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For Bioinformatics Companies, 2002 Was the Year of Change or Die : What s Next?

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They say what doesn’t kill you only makes you stronger, and bioinformatics companies who survived the harsh shakeout of the past year are certainly hoping there’s some truth in Nietzsche’s famous words.

Grim macroeconomic conditions, reductions in capital spending in the pharmaceutical and biotech sectors, competition from public domain resources, and a skeptical marketplace combined to make 2002 especially difficult for bioinformatics vendors. Many of those still standing drastically modified their business models and product lines over the year with hopes of surviving into 2003 and beyond. The fate of a large portion of the sector will depend upon strategic decisions made in 2002.

Of course, other companies never made it to this turning point. Double-Twist, Entigen, and Viaken Systems were forced to close up shop during 2002, while InforMax, NetGenics, and ProteoMetrics were snatched up in acquisitions. Celera Genomics and Incyte Corp. (Incyte Genomics until last week) continued their makeovers into drug discovery companies, all but abandoning their information businesses. With change being nearly the only constant in the sector this year, rapid morphing emerged as a necessary survival skill.

Most larger bioinformatics firms have learned (the hard way) that selling shrink-wrapped, standalone software is not a sustainable business model. While the trend to add customization services or other capabilities to basic software and data offerings emerged in 2001, it developed into full flower during 2002 and vendors are hoping it will bear fruit in the year ahead.

Integrating for Dollars

A number of vendors tweaked their product lines to offer their own software within the context of customized solutions that integrate with the motley collection of third-party, public domain, and home-grown tools that most research informatics departments rely on. Lion, for example, is in the process of repackaging several of its discovery software products into a single modular package called Target Engine, and also plans to sell integration services based on its Lion Discovery Center platform, which is built on technology it gained from its acquisition of NetGenics.

Accelrys has taken a similar approach with its Discovery Studio suite of products, which allows users to pick and choose from a number of components that can be integrated with other Accelrys products as well as those from third-party vendors.

InforMax also reversed its earlier strategy of counting on the pricey GenoMax enterprise solution to generate revenues. The company abandoned the monolithic bioinformatics solution in favor of a mix-and-match approach based upon a new product, Vector LabShare, that allows distributed users to share data across the enterprise at a fraction of the cost of GenoMax. Other Vector modules can be purchased to plug into the system one component at a time.

The jury is still out, however, on whether these companies have found the magic formula for survival. Lion’s new products are not due to launch until early 2003, Accelrys began rolling out its Discovery Studio line over the summer, and InforMax released LabShare in September. Invitrogen, which closed its acquisition of InforMax earlier in December, has not disclosed its plans for InforMax’s products, beyond its intention to use the company’s desktop tools in conjunction with its e-commerce catalog of lab supplies.

Meanwhile, pure-play software vendors aren’t the only players trying to bank on the demand for integrated informatics solutions. During the course of the year, a number of instrumentation vendors began taking informatics seriously enough to expand their reach into the area. Agilent launched an informatics business unit in April, and released a workflow-based framework called the Synapsia Informatics Workbench in August. Amersham Biosciences formed an informatics business unit in March, and Applied Biosystems, which inherited the Celera Discovery System from its sister company as part of Applera’s reorganization in April, launched what it refers to as its Knowledge Business unit. PerkinElmer also entered the informatics game, and launched its first product, ArrayInformatics, in May.

These companies don’t see informatics as a huge revenue-generating opportunity, but as an important added value for their customers. Easy access to data from laboratory instruments, and integration of that data with other resources, may prove to be a competitive advantage for many life science tools companies without becoming their central mission.

Infrastructure Wars

If the competition was tough on the software side in 2002, it was nearly cutthroat in the hardware and infrastructure market. IBM accelerated its push into life sciences by initiating a key alliance with Accelrys and expanding its partnership with Lion, while the former Compaq experienced a bit of a lull as it grappled with the drama of its merger with Hewlett-Packard.

The rivalry between the two IT giants came to a head in September, when IBM drastically underbid Hewlett-Packard to win the Celera Genomics/Applera account that had previously been Compaq’s. Hewlett-Packard announced that same week that it had sold a $22 million upgrade to its installation at the Sanger Center.

But the big guys are seeing some competition from alternative computing approaches. The growing popularity of cluster computing brought a few new IT names into the life science market this year, including Dell, Intel, AMD, and Apple — which is counting on its OS X-based Xserve server hardware to increase its market share in life science high-performance computing.

2002 also saw slow but steady acceptance of grid and distributed computing approaches. United Devices and Platform computing sold desktop grid solutions to Novartis and Bristol-Myers Squibb, respectively, while Entropia signed Isis Pharmaceuticals for its distributed solution.

Signal from Noise

But alongside the clamor of the skirmishes and full-scale battles that waged across the commercial bioinformatics landscape in 2002, bioinformatics as a discipline quietly continued its steady progression into the post-genomics age. Rice, fugu, mosquito, malaria, mouse, rat, and sea squirt were added to the number of available genomes for bioinformaticists to sift through, ushering in the practical application of comparative genomics approaches.

Microarray-based gene expression analysis came into its own in 2002, and gene expression repositories — such as the EBI’s ArrayExpress, the NCBI’s Gene Expression Omnibus, and the NCI’s Gene Expression Data Portal — were made available as community resources.

Clinical data found its way into the realm of bioinformatics in 2002, with companies like Ardais and Genomics Collaborative working on methods of integrating tissue and sample data into the discovery process. In addition, the Pennsylvania Cancer Alliance, a consortium of six cancer research institutes in the state, is working on a similar effort to build a distributed bioinformatics system to store and exchange clinical cancer data.

Pathway informatics also made headway during the year. The BioPathways Consortium embarked upon a community-wide project to improve the exchange of pathways-related information, and the Object Management Group’s Life Science Research domain task force issued a request for proposals on a pathway data standard. On the commercial front, InforMax launched a pathway analysis software product called PathBlazer and 3rd Millennium revealed some features of the PIMS (Pathway Information Management System) it’s been developing with an ATP grant.

A Growing User Base?

Regardless of the trials and tribulations the commercial bioinformatics sector witnessed in 2002, demand for skilled bioinformatics practitioners continued to increase in biotech and pharmaceutical companies as well as the academic and government sectors. Luckily, the number of trained bioinformaticists is also growing.

BioInform’s annual survey of US bioinformatics degree programs found that the number of bioinformatics graduates tripled in 2002, with 164 BS, MS, or PhD-level bioinformatics graduates compared to 53 in 2001. In addition, while many industry conferences saw a downturn in attendance this year, ISMB 2002 drew a record-breaking 1,500 people to Edmonton, Alberta, making the event the largest bioinformatics symposium ever, according to conference organizers.

For bioinformatics companies struggling to remain afloat as 2002 draws to a close, this trend can be interpreted in two ways: On the one hand, it proves that there is a strong demand for bioinformatics tools and technology within research groups; On the other hand, it signals that many bioinformatics departments are still relying on their in-house bioinformatics staff to roll their own solutions rather than purchasing commercial products.

Whether commercial bioinformatics firms can reverse this trend in 2003 remains to be seen.

— BT


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