AS THE HECTIC EARNINGS SEASON

draws to a close, investors and analysts can afford to think a bit more about long-term investments than quarterly upside surprises. Some of them are already looking at

SeraCare Life Sciences

SeraCare's business model can be divided roughly into two main categories: diagnostic testing, in which crude materials are sold to companies developing tests for viruses like HIV, hepatitis and West Nile Virus; and research services, in which databases of patients, tissues and genetic information are sold to other companies for the development of products like new drugs. Neither is as thrilling or as potentially lucrative as a hot new cancer drug, of course. But the steady business units create the conditions for consistent sales, with less overhead than most big biotechs or pharmaceutical companies.

Consider the Oceanside, Calif.-based company's latest earnings results. On Aug. 10, SeraCare reported second-quarter revenues of $14.2 million, up 123% from the year-ago period, and earnings of 16 cents a share, which matched First Call estimates and represented a 60% jump year over year. The company should post even stronger results next quarter, seasonally its best. First Call predicts revenues of $17 million and earnings of 18 cents a share, compared with $13 million and 15 cents, respectively, a year ago.

Why the surge? The company's crude-materials unit boomed. "Quite frankly, it seems like every year we're being reminded that there's always a new virus around the corner," says Barry Plost, the company's chairman.

Some investors are flocking to SeraCare's stock up 27.5% since May because of the small biotech's relatively diversified revenue stream. No single product accounts for more than 5% of its sales (see table). By contrast, most biotechs develop just a few products, while most large-cap pharmaceuticals sell big-name drugs that can make up more than 10% of their revenues. That model can backfire if a drug is unsuccessful, loses its patent exclusivity early or is proven toxic.

"No single product is going to drive [SeraCare] one way or the other," says Richard Watson, an analyst with William Blair & Co. "It really has an aggregate mix of products. The diversification really helps from a risk standpoint." (Watson doesn't own shares of SeraCare; William Blair has an investment-banking relationship with the company.)

Steve Brozak, an analyst at WBB Securities, says SeraCare's products have become popular resources for companies and researchers. SeraCare's customer base is "the gosh-darn Who's Who," he says. "It ranges from corporate to governmental to non-governmental. You go from Amgen to the CDC, to the U.N., back to the Red Cross."

Part of the reason SeraCare is so diversified is that it has made several large acquisitions in the last couple of years, including Boston Biomedica, a manufacturer of viral controls, in September and Genomics Collaborative, which managed a repository of genetic information and clinical data, in June 2004. "You're looking at a company that is the logical consolidator in this particular industry," says Brozak. "They've been acquiring operations left and right. You won't see a slow-down to this process." (Brozak doesn't own shares of SeraCare; WBB Securities doesn't have an investment-banking relationship with the company.)

SeraCare's acquisitions have given the company plenty of manufacturing capacity which it might put to use later this year with the emergence of a new blockbuster test. On June 27, researchers at the University of Maryland collaborating with SeraCare reported they had developed a test for bovine spongiform encephalitis, commonly known as mad cow disease. The new screening, the researchers say, is more sensitive than existing tests and, unlike the others, can be administered while the cow in question is still alive. In the event of an outbreak, the live animal would be helpful to epidemiologists looking to assess other animals' exposure to the disease.

"What we would look to do is go directly to the feed lots while the animals are still alive and test them prior to going to the slaughterhouse," says Plost, the company's chairman. "We think it's more efficient, more cost-effective and safer."

Analysts say the mad cow test, which could be approved by the Food and Drug Administration later this year, has big potential. Although a federal mandate by the FDA or the Department of Agriculture is unlikely, they say, the industry might adopt the test on its own to self-police or even to offer a kind of premium service. "All of the sudden, you have the possibility of a certification process that would allow foreign consumers, in addition to American consumers, to know that this beef has been tested," says Brozak. "And what's the premium on that? How do you quantify that?" Analysts haven't yet attached a dollar figure to the mad cow test's annual sales potential. But Brozak is highly enthusiastic about the diagnostic, which he calls "the icing" on the company's cake.

Since the announcement, at least two financial services firms have initiated coverage of SeraCare Thomas Weisel, with a Peer Perform rating, on July 11, and Brozak's WBB Securities, with a Buy rating, on July 31.

Imagine what they'll say when the test is actually approved.