Skip to main content
Premium Trial:

Request an Annual Quote

FEATURE: Companies Continue to Spend Despite Downturn in Markets

NEW YORK, March 26 –Applied Biosystems said last week that a drop in demand for its ABI Prism 3700 DNA Analyzers reflected genomics companies’ efforts to rein in spending while they ride out the economic downturn.

But conversations with a number of executives at development-stage genomics companies and consulting firms indicated that spending plans have not changed due to present market conditions.

“We don’t have any clients saying, ‘we’re going to hold up on purchases of new equipment because of the slowdown,’” said Richard Dweck, president of 3 rd Millennium, a genomics consultancy firm. “We would know because we’re the people who are tying these instruments into their infrastructure.”

In a conference call last week, Applied Biosystems attempted to partially explain its reduced short-term growth expectations by saying that customers for its high-end sequencers had become more cautious because they feared that they would not be able to raise more money in the near term.

“I know a lot of these people put a lot of money in the bank last year and have an awful lot of resources available to them,” Tony White, CEO of Applera, Applied Biosystems' parent company, said. “We've talked to some of our customers who basically said their concern is that   their ability to go back and get more is going to be limited for a while and therefore they think they need to conserve capital.” 

Applied Biosystems declined to disclose the names of customers for the 3700 sequencers that had altered their spending plans, but analysts who cover Applied Biosystems named Genaissance Pharmaceuticals as one of the companies that had cancelled an order for a number of the instruments.

However, several months ago, long before the downturn caused people to speculate that capital expenditures would decline, Genaissance, which went public in 2000, told GenomeWeb that it no longer expected to increase the number of its sequencers beyond 59 since a new Applied Biosystems’ productivity pack had helped to make their machines 50 to 100 percent more efficient.

Some industry players attributed the perceived drop in demand for brute force sequencers to the fact that the nature of the sequencing business is changing.

“A lot of the companies that were buying 3700s were focused on the human. As the human gets done there is less sequencing [demand],” said Todd Smith, CEO of Geospiza, a company that offers tools to manage sequencing data. “Sequencing is going to continue to grow for a while but probably not at the same rates.”  

Smith said he had spoken with academic labs as well as pharmaceutical companies that were now more interested in equipping their core labs with the lower throughput but cheaper ABI Prism 3100 Genetic Analyzer. The 3100 sells for $100,000, compared with $300,000 for a 3700, and is considered to be more appropriate for smaller, less demanding sequencing projects because it   can be stopped and restarted. The 3700 functions best when it runs around the clock, Smith said.

Analysts also said that they had seen sales of 3100s increase.

“Sales are better than expected,” said Winton Gibbons of William Blair, who noted that Applied Biosystems was recording double-digit sales of the 3100 sequencers albeit on a relatively small customer base.

Applied Biosystems declined to comment on the breakdown of its sequencing business, as did competitor Amersham Pharmacia Biotech, which is in a quiet period due to its pending initial public offering. Beckman Coulter did not return calls for comment.

There was, however, no anecdotal evidence that companies were adopting more conservative spending habits for instrumentation or other outlays due to the current economic slowdown. Companies that raised money in 2000, including Orchid Biosciences, Variagenics, and Compugen, all said that they were still planning to go ahead with their original spending plans.

“We have plans to purchase a variety of lab equipment…we’re buying some sequencers and those plans are in place,” said Rick Shea, CFO of Variagenics, which raised over $100 million last year. “Our plans haven’t changed.”

In fact, Compugen even said that it might step up its spending as it reaps one of the benefits of the slowdown. Chairman Martin Gerstel said that over the past year the company had difficulty finding qualified sales and marketing people because the economic climate favored the creation of new companies. Now, however, he said fewer companies were being launched, allowing Compugen and others to select employees from a bigger pool.

“We will be spending more money than we would have if the market had stayed up,” said Gerstel, noting that the company was planning to double its sales and marketing team to 25 by the end of the year. “People are now available.”

The Scan

Shape of Them All

According to BBC News, researchers have developed a protein structure database that includes much of the human proteome.

For Flu and More

The Wall Street Journal reports that several vaccine developers are working on mRNA-based vaccines for influenza.

To Boost Women

China's Ministry of Science and Technology aims to boost the number of female researchers through a new policy, reports the South China Morning Post.

Science Papers Describe Approach to Predict Chemotherapeutic Response, Role of Transcriptional Noise

In Science this week: neural network to predict chemotherapeutic response in cancer patients, and more.