Lumera, a Bothell, Wash.-based company best known in the life sciences space for its protein array-analysis technology, last week announced that it plans to close the Plexera subsidiary it founded last year in order to merge with electro-optics firm GigOptix.
Since it was founded in 2000, Lumera has focused on developing optical network components based on electro-optic polymer materials. In 2006, the company formed a bioscience business unit to apply its organic polymer technology to the life-science market, and this led to the formation of Plexera Bioscience last July (see BAN 7/24/2007).
The company, which is laying off all of Plexera’s staffers and is currently seeking a buyer for the subsidiary’s assets, had placed early-access versions of the Plexera KX5 System, formerly known as the ProteomicProcessor instrument, at labs at the Medical University of South Carolina, Harvard Medical School, Baylor Institute of Immunology in Houston, Tex., and the Institute for Systems Biology in Seattle.
As recently as February, Plexera was touting the KX5 as a replacement for the internally developed protein-array platforms commonly used in pharmaceutical R&D (see BAN 2/5/2008). However, according to company officials, the funding necessary to push the system into the market just wasn’t there. Instead, Lumera has decided to focus solely on electro-optics, and to merge with GigOptix, retaining the GigOptix name, and listing on the Nasdaq market.
Joseph Vallner, interim CEO of Lumera, told investors and analysts during a call discussing the merger that he expects the deal to close in the third quarter. He said that the decision to close Plexera came as the “culmination of the Lumera board of directors’ strategic evaluation of [the company’s] positioning in both the electro-optic and life science tools marketplaces.”
Vallner said that before deciding to shutter Plexera, Lumera’s board had to assess the risks, the capabilities, and the resources available to see both of Lumera’s business units through to profitability. The review led the board to conclude that it made more sense to invest in the electro-optics business rather than the life-sciences business.
According to Vallner, Lumera had estimated that it would require between $6 million to $8 million to complete and launch the Kx5 this year as intended, plus a similar amount in 2009 to develop “high value arrays” that would ultimately return the large investment into Plexera. He added that undisclosed “technical issues” had forced the company to delay a full commercial launch of the instrument.
Lumera had $7.1 million in cash and cash equivalents as of Dec. 31, 2007. Vallner said that one of the reasons the company founded the Plexera subsidiary last summer was to open it up to strategic alternatives, including combining with, or winning additional investment from, a partner. He added that Lumera also considered “traditional funding sources” for the subsidiary, but that ultimately “the search has been without success.”
Burn Rate
Based on the impact the investments in Plexera were having on Lumera’s funding options for its eletro-optics business, the company therefore decided to halt investments in the subsidiary immediately. Lumera, which is seeking a buyer for Plexera’s assets, now finds itself in the position of other companies that have exited the microarray market over the last year and a half, such as GE Healthcare and Nanogen (see BAN 1/2/2008), which have had to offload array assets after years of R&D work
During the call, Chief Financial Officer Peter Biere said that the company is now seeking a buyer for Plexera’s assets as well as the intellectual property related to the Kx5 system. He did not discuss what kind of value those assets may have.
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“We are, in fact, laying off the entire workforce.” |
“I think it's fair to say we've been very focused [on evaluating] different opportunities, partnering, the potential sale of the business, or even conventional financing,” Biere said. “The markets are tough, we don’t know what the valuation is going to be and I think the board's decision really has to stand on its own.”
As a consequence of the shutdown, 23 Plexera employees and six corporate employees will lose their jobs, according to Lumera. “We are, in fact, laying off the entire workforce,” said Biere. “But the burn rate of shutting down Plexera is that we'll spend less cash than we would if we were operating it,” he said. “The net shutdown cost will be less than operation.”
According to Hélène Jaillet, Lumera’s head of investor relations, all of the employees that have been laid off are located at the firm’s office in Bothell. Lumera will retain around 30 of its employees who are associated with the electro-optics business.
Jaillet told BioArray News this week that it was “too early to say” how Lumera will manage to market Plexera’s assets. Another question is how the firm will support projects underway at its four early-access sites. “These questions are still being decided,” she said. “I can't say for sure how things will happen.”
For users like MUSC’s Craig Beeson, the hope is that Lumera will be able to offload the Kx5 to another firm that can support the projects of existing users as well as develop the technology.
“We have been working on antibody arrays with a focus on proteomic analyses of cellular stress responses,” Beeson told BioArray News in an e-mail this week. He said that one of Plexera’s strengths is that it is an open system and that he has made modifications to the system that will enable users to continue current research projects even without Plexera’s support. Overall, Beeson gave the system high marks.
“We are able to cope but if this is to be the end of further development of their technology, it will be a tremendous loss because it is the best we have worked with — truly enabling,” he said. “However, we are hopeful and confident that the Plexera technology will survive one way or another.”
Baylor’s John Connolly told BioArray News this week that he has been using the Kx5’s surface-plasmon-resonance imaging system to detect cytokines and chemokines in human biological samples.
“We are interested in using this label-free method to detect changes associated with human diseases like cancer,” he said. Connolly’s lab is currently using fluorescence-based detection in its assays, but had been transferring the assays to the Kx5 to take advantage of the SPR imaging.
Connolly said that he has been in touch with Lumera since last week’s announcement, but that since he has a system installed and his own support, his lab can “certainly continue with development.” He said that if the technology does not find a new home, he could transfer his assays to a system that also uses SPR, such as platforms sold by Biacore or Bio-Rad.