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Ciphergen Stock Slides on Restructuring News; Decline Eats Into Gains Made on Reorg Leaks

NEW YORK, Aug. 9 (GenomeWeb News) - Shares in Ciphergen Biosystems were down 6.11 percent, or $.14, at $2.15 in mid-afternoon trading after the company said it was restructuring its business and laying off 20 percent of its workforce.

 

The company made the announcement as it reported a 10-percent slide in second-quarter revenue, declining R&D costs, and a 30-percent reduction in net loss.

Typically, investors react favorably to companies that initiate cost-cutting measures. Today's decline also chips away at the 15-percent gain the shares have enjoyed since news of Ciphergen's reorganization was first reported on Aug. 2.

As GenomeWeb News reported today, Ciphergen yesterday confirmed it will lay off around 20 percent of its workforce during the fourth quarter. Sales and marketing, which will get the lion's share of the lay-offs, will be cut by 30 percent and represents around half of the current total workforce. R&D, manufacturing, and general and administrative costs will make up the remainder of the downsizing.

 

Ciphergen said it expects the move to save it around $2 million per quarter beginning in the fourth quarter.

 

The company said the reorganization is aimed at increasing its play as a biomarker-discovery ally, and said its recent deals with Bayer and Quest will be a catalyst for future growth. To that end, the company has promoted Gail Page, who headed the diagnostic division, to president and chief operating officer.

 

Ciphergen also said it will continue selling and servicing its SELDI instruments, and will look to generate revenue not only in the volatile pharma space but also in the highly contested academic market. In a conference call with investors and analysts, CEO Bill Rich said he believes the Quest alliance will help generate buzz in the academic market and encourage translational medical scientists to buy platforms.

 

Though Ciphergen is consolidating its two businesses, both units will continue to play a role in the company, Rich said. The discovery business will focus on biomarker discovery and validation as well as research assay development for collaborators and internal research. This unit will oversee sales and services.

 

The diagnostic unit, meanwhile, will be responsible for assay development, business development, and all internally funded BiomarkerDiscoveryCenterprograms, among other things.

 

Ciphergen has also restructured its customer service department. Its installed base, which comprises 600 customers, will now be overseen by a "centralized after-sale support" approach as opposed to a "non-centralized after-sale service" department." The immediate or foreseeable upshot for existing customers was not immediately clear.

 

On the earnings front, Ciphergen said second-quarter R&D spending fell to $3.6 million from $5.5 million.

 

Net losses fell to $9 million, or $.31 per share, from $13.1 million, or $.45 per share, year over year.

 

The company said it had around $21.3 million in cash and equivalents, and around $2.2 million in short-term investments as of June 30.

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