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The Bioinformatics Bubble Continues to Deflate: LifeSpan, SGX Latest Firms to Cut Staff

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Further proof of the bioinformatics sector’s ongoing adolescent crisis came in the now-familiar form of layoffs at two firms recently: Seattle-based LifeSpan Biosciences and Structural Genomix of San Diego.

LifeSpan was forced to lay off 12 of its 155 full-time employees and eliminate another 12 part-time and contract employees in a cost-saving move as it tries to raise additional capital, CFO Jim Sheppard told BioInform last week. Meanwhile, SGX told BioInform’s sister publication ProteoMonitor that it cut approximately 20 percent of its workforce as part of its transition to a drug discovery company.

The layoffs at LifeSpan, which Sheppard called “prudent management given current market conditions,” occurred across all divisions of the company, which is planning to close a $25 million round this fall, adding to $37.4 million raised since it was founded in 1995. Current investors include SAIC Venture Capital and equity4life.

At SGX, the layoffs were not associated with cutting costs so much as keeping in line with the budding industry perception that “bioinformatics” and “drug discovery” are incompatible concepts: Most of the layoffs at SGX occurred in the bioinformatics department, according to Eric de la Fortelle, Structural Genomix’ director of business development. “We measured the degree to which the employees contributed to the company’s central mission of drug discovery [and made cuts accordingly],” he said.

The departing employees, whose primary functions were determining the structure of previously uncharacterized proteins, will be replaced with chemists as the company shifts its resources toward crystallizing specific protein-ligand complexes in the search for promising lead compounds. “It would be fair to say we have many more targets than we can handle,” said CSO Stephen Burley. “We have so many on deck that I couldn’t justify maintaining considerable strength in bioinformatics when I needed the resources to recruit computational chemists and chemists.”

Burley said that SGX still retains “some very high quality people” in bioinformatics, but that these researchers are primarily involved in computational chemistry. He said he has already begun adding to the current team of eight bench chemists at the company. In addition, Ian McDonald, formerly head of drug discovery for Structural Bioinformatics, has joined SGX as vice president for drug discovery. Tod Klingler, vice president of information sciences, is no longer with SGX. Nor is Linda Grais, executive vice president and co-founder, who is taking the summer off prior to beginning work with another early-stage venture.

It remained unclear how the cuts in bioinformatics staffing would impact development and sales of SGX’s ModBase of computationally modeled protein domains.

LifeSpan, however, still has “adequate staffing to execute on our current model,” said Sheppard, who added that the company has no immediate plans to begin rehiring once its funding comes through. Sheppard noted that LifeSpan, whose business relies heavily on sales of its DrugTarget database, does not intend to alter its strategy to appease would-be investors. “One potential investor might love your current model and another might think you should become a product company,” he said. “We believe in our business model.”

— BT

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