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Financial Prosperity in the Bioinformatics Business Still a Long Shot, Says Industry Panel

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Have a great idea for a money-making bioinformatics product? Think again, cautioned a panel of industry players at the BioITWorld conference in San Diego earlier this month.

“How do you write a business case when the competition is free?” Rudolph Potenzone, CEO of Lion Bioscience, Inc., asked rhetorically. “A pure bioinformatics play is tough. The need is satisfied by the public domain or a free database.”

Alex Bangs, Entelos CTO, affirmed this view. His company is already on its second business model, abandoning a subscription-access approach for one using research collaborations based around its PhysioLab simulation technology.

Bangs pointed to Spotfire as a success story because “the product could be on anyone’s desktop. I would be very concerned today if I had enterprise software only pharma could understand.”

Pharma, however, may be slowly waking up to the power of bioinformatics, said Peter Bleicher, CEO of e-clinical trials firm Phase Forward. “Information technology for many years has been in the backwater in pharma,” said Bleicher. “I believe that’s changing; we’re in the midst [of that change].”

The evidence, he said, is that companies like IBM, Accenture, and Sun are taking the industry seriously.

However, these firms are more focused on pharma’s IT infrastructure, rather than on the bioinformatics tools and applications in the hands of researchers. Companies working exclusively in the area are facing stiff competition from academic and non-profit institutions, which Potenzone believes helped burst the short-lived bioinformatics bubble. He views free data and tools as steering money away from commercial products that could eventually prove innovative.

Peter García, CFO of Hyseq Pharmaceuticals, offered a more pragmatic view, suggesting that the tough funding market should not dissuade startups, so much as rein in their goals. What is considered successful “depends on your expectations,” said García. “If you have five guys from Stanford [who] want to make a few million, okay. You need to have expectations of what the market should accept.”

“There are not a ton of models that will work,” added Bleicher. “So you’ve got to pick something people will put real dollars in, to replace a process that already exists.” And, he cautioned, don’t rest your idea on the promise that it will shave months off drug development. “Pharma is too savvy for [that] pitch.”

The consensus message isn’t news to anyone who’s been tracking the sector: Bioinformatics is a tough sell for attracting investor dollars, and there are three initials that informatics entrepreneurs should wipe from their vocabulary: IPO.

— KH

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