Accelrys is counting on its recently launched Discovery Studio 2.0 software suite to reverse a trend of declining revenues in its life science software business, company officials said this week.
Accelrys began shipping Discovery Studio 2.0 in mid-October [BioInform 10-19-07]. This week, in a conference call to discuss the company’s fiscal second-quarter 2008 earnings, Accelrys CEO Mark Emkjer called the launch “one of the most significant software releases in our company’s history” and the “largest single release Accelrys has ever delivered.”
The company is counting on the new product to revitalize its revenue base as it heads into what is historically its strongest quarter for renewals.
Accelrys CFO Rick Russo said during the call that the company is “optimistic” that Discovery Studio 2.0 will help “stem the erosion of our legacy life science products by the end of fiscal 2008, and that this, combined with the growth from our remaining product lines, will result in overall order intake growth for the company in the fourth quarter of the current fiscal year,” which ends March 31, 2008.
For the three months ended Sept. 30, revenues dipped to $19.7 million from $20.2 million for the same quarter of the previous year, marking the latest in more than a year’s worth of flat or declining quarterly revenues.
Officials again blamed the decline on lower overall order rates, and an expected fall-off in revenues for “sunsetted” products. This decline offset strong quarterly sales for SciTegic Pipeline Pilot, which Russo said is seeing growth of approximately 40 percent this year.
“We believe this erosion has resulted from a combination of continued cutbacks in the early discovery research phase of many of the big pharma companies, and expected pressures on renewal orders,” Russo said.
“Now that we have released Discovery Studio 2.0, we expect this pressure on our renewals to ease over the next few quarters, as we are able to demo the new releases in advance of the renewal base,” he said, adding that Accelrys expects the product to drive “improvement on the renewal side for all the legacy products.”
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Emkjer said that the release of Discovery Studio 2.0 “completes the reconstruction, integration, and modernization of our entire suite of life sciences offerings.”
“Now that we have released Discovery Studio 2.0, we expect this pressure on our renewals to ease over the next few quarters, as we are able to demo the new releases in advance of the renewal base.”
Accelrys has been working through this “modernization” phase for more than three years, and the result — Discovery Studio 2.0 — brings the company’s flagship modeling and simulation software technologies together with its SciTegic Pipeline Pilot “scientific operating platform.”
Russo described the scientific operating platform as the “backbone” of the company’s broader strategy to offer the industry a “scientific business intelligence” solution.
Although this solution is expected to include many Accelrys products and services, Russo said that the success of Pipeline Pilot to date is “a good indicator of our success in providing scientific business intelligence solutions to our customers.”
Emkjer added that the company is making “progress” in this strategy. As an example, he said that during the quarter, Accelrys worked with “Spain’s largest pharmaceutical company” to develop a system to help researchers track the progress of drug candidates through a series of analytical experiments.
“Our solution will inhale data from numerous databases to include the laboratory information management systems at various sites, and track results, while providing a summarized status on their experiments,” Emkjer said. These summaries are in an “interactive dashboard” that is integrated with the scientific operating platform, he said.
“We believe this solution to be a repeatable opportunity across our client base,” Emkjer added, without providing further details.
For the quarter ended Sept. 30, product development spending fell to $4.3 million from $4.9 million in the prior-year period.
Net income increased to $1.6 million from $935,000 in the comparable period of 2006.
As of Sept. 30, Accelrys had $64.9 million in total cash, cash equivalents, restricted cash, and marketable securities.