would immensely hurt all the plans we have for the region. It’s an important part of the cluster.”

Don Berg, executive vice president of business development at the Greater Fargo Moorhead Economic Development Corp., agrees Cetero has a crucial role in the area’s research future.

“They really are the cornerstone of the bioscience industry here in the region,” Berg said. “They have a long history here. They mean a tremendous amount to us.”

Berg, who worked in the biotechnology industry before he recently joined the development group, said he believes the Fargo center is one of Cetero’s jewels.

“I think it was one of the top labs, if not the top center, in the Cetero system,” Berg said. “They have a tremendous track record in the biotech industry.”

Readers can reach Forum reporter Patrick Springer at (701) 241-5522