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As Part of Affy, Neomorphic s Drug Dream Still Alive

NEW YORK, Oct 2 - First it dropped the word software from its name as it reinvented itself into a computationally-driven drug-discovery company. Now the name Neomorphic is destined for the dustbin of corporate history as it is swallowed up by chipmaker Affymetrix (Nasdaq: AFFX).

But by swapping its shares for about $70 million dollars worth of the chipmaker’s stock, the software-provider-turned-drug-discovery-company also swaps its name for one that carries “instant critical mass,” Neomorphic executive vice president David Pritchard said.

Becoming the Berkeley branch of Affymetrix may not kill Neomporphic’s lofty drug discovery ambitions. It may actually further them in the long run.

“If anything this will make it easier for us to put together the kinds of scientific collaboration that we were trying to do on our own,” said Pritchard.

“When we go in and knock on the door at Pfizer and say ‘Hi, we’re Neomorphic’ they’ll look at us and say, ‘who the hell is Neomorphic?’” On the other hand, “Affy’s already got those relationships,” he said.

For now Neomorphic’s bioinformatics expertise will simply serve to round out the Affymetrix GeneChip with click through Internet-based access to underlying biological information of array results.

“I have heard comments from Affy’s customers saying that ‘gee we have all this wonderful data—we don’t know what to do with it.’ And we can certainly address that,” said Pritchard.

“It’s true there is more of the tool provider element here,” said Neomorphic CEO Cyrus Harmon. “But over time we will be able to do things in the collaborative discovery mode that we were moving towards at Neomorphic.” Harmon will assume the position of vice president of computational genomics.  

But whether or not Affymetrix will pursue drug development collaborations with big pharmaceutical companies, the acquisition is a big leap for the three-year-old Neomorphic, which got its start with license fees from SmithKline Beecham (NYSE: SBH) for software Harmon and the company’s co-founders developed as University of California, Berkeley graduate students.

The deal, expected to close by the end of this month, represents a windfall for the 30-year-old CEO of a company that only brought in $2.6 million in revenue last year.

“What we didn’t want was to just take their money, because a dollar from Affy is just going to be worth a dollar. But a share from Affy could be worth two or three times its current value a year or two from now,” said Pritchard.

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