The bioinformatics software sector may be in better shape than you think it is. While the recent financial struggles of publicly traded bioinformatics firms have been well documented, it turns out that the performance of these firms is not representative of the sector as a whole: A recent BioInform survey found that more than half of the privately traded software companies in the space broke even or were profitable in 2003.
BioInform took to the phones during February and March to gather data on the privately held companies that make up the majority of the market, but are not required to disclose their financial records. In total, 97 private firms shared information under the condition that financial data for individual companies not be disclosed. (BioInform combined the data obtained from the survey with that provided by four public firms — Accelrys, Compugen, Invitrogen subsidiary InforMax, and Lion Bioscience — for a total of 101 companies). Of the firms in this private-public group, 48 reported that they were profitable in 2003, and four said they broke even or were cash-flow-neutral for the year. Among the remaining firms, hopes are high for 2004: 22 said they expect to reach break-even by the end of this year (see p. 9 for more details on the sector’s profitability goals).
BioInform’s survey focused only on a very narrow segment of the bioinformatics market in an attempt to gauge the performance of software and software-related services firms. Therefore, much of the broader life science informatics sector — including consulting companies, database providers, IT vendors, and cheminformatics firms — was not included (a complete list of the 101 companies in the survey is available at http://www.bioinform.com/companies.htm). The resulting cross-section of the market is small and highly fragmented. BioInform broke the sector down into 12 subcategories: DNA/protein sequence analysis (23 companies); microarray/gene expression analysis (26 companies); proteomics software for mass spectrometry and/or 2D gel analysis (5 companies); structural proteomics (6 companies); pathway analysis (6 companies); genetic variation analysis (6 companies); cellular simulation (6 companies); ontologies (2 companies); text mining (8 companies); workflow management /data pipelining (5 companies); data integration (3 companies); and multiple products (5 companies).
Categories were assigned rather loosely, based on companies’ flagship technologies or products, and also based on which firms they considered to be their primary competitors. Silicon Genetics was the most frequently cited competitor — with 13 companies listing the company as their primary rival — followed by InforMax (cited 12 times as a primary competitor), Accelrys (11 citations), and Ingenuity (9 citations). In-house software development (12 citations) and academic freeware (8 citations) were also cited frequently as competition for commercial bioinformatics software firms.
BioInform contacted several additional software companies who either declined to participate or did not respond (Biotique Systems, DNA Software, Imaxia, Protein Pathways, Scientific & Educational Software, Acero, and Biosift), so they are not included in any of the analysis that follows. In addition, a number of firms who shut their doors or were acquired in 2003 were not included, among them Aneda (acquired by QbioCom), BioLab Software, Enodar, Silico Informatics Systems, Science Factory, X-Mine, and Xpogen.
Nearly two-thirds of the companies surveyed (63) are based in the US, with California the most popular state for company headquarters (23). Out of the 24 companies based in Europe, seven companies are in the UK and six are in Germany. Five companies in the sector are based in India.
A full breakdown of the survey data appears on the following pages.
Young, Small, and Scrappy
The commercial bioinformatics sector is still young, and is relatively small. Only six companies out of 101 were founded in 1990 or before, and around 90 percent of the companies in the market are less than a decade old. Nearly a quarter of the sector — 23 companies — was formed in the short-lived bioinformatics boomlet in 2000. New launches dropped off steadily to 14 in 2001, 12 in 2002, and 7 in 2003.
Including publicly traded firms, which tend to have higher headcounts, the total number of people employed in the sector is only around 2,400. This breaks down to an average company size of 24 employees based on the 101 firms included in the survey, but the average is misleading due to bias from those few larger firms: The vast majority of companies in the sector — 65 companies — actually employ 20 people or fewer. Seven companies are one-man (or woman) shops.
Average company size varied widely among subsectors. In the genetic variation category, for example, the average company size was only 7 people, while the average for companies selling multiple products was 188. The multiple product category employs the most people in the sector — 942 (including Accelrys’ 540 employees) — followed by the microarray analysis category, which employs 746 people.
Small size is correlated with profitability in the bioinformatics market. Of the 52 firms that reported being in the black for 2003, 22 employed 10 people or less, and 12 employed between 11 and 20. Only seven of the 15 companies that employed more than 50 people were profitable in 2003. Of course, many smaller firms have little choice. As one respondent explained, “We have to be profitable — we have no venture capital funding.”
Companies provided revenue information for 2003 within ranges (see charts, p. 8), with the most common response being $1 million to $5 million in revenues for the year, which just over a quarter of firms in the sector (26) claimed. The second most common response was $100,000 to $500,000 in revenues for 2003, reported by 22 companies. Among the larger subsectors, eight companies in the sequence analysis category (35 percent of the subsector) reported 2003 revenues of $1 million to $5 million, and 6 companies (26 percent) reported revenues of $100,000 to $500,000. For microarray analysis, the largest chunk of firms (8 companies, or 31 percent of the category) reported revenues of $100,000 to $500,000.
Three firms said they had no revenues at all for the year, while only one company earned more than $50 million.
— BT and JK