True to its word of finding a replacement for departing CEO Alex Titomirov within six months of his October decision to step down [BioInform 10-22-01], InforMax announced the appointment of Andrew Whiteley as its new leader on March 13.
Most recently vice president of bioinformatics at Amersham Biosciences, Whiteley’s loftier new title carries an unenviable responsibility — as CEO, he’ll be expected to steer InforMax toward profitability as the company emerges from a year of turbulent management changes and disappointing GenoMax sales. But while some may have shied away from the task of building a viable bioinformatics business in this uncertain climate, Whiteley is optimistic about his chances for success. “I’m absolutely excited about the overall opportunity that exists for bioinformatics in the future,” he said in a conference call to discuss his appointment. “It was a no-brainer for me to come to InforMax and commit my career to this particular sector of our marketplace.”
InforMax didn’t have to look far to find Whiteley — he’s been a member of the company’s board of directors since 2000, when the companies began a strategic collaboration that included Amersham’s investment of $10 million in InforMax. This familiarity with the inner workings of the company should be an advantage for Whiteley, according to some observers. “He certainly understands their business because he’s been on their board,” said Jim Ackerman, who covers InforMax for Punk, Ziegel & Co. “The transition process should be pretty minimal,” he added, noting that the current management team would likely remain intact “because they know him and he knows them.”
The Revolving Door
A stable management team would be a blessing for InforMax, which has lost a number of executive staff members since its IPO in late 2000: Joe Lehnen left his post as CFO in February 2001; CTO and co-founder Vadim Babenko resigned in May along with senior VP of sales and marketing Tim Sullivan; COO Jim Bernstein announced his retirement along with CEO and co-founder Titomirov in October; and Sullivan’s replacement Richard Melzer resigned earlier this month.
Whiteley — whose position at Amersham has already been filled by former VP of services Jerry Walker — addressed what Ackerman referred to as the “revolving door” in InforMax’s sales and marketing management by highlighting the company’s need for a dedicated marketing effort. Noting that current VP of sales J Rollins “continues to do a great job for us in managing the sales group,” Whiteley said the company requires a senior-level marketing position “in order to really progress the company forward. It’s not been a functional part of the organization at InforMax so far, but I certainly intend to make it so.”
Whiteley disclosed few details of his future plans for InforMax, saying he would give himself 90 days after assuming the role of CEO on April 1 to “shape up and articulate” his strategy for the company. He did say his focus would be on developing a “robust product strategy in software and services that will provide a path to the necessary profitability of the organization going forward.”
GenoMax Sales are Key
The top priority for Whiteley in developing that strategy, according to Friedman, Billings, & Ramsey analyst Jonathan Aschoff, will be “beefing up the sales of GenoMax.” InforMax sold 26 GenoMax systems between the product’s launch in 1998 and December 2000, and a total of 15 systems in 2001. According to the company’s third-quarter earnings call, seven GenoMax deals that were set to close in the final weeks of the quarter were stalled due to the events of September 11. While five of those were recovered in the fourth quarter, revenue for the fourth quarter of $6.3 million was below expectations of between $7.0 million and $7.5 million — a shortfall InforMax attributed “to a slight decline in the average enterprise revenue per transaction of $280,000 as several biotech customers bought fewer GenoMax modules than anticipated and exhibited cautious buying behavior in the quarter compared to buying patterns exhibited earlier in the year.”
But slow GenoMax sales may be due to more than the general slowdown in capital spending. Companies seem resistant to turn to third-party vendors for enterprise-wide bioinformatics platforms. Explained Aschoff, “There’s just a lot of market force that promotes the internal development of these things, because when you buy them externally there’s customization that’s required and there’s integration with existing software at a massive company. Then you call in professional services to teach all the people at your firm. It almost makes sense to have a team build it for you, be there all the time, and walk you through it.”
Indeed, InforMax states on its website that GenoMax requires “significant resources” from both InforMax and its customers. In addition to the expected hardware and software requirements, InforMax recommends that its GenoMax customers retain a project manager, a Unix system administrator, an Oracle database administrator, and a bioinformatics scientist to install and maintain the system. As belts tighten across the industry, companies unwilling to support the total cost of ownership involved in purchasing, installing, and maintaining GenoMax may opt to devote those resources to an in-house system instead.
But while conceding that the “build-it-yourself” approach still prevails in both academia and pharmaceutical companies, Whiteley pointed out that “that type of investment is really unsustainable in the future. There are simply not enough bioinformaticians and IT experts familiar with the biological world to provide that type of capability.”
Whiteley said he’s confident that plenty of business awaits the company in enterprise software sales. “The progression into enterprise-class multi-tier systems has been a natural evolution and one I see as very important for the industry going forward,” he said. “How we convert that into a successful product strategy that is sustainable and profitable for the company in the future is all about strategy and the deployment of our resources.”
Toward the Future
Although InforMax laid off 30 employees, approximately 14 percent of its workforce, in January, COO John Green told BioInform that the company is now hiring in both R&D and sales. Of the company’s current 220 employees, 53 are in sales and marketing, 93 are in R&D, with the balance in professional services and general support. InforMax employed 244 people as of last March.
The company expects first-quarter 2002 revenue in the range of $5.7 million to $6.2 million. Cash and cash equivalents as of December 31, 2001 were $61.3 million and market capitalization at press time was $43.8 million.
While Titomirov noted in the company’s third-quarter 2001 earnings call that InforMax was on track to be profitable by the end of 2002, Whiteley said he would be unable to provide any guidance for the balance of the year until he completes his assessment at the end of the second quarter.
Whiteley will be on the receiving end of the assessment process as well, as observers have yet to pass judgment on the newcomer’s capabilities for leading InforMax forward. Said Ackerman, “Selling bioinformatics software is a challenging business right now. I’m looking forward to see if he has any new approaches that he was not able to share with them as a member of the board.”
Noting that Whitley has no track record as CEO elsewhere, Aschoff said, “There’s quite a bit of proving oneself that would have to occur before you could take great faith in the company’s direction changing as a result of this appointment.”