InforMax shares slump to new low

Bioinformatics firm punished for losses, but has $57 million in cash

April 06, 2002|By Julie Bell | Julie Bell,SUN STAFF

InforMax Inc. Chief Executive Officer Andrew Whiteley had been on the job for only five days yesterday, but already he was spending much of his time trying to persuade investors and others that the company has a future.

To survive, the Bethesda company that makes software for gene-sleuthing scientists will have to escape a fate that has claimed a number of companies in the fledgling field known as bioinformatics.

And it will have to overcome a first quarter in which its net loss ballooned 86 percent to $7.8 million, according to preliminary financial results released late Thursday.

Investors punished InforMax for those results yesterday, pushing its shares down 31 cents, or nearly 19 percent, to an all-time low of $1.33. That means that by one measure of the company's value - shares outstanding multiplied by share price - investors believe that InforMax is worth even less than the $57 million in cash it has in the bank.

"What the market is basically saying is they don't think we can get to the profitability mark and that we'll end up finished," Whiteley said yesterday in an interview. "I don't see that."

In some ways, InforMax has been one of the more successful companies that's cropped up to sell access to software for analyzing and sorting genes and proteins. The idea: to help scientists at labs big and small turn mountains of genomic information into the bases for new drugs.

InforMax, founded in 1990, has nearly 1,900 customers, including the Johns Hopkins University and pharmaceutical giants Pfizer Inc. and Merck & Co. But, despite booking $25.2 million in revenue last year, it posted a $21.4 million loss.

Others in the field also have struggled.

DoubleTwist, of Oakland, Calif., ceased operations in March, claiming a lack of money, according to genetics-information site GenomeWeb.

DoubleTwist ran a Web portal that allowed subscribers to analyze genomic data over the Internet without having to own the software themselves. The company now answers its phone with a recording that says its offices are "currently closed." Recently, Heidelberg, Germany-based Lion Bioscience AG announced that it was acquiring another InforMax competitor, NetGenics Inc.

"Things right now in that space are looking grim," said Jonathan Aschoff, a Friedman, Billings, Ramsey & Co. analyst.

The problem across the industry, said Boston Consulting Group Vice President Oliver Fetzer, is that numerous companies are going after a small number of big-money customers.

There are only about 20 to 25 major pharmaceutical and 10 major biotechnology companies in the world. What's more, software companies traditionally make money by being able to sell a single version of software over and over. But bioinformatics companies are finding they often have to customize it.

Plus, Fetzer said, "There are new scientific advances: You can't sell the same software for years and years and not update it."

That means significant research and development costs, something that has dragged down InforMax.

Still, Fetzer said, he doesn't think the problems are insurmountable, partly because the market for such products is big and growing.

InforMax points to one report that estimates the worldwide market - including bioinformatics consulting and software - will grow from $468 million in 2000 to $5.4 billion by 2010.

Whiteley, who previously was vice president of bioinformatics for Amersham Biosciences Corp., said he wouldn't have come to Infor- Max if his plan was simply to sell or dismantle the company.

What the company has going for it, he said, is that it has booked "sales of excellent products, a franchise in the marketplace, cash in the bank and an opportunity to lead [the industry] into the next stage of development."

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