Skip to main content
Premium Trial:

Request an Annual Quote

Genomica Outlines Restructuring Strategy; Halts Launch of dmGenetics Software Product


Genomica, which announced plans to lay off 67 percent of its staff and modify its business model as BioInform’s last issue went to press, has since disclosed the details of its restructuring strategy.

In a conference call, Genomica CEO Teresa Ayers said that the company would no longer distribute its products independently and would instead “pursue aggressively some of the opportunities that we have to bundle our products and technologies with the products of other life science companies.”

As a result of this decision, Genomica cancelled its plans to launch its dmGenetics analysis tool during the first quarter of 2002. The software was originally scheduled for release in late summer. Ayers said that while the product would not be available on an independently marketed basis, Genomica “may make dmGenetics product functionality available to some of our current customers.”

In an effort to operate the business at cash flow breakeven, Genomica slashed its headcount from 150 to 40. Ayers said that around 28 of the remaining employees are in R&D. “We have dramatically scaled back our R&D efforts,” Ayers said, “but many of the people that we had in that department were hired in anticipation of having a broader, more expanded enterprise-wide platform.”

The efforts of the remaining staff will be focused on “the unique needs of particular companies that may be distributing our products in connection with their hardware.”

In its new role as an integrator, Genomica will seek partners along the lines of its current distribution relationships with Applied Biosystems and Celera Genomics. ABI is currently co-marketing Genomica’s LinkMapper software. In the alliance with Celera, Genomica integrated its Discovery Manager platform for use with the Celera Discovery System.

In its second-quarter earnings statement, Genomica attributed the bulk of an increase in revenues to $464,000 from $396,000 in the year-ago period to licensing fees from the ABI alliance. The company did not disclose revenue associated with the Celera partnership.

Ayers attributed the lackluster demand for the company’s standalone products to a laundry list of factors: “Customers seem more interested in buying niche vs. enterprise-wide software, customers are using hardware and content vendors as the delivery channel for some of their software solutions, the customer is making an internal build vs. a buy decision in this early market for informatics products, and to a lesser extent the new data generation technologies that were anticipated are slightly behind schedule and customer adoption rates are slower than expected for these new technologies.”

The company estimated that its cash and cash equivalents balance would be approximately $107 million as of December 31, 2001, after estimated restructuring charges of between $5 million and $6 million. Ayers emphasized that Genomica is committed to protecting its strong cash position while it considers “the numerous strategic alternatives available.” These alternatives include “whether we might want to acquire other companies, whether we might want to collaborate with other business entities to form separate business units such as joint ventures, or of course whether we would entertain the idea of being acquired.”

Ayers said that Genomica also evaluated the possibility of liquidation or return of capital through share repurchase, but considers this an unlikely option.

Ayers added that the shareholder rights plan Genomica adopted to protect against a hostile takeover was “not in response to any particular inquiry.”

Most observers seem to think the company is making the most out of a bad situation by protecting its current holdings and modifying its strategy.

Jim Tullis, a founding partner at healthcare venture capital firm Tullis-Dickerson, said it''s not uncommon for early-stage companies to shift gears in mid-stream as they come to grips with market realities. “If I were an investor, I would rather see them stop burning cash and figure out a better business model than spend all the money and say, ëGee, the business model didn''t work and we blew through $100 million along the way,’ which is what we''ve seen with an awful lot of internet companies.”

Tullis noted, however, that pure-play bioinformatics vendors are hardly the darlings of the investment community. “If all you have is one more software system it''s pretty difficult to get the attention of big pharma,” he said.

“A lot of these young bioinformatics companies, at least on the public side, had fairly aggressive revenue expectations and many of them are simply falling short,” added Mike Clulow, an analyst at UBS Warburg.

But while Genomica’s decision to cut its burn rate may be the wisest option, it still won’t guarantee its survival in the long run. “Cash is a hugely helpful thing to have, but in our experience sometimes when you don''t have it you get enormously inventive and creative about how to make your business work,” said Tullis.

— BT


Filed under

The Scan

Enzyme Involved in Lipid Metabolism Linked to Mutational Signatures

In Nature Genetics, a Wellcome Sanger Institute-led team found that APOBEC1 may contribute to the development of the SBS2 and SBS13 mutational signatures in the small intestine.

Family Genetic Risk Score Linked to Diagnostic Trajectory in Psychiatric Disorders

Researchers in JAMA Psychiatry find ties between high or low family genetic risk scores and diagnostic stability or change in four major psychiatric disorders over time.

Study Questions Existence of Fetal Microbiome

A study appearing in Nature this week suggests that the reported fetal microbiome might be the result of sample contamination.

Fruit Fly Study Explores Gut Microbiome Effects on Circadian Rhythm

With gut microbiome and gene expression experiments, researchers in PNAS see signs that the microbiome contributes to circadian rhythm synchronicity and stability in fruit flies.