The global financial crisis has hit home for at least one proteomics firm.
Pressure BioSciences, with enough cash to last until the middle of 2009, this week announced that it will lay off eight staffers and cut back its research and development programs as global credit and equity markets remain frozen.
The firm said that the cost-cutting will allow it to focus on the parts of its business that have the greatest likelihood for success, including mass spectrometry.
As life-sciences companies continue figuring out how the current recession in the US and some of Europe will affect their businesses, PBI’s experience may portend challenging times ahead for similar proteomics technology-development firms in need of capital.
As of the end of the third quarter, Pressure BioSciences, whose stock is traded on the Nasdaq, had $1.9 million in cash, enough to carry it through the first half of 2009. The firm still needs an additional $1 million to take it to the end of 2009, and $2 million to carry it into the middle of 2010, PBI CEO Richard Schumacher told ProteoMonitor this week.
The company has been trying to drum up investments since the start of the year, but until only recently had had no takers, forcing it to scale back its business. As part of its restructuring, announced this week, the company has laid off eight full-time employees, or 40 percent of its staff, leaving it with a 12-person payroll.
Lay-offs were from all parts of the business including engineering, marketing, and sales, Schumacher said.
PBI, based in the South Easton, Mass., has also shut down its R&D facility in Rockville, Md., and consolidated its R&D activities in Massachusetts. Some R&D projects have been scrapped as a result, though Schumacher declined to identify them.
The company also has made unspecified cost reductions across all departments, and has taken steps to increase operational efficiencies.
In all, the steps are expected to reduce PBI’s cash burn from about $1 million per quarter to about $600,000 per quarter, the company said.
According to Schumacher, after years of encountering market resistance to its pressure-cycling technology for sample preparation, PBI has begun to make inroads with the technology and currently has 31 Barocyclers, its flagship instrument, either sold or leased.
Technology acceptance is no longer the dragon the company needs to slay, Schumacher said. Rather, it is the unwillingness of investors to open their wallets.
“We started to raise money in January,” he said. “We expected to raise money within a few months [but] we were not able to do that because of issues related to the economy.”
After that initial financing effort, PBI tried twice more during the summer, but both times found no takers.
“Our business plan was one in which we needed to do two things in the past 12 months,” Schumacher said. “One was to continue to work with customers and collaborators … to try to drive the adoption of the technology, and I believe that we’ve done that and done that well.” The second part was “to go out and refill our coffers.”
“We’ve never said that we had enough cash to get to profitability. We had enough cash to push the adoption,” he added. “And then we expected to raise a second round of cash that we believed would get us to profitability.”
But instead, PBI has been “fighting the economy where people are afraid to invest dollars in anything.”
Autumn Chill
Since the broader financial markets began their descent in September, life-science firms have been receiving conflicting signals about the effect on their industry.
At an analyst conference held less than two weeks after the failures of investment banks Lehman Brothers and Merrill Lynch accelerated the decline throughout the financial markets, executives of several life-science companies said that their industry would be relatively unscathed by the crisis.
Greg Lucier, then-CEO of Invitrogen, now called Life Technologies after its merger with Applied Biosystems last month, said during the firm’s third-quarter conference call in October that the life-science sector tends to be less affected by problems in the broader markets.
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“We’re fighting the economy where people are afraid to invest dollars in anything.” |
“Experiments that have been in the works for years don’t just stop on the dime,” he said. Demand for consumables and cutting-edge technology would remain consistent with levels before the meltdown, he added.
But other executives were more guarded. In a conference call accompanying Thermo Fisher Scientific’s third-quarter earnings results two months ago, CEO Marijn Dekkers said that its pharma and industrial customers have been tightening their budgets in the tail end of the period in reaction to the rough financial climate.
The company, he said, had taken steps to reduce its spending and was prepared to pull “additional cost levers … if we need to, depending on how the economic situation unfolds.” He did not elaborate.
Meanwhile Agilent Technologies CEO Bill Sullivan last month said that the company was planning ahead “based on the assumption that an economic downturn in much of the world will continue through mid-2009, and that no geographies or markets will be entirely immune from its impact.”
For smaller proteomics firms with less cash reserves, an equity market that won’t free up investment funding can be particularly debilitating, especially if the freeze out persists. While the events of the late-summer represented historic low-points, PBI’s financing troubles were felt long before then, Schumacher said.
“People can’t look at the market the last two months and think this is the turmoil,” Schumacher said. “We’ve been in turmoil since the beginning of the year.”
Indeed, this week, the National Bureau of Economic Research officially declared the US has been in a recession dating back to a year ago.
PBI is once again trying to raise capital. After working with three different investment banks in its earlier failed efforts, PBI is now reaching out to investors directly.
The company is targeting four types of investors: Funds that have a history of investing in life-science tool companies, including venture capital funds, hedge funds, and retirement funds; other companies, including the large tool makers and smaller firms with technology that may be complementary to what PBI offers; individual investors; and existing investors.
According to Schumacher, PBI has received a “very good response” so far, and some commitments to invest in the company. He declined to elaborate.
In a statement this week, PBI Chairman Wayne Fritzsche said that the cost-cutting measures will allow the company to focus on the parts of its business that have the greatest likelihood for success, including mass spectrometry.
“We believe that mass spectrometry is a multi-billion-dollar market and that PCT offers significant advantages in speed and quality compared to current techniques used for protein digestion prior to mass spectrometry analysis,” he said.
During the summer, the company received an $850,000 Phase II Small Business Innovation Research grant to enable the PCT technology to develop automated and reproducible methods of extracting protein biomarkers, subcellular molecular complexes, and organelles from cells and tissues [See PM 07/10/08].
The changes announced this week, Fritzsche said, “will give us the greatest opportunity to successfully reach our short- and long-term business goals,” which include a significant increase in the number of installed PCT systems, consistent revenue growth, strategic alliances with marketing and distribution partners, and, ultimately, profitability.
In addition to cost-cutting steps, the company said this week that revenue-generating measures it is taking include focusing on current PCT-enhanced enzymatic-digestion products geared specifically to the mass-spec market. PBI is also looking to accelerate the release of a high-throughput sample-processing system designed for mass specs.
And greater sales focus will be paid to sample-prep products that have shown market acceptance, including the Barocycler and its accompanying kits and reagents.
During the three months ended Sept. 30, PBI said total revenues swelled 90 percent to $265,662 from $138,052 during the year-ago period. Net loss for the three months remained essentially flat at $1.1 million.