Gene Logic can continue breathing a sigh of relief that its drug-repositioning business is safe.
The company last week disclosed that a recently completed external business review supports its decision to shift its focus from its floundering genomics business and onto drug repositioning.
Though the review confirmed that Gene Logic’s potential lies in its drug-repositioning business, the company said it will retain “core competencies” for its genomics products and services and will continue to support existing customers.
Also, Gene Logic said it will continue to give new customers access to its twin gene expression-reference databases, ToxExpress and BioExpress. The company said it will also make the assets from the genomics business available to other areas, such as drug repositioning, clinical biomarker development, and molecular diagnostics.
Lynn Kiefer, a Gene Logic spokesperson, said the end of the external review, which was contracted out to an undisclosed company, signals that Gene Logic has concluded the restructuring of its genomics business and that it doesn’t anticipate any more lay-offs associated with the business.
In August, Gene Logic said it would lay off approximately 80 staffers, or half of those employed in the genomics business. The lay-offs will take effect Oct. 5 and will cost $1.8 million in severance, the company said. The restructuring came after reporting a 44-percent decline in revenues for the second quarter, which was attributed to the weak performance of the unit (see BAN 8/8/2006).
Last week Gene Logic said the review “confirmed” the potential of its drug-repositioning business, and recent agreements with Pfizer, Organon, and Roche, confirm the industry’s acceptance of the business, the company said.
The company expects the preclinical services business to continue improving its operating margins and to narrow losses. The business has sufficient capacity as a result of facility expansions, the review found.
“We are looking at applications of our genomics technologies further downstream in the development process, such as in clinical applications,” Kiefer said. “Drug repositioning is an emerging market that has the potential to yield substantial long-term value through milestone and royalty payments. All the major pharmaceutical companies have stalled drug candidates that may benefit from repositioning, and all are interested in adding high-quality, late-stage drug candidates to their pipelines,” she added.
Still, the refocused Gene Logic will look to capitalize on its retained genomic products and services, according to Kiefer. She said specifically that the company hopes to take “advantage of business opportunities in areas such as clinical biomarker development and molecular diagnostics.” She did not elaborate.
Distant Early Warning
The first signal that the genomics business was in trouble came in June when Gene Logic announced it would conduct an external review after withdrawing its financial guidelines for the second quarter and full year 2006 and 2007 (see BAN 6/27/2006). The firm blamed lackluster sales in its genomics business.
Gene Logic had made similar pronouncements about the genomics business in the past (see BAN 2/28/2006). For example, in February, Qing Zeng, Gene Logic's senior marketing manager, told BioArray News that reference data was the company’s “bread and butter.” However, Kiefer said this week that changing market conditions had forced the company to reevaluate how it made its genomics assets available to customers.
Gene Logic had previously sold its databases as one package to larger pharmaceutical customers. Earlier this year, the company decided to chop the database up into smaller units to attract a smaller and more diverse clientele (see BAN 2/28/2006).
That decision was apparently not flexible enough to meet what Gene Logic sees as changing needs of the marketplace. “The genomics market has not failed, but the subscription model for genomics databases in target discovery has matured,” Kiefer explained. “We’ve seen the genomics market move to smaller, more flexible deal structures.”
This article originally appeared in BioArray News.