In the end, its proteomics business was unsustainable.
Last week, Lumera announced that as part of an agreement to merge with privately held GigOptix, it would be shutting down Plexera just eight months after Lumera carved it out as a subsidiary to concentrate on developing its proteomics business.
The company said the action is being taken in order to conserve cash and focus its full attention on developing electro-optical polymer modulators and other devices for optical networks and systems.
“We’re proud of the accomplishments and progress we’ve made in both our electro-optic and bioscience businesses,” said James Judson, chairman of Lumera, in a statement. “However, we do not have enough cash resources to see both our businesses reach their full commercial potential. After carefully considering our strategic options, it became clear that the greatest shareholder value would be derived by focusing on our electro-optic business.”
Plexera’s entire work force of 23 will be laid off, said Helen Jaillet, a spokeswoman for Lumera.
As of Dec. 31, 2007, Lumera had $14.6 million in cash, cash equivalents, and investment securities, down from $26.3 million a year earlier.
The move comes after several efforts by the company to increase the viability of its proteomics business. In 2006, it turned the business into its own separate segment within Lumera to hasten market commercialization and drive its transition from an R&D firm.
Then last July, Lumera went a step further by spinning the business out as a subsidiary. When it did so, company officials characterized it as a step to end confusion on Wall Street about Lumera’s business.
“The main goal was to clarify, for not only the scientific community but also the investment community, the business goals and the technical goals of the organization,” Tim Londergan, president and COO of Plexera, told ProteoMonitor at the time [See PM 07/26/07].
Plexera has no products on the market directed at proteomics research, but had been developing its Kx5 platform, a high-throughput surface plasmon biosensor system for protein identification and characterization, for commercial launch.
During the summer, Plexera said that it hoped to commercially launch the instrument, formerly called ProteomicProcessor, in early 2008. Four institutions had been beta-testing it: Harvard Medical School, the Institute for Systems Biology, the Medical University of South Carolina, and Baylor University.
“We do not have enough cash resources to see both our businesses reach their full commercial potential.”
In a conference call last week, Joseph Vallner, interim CEO of Lumera, said that since spinning out Plexera, Lumera management had been exploring different strategies to increase the liquidity of its proteomics business, including searching for new partners and new funding sources, but was unsuccessful.
Bringing its proteomics platform to market has also been more arduous than the company had anticipated, Vallner added, estimating it would take an investment of between $6 million and $8 million this year to develop and launch the Kx5, and at least as much in 2009 to develop high-content arrays for the instrument. In addition to the Kx5, Plexera had been developing a suite of antibody microarray products.
“We still face some technical hurdles before our first commercial sale can be realized,” he said. “Faced with the uncertainty of the burn rate and the uncertainty of Plexera revenue, the board had to look at Plexera’s impact on the electro-optics business,” Vallner said. “That impact was, quite simply, that Plexera was affecting how fast the EO business could grow.”
Since its inception through Dec. 31, 2007, Lumera has incurred losses totaling almost $77 million, according to its annual report filed with the US Securities and Exchange Commission last month. In 2007, the company posted a loss of nearly $16 million on $2.8 million in revenues.
The demise of Plexera is the most recent reminder of the risks involved in trying to develop and commercialize a proteomics platform. Over the past year and a half, other companies have similarly pulled out of the proteomics space after platforms they developed failed to pan out the way they had anticipated.
Last year, Caprion Pharmaceuticals put up for sale its proteomics assets, including its CellCarta platform, in order to merge with Ecopia BioSciences and concentrate on the oncology and infectious diseases markets [See PM 01/11/07].
The proteomics business was eventually spun off into Caprion Proteomics, and during the summer, Great Point Partners, a hedge fund, bought an 80 percent stake in the business [See PM 07/05/07]. At the time, Caprion Proteomics’ president told ProteoMonitor the strategy was to build up the tool company in order to sell it at a high premium.
And before that, Vermillion, formerly Ciphergen Biosystems, sold its SELDI business to Bio-Rad Laboratories to focus on the specialty diagnostics market [See PM 08/17/06].
A Lumera official said during the conference call that the company is looking to sell Plexera’s assets and intellectual property, but did not have a target price.
“The markets are tough,” Peter Biere, vice president, CFO, and treasurer of Lumera, said. “We don’t know what the valuation is going to be.”
Existing Kx5 users said they hope that the end of Plexera doesn’t translate to the demise of the technology.
“We have been working on antibody arrays with a focus on proteomic analyses of cellular stress responses,” Craig Beeson of the Medical University of South Carolina told ProteoMonitor’s sister publication BioArray News. He said that one of Plexera’s strengths is that it is an open system and that he has made modifications to the system that will enable users to continue current research projects even without Plexera’s support. Overall, Beeson gave the system high marks.
“We are able to cope but if this is to be the end of further development of their technology, it will be a tremendous loss because it is the best we have worked with — truly enabling,” he said.
Baylor’s John Connolly told BioArray News that he has been using the Kx5’s surface-plasmon-resonance imaging system to detect cytokines and chemokines in human samples.
“We are interested in using this label-free method to detect changes associated with human diseases like cancer,” he said. Connolly’s lab is currently using fluorescence-based detection in its assays, but had been transferring the assays to the Kx5 to take advantage of the SPR imaging.
Connolly said that he has been in touch with Lumera since last week’s announcement, but that since he has a system installed and his own support, his lab can “certainly continue with development.” He said that if the technology does not find a new home, he could transfer his assays to a system that also uses SPR, such as platforms sold by Biacore or Bio-Rad.
The merger of Lumera and GigOptix is expected to be completed in the third quarter, Jaillet said. The combined company will be called GigOptix, and its shares will be traded on the Nasdaq exchange, as Lumera’s are, though it has not been decided whether the new company will continue using Lumera’s ticker symbol “LMRA.” The new company will have between 80 and 85 employees.
Avi Katz, currently CEO and chairman of GigOptix, will become the CEO of the combined company.
— Justine Petrone, editor of BioArray News, contributed to this story.