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Cellomics Increases Focus on Customer Service and Support in Wake of Recent Restructuring

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Cellomics, the privately owned Pittsburgh-based company that is credited with inventing high-content cellular screening, recently laid off up to a quarter of its workforce as part of a restructuring plan to focus more on customer service and support, Inside Bioassays learned last week.

Sources close to Cellomics, who asked to remain anonymous, said that the company laid off approximately 20 employees in August, and three more in September. Dan Calvo, president and CEO of Cellomics, last week declined to disclose the exact number of employees released by the company, though he told Inside Bioassays that the number was “well below 20.” The company currently employs approximately 60 people, he added.

“The real crux of this restructuring was about redeploying our current resources to focus on customer service and support, and also more on applications of our current products,” Calvo said. “There was some cost reduction as part of this redeployment, but along the lines of the first goal, we are actively recruiting in Europe and in the US for field people right now.”

Calvo said the lay-offs were “fairly scattered” among the company’s divisions. “Obviously, if you look at our organization, the highest percentage people-wise we have is in R&D, but we didn’t take an inordinate amount out of any one group,” he said.

News of the lay-offs surprised industry insiders. Cellomics has been as busy this year as almost any company in the cell-based assays arena building alliances, launching products, and attending conferences.

It is unclear whether the staff cuts are indicative of larger financial distress at the company, but the situation is not new to Cellomics. After withdrawing a $60 million IPO in October 2001, the company has struggled to put black ink in the ledgers, and has twice initiated company-wide layoffs in an attempt to right the ship.

In January 2002, a year in which Cellomics closed a $15 million round of private-equity financing, the company laid off about 50 of its nearly 200-person staff. Nine months later, it let go an additional 25 percent of its workers.

The following year was much quieter for Cellomics as it stepped up its strategy of making HCS more broadly available to the drug-discovery and research communities, with initiatives such as opening an HCS “center of excellence” and offering HCS 101 classes to its customers.

In January this year, Cellomics announced the completion of additional financing worth $5.3 million. Calvo said that although it wasn’t an official financing round, many of the investors from previous rounds were on board, including Carl Zeiss MicroImaging, Oxford Bioscience Partners, Vector Fund Management, and others.

“That was more of a balance sheet restructuring, and at the same time … some of the internal investors pumped a little bit more in to give us some working capital cushion,” Calvo said. “It was basically debt-to-equity conversion that changed the shareholder ownership structure, and at the same time, there was influx from those same investors who were getting additional shares based on some debt-to-equity.”

Although Calvo confirmed that the company has not yet reached profitability, he said that the August restructuring was anticipatory, adding that Cellomics “exceeded our Q3 forecast just coming out of the end of September,” and “feels very good about hitting our profitable financial milestones in Q4.”

“Certainly, because of Cellomics’ history, what we didn’t want to do was get into a position where we were not able to pay our bills,” Calvo said. “So the cost reduction aspect was really more preventative rather than a knee-jerk reaction. And we wanted to look at the world conservatively and anticipate concerns as opposed to having to react in real time or after the fact. But from a financial aspect, we feel very confident about finishing the year strong and as a profitable company.”

In terms of product sales, Cellomics has recently been quite busy building up the analysis and informatics portions of it product offerings. In August, it signed an agreement with IBM to develop a storage and management platform for its high-content screening instrument (see Inside Bioassays, 8/17/2004). And late last year, the company penned a deal with EMC to make Cellomics’ ArrayScan plate reader compatible with EMC’s Centera content addressed storage device (see Inside Bioassays, 4/27/2004).

But it appears as if its stated plan to focus more on customer service and support is designed to further boost its product offerings in this particular area, as opposed to its hardware, which Calvo said is still selling at a brisk pace.

“I’m not here to tell you we’re not selling software to our installed base — just not at the levels projected,” Calvo said. “Because we have such a large installed base, if you talk to others in this field, who might have an installed base of 10 or 20 or 30, the revenue from that group is much more trivial than when you have the installed base that we have.

“The other dynamic we’re seeing [is] that there’s price pressure on the initial [software] package as well, due either to competitive pressures or budget pressures,” he added. “And while people are investing in HCS and Cellomics as projected, the dollar per placement [related to software] is not at rates that we had projected.”

As evidenced by its large installed customer base, the company’s technology and intellectual property portfolio has a great deal of value as the high-content screening boom is just beginning to take hold in the drug discovery arena. But as Cellomics’ headcount dwindles, it might be morphing into an attractive acquisition target.

Calvo maintained that Cellomics is not actively seeking merger or acquisition partners, but he said interest is palpable. “As this market has gotten hot, and … given the activity of some players recently, certainly we’re getting calls fairly routinely,” Calvo said. “I think our licensing initiatives, and therefore the value of our intellectual property, has also gotten people’s attention.

“Since we have a very strong partnership strategy already, we clearly see the need to work with certain companies to enhance our overall solution capabilities, and one area in particular is in the area of reagents,” Calvo added. “So we’re in various discussions with various reagent companies, and how those discussions transcend to broader things remains to be seen.”

—BB

 

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