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InforMax Slashes Q3 Forecast, Hints at Discovery as CEO and President Bow Out

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 In a tumultuous week, InforMax announced that both its CEO and its president would step down and cut its third-quarter revenue forecast to $4.7 million from the $8.4 million it had projected in August.

Alexander Titomirov, an InforMax founder who served as the company’s CEO and chairman of its board of directors since its 1990 launch, said in a conference call on October 18 that his decision to step down was based on “personal career interests and also my impression that the company should have a different skill set and a person who would know a lot more about the drug discovery field.”

Titomirov said he would continue to serve as CEO until InforMax hires a replacement. The recruiting company Heidrick & Struggles has been hired to recruit a new CEO, which the company hopes to do by the first quarter of 2002. Titomirov will retain his position as chairman and will continue to support the company’s business development as a consultant.

“I’m not going anywhere,” Titomirov said. “I’m excited in my new role.”

In addition, another company founder, James Bernstein, will retire as president and COO, effective December 31, 2001. He will remain on the company’s board of directors.

John Green, who currently serves as executive vice president and CFO, will assume the duties of COO.

Green said that Titomirov and Bernstein’s departures had no relation to the slowdown in sales the company reported for the third quarter on October 15. Titomirov began discussing his plans to step down in the summer, Green said. “This has been very much a part of our strategy. This is not a knee-jerk reaction to any negative events.”

 

Q3 Sales Delayed, Not Lost

 

InforMax attributed its disappointing revenues to the weakness in the overall economy and delays in customer purchasing decisions that are normally made during the end of the quarter. Travel restrictions and the general slowdown in purchasing due to the events of September 11 stalled seven deals that were set to close in the final weeks of the month, the company said.

Richard Melzer, senior vice president of sales and marketing, said that although sales were delayed, “We did not lose any business in the quarter. The softness was not a result of lack of competitiveness or losing deals to competitors; in fact we didn’t lose any deals to competitors.” InforMax expects the delayed sales to close in the fourth quarter of 2001 or the first quarter of 2002. These would be in addition to sales that are already in the pipeline for those quarters, Melzer added.

Noting that things are already looking up, Melzer said that on the first day of the fourth quarter the company closed a GenoMax enterprise deal worth over $600,000 that had been delayed from the third quarter. In contrast, the company sold only one GenoMax system in the entire third quarter, accounting for around $340,000 in revenues.

Green said he is confident of the continuing demand for bioinformatics software and said Vector NTI sales are already returning to their pre-September 11 levels. Noting that the current bioinformatics market is approximately $800 million and growing at 35 percent compounded per year over the next five years, Green said, “This is going to be easily a $3 billion market. We’re tracking at about a $30 million running rate right now for revenues. So while we’re the market leader we’ve got a long way to go in terms of an opportunity to increase our penetration from our installed customer base.”

 

Future Strategy Includes Discovery Role

 

While not disclosing the details of its strategy, company executives hinted that drug discovery would play a larger role in the company’s future activities.

“Certainly getting more involved in discovery services and our potential in discovery is very much part of our vision,” said Green.

Steve Lincoln, executive vice president of product development and CSO, said the company’s longer-term plans involve “working our way into some other areas in the life sciences as well as extending the services component of our offerings.”

In addition, Lincoln said that customers are currently evaluating the latest GenoMax upgrade, version 3.2, and that the product should be released by the end of the month.

The company’s expected third-quarter revenues of $4.7 million represent a 4 percent decrease compared to the $4.9 million achieved for the same quarter in 2000 and its total bookings of $3.3 million represent a 27 percent decrease versus the same period last year. In addition to the approximately $340,000 in enterprise sales, InforMax had about $1.6 million in revenues from its Vector line of business, around $872,000 in revenue from its services offerings, and $1,848,000 in deferred revenue, Green said.

Green said the revenue shortfall was partly offset by savings achieved from “rigorous cost management efforts,” which reduced the company’s operating cost by approximately $1 million. “Aggressive headcount management and increased productivity measures in both our sales force and R&D team, cutbacks in discretionary spending areas, and effective purchasing reductions with our vendors have all contributed to our favorable operating cost trends.”

Green stressed that no layoffs occurred and that the company’s headcount remained stable at around 250 full time employees throughout the quarter. “When there’s natural attrition we take advantage of that and only fill positions that are in line with our strategic goals,” he said.

Green added that no further changes are expected in the company’s management.

InforMax has a current cash position of over $65 million and expects to meet its target of profitability by the fourth quarter of 2002.

— BT

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