Led by Russian immigrant Alex Titomirov and recent Incyte defector and star Stephen Lincoln, InforMax has stealthily put its bioinformatics software in the hands of 20,000 scientists worldwide. Not exactly Microsoft Word, but a big deal in a small market. But is it really a global leader in a bioinformatics world where Celera Genomics touts its mission to become the world's foremost source of genomic and related medical and agricultural information? Maybe, but we're talking a small and precarious niche.
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Bioinformatics company InforMax (Nasdaq: INMX) popped up 25% yesterday to join the top percentage gainers on the Nasdaq yesterday. Despite Scientific American naming the company one of the six leaders in software tools for analyzing biological data, InforMax is hardly a biotech household word. And it's just one of six small competitors hoping to survive in a world run by Celera Genomics (NYSE: CRA) and Incyte Genomics (Nasdaq: INCY). The big fish, for now, are willing to feed the small fry. InforMax is the child of Russian immigrant Alex Titomirov, who came to the U.S. in 1989 to give a lecture at Dr. James Watson's invitation. With $300 in his pocket -- and a Ph.D. from the Russian Academy of Sciences -- he stayed. He so impressed businessman Dr. James Bernstein with his vision that Bernstein joined and backed Titomirov's new company, InforMax, in 1990. After 10 years of developing software and selling to hundreds of companies and institutions, and with a user base of 20,000 individual researchers, InforMax snapped up Incyte exec Stephen Lincoln. It went public in October, selling 5 million shares at $16, for a cool $80 million. Not bad for an unprofitable company with $10 million in 1999 revenues. (Perhaps they should consider a donation to the Foolanthropy 2000 Charity Drive!) InforMax and its competitors All of these companies envision a molecular biology world shifting from lab experiments to experiments carried out on computer. They target the big drug makers with enterprise-wide and desktop bioinformatics systems and service, sold individually to companies, through proprietary or other company portals and as shrink-wrapped software -- but don't expect the last item to lead the list at Egghead.com (Nasdaq: EGGS). Celera and Incyte sign up the software shops Are biosoftware companies a good investment? Foolish warning? High risk! If you'd like to find some investment ideas for the New Year, The Motley Fool's Industry Focus 2001 has 17 -- in industries from biotech and optical networking, to security software and Foolish 8 small-cap stocks.
Scientific American plunks InforMax in a group with other bioinformatics software makers: Germany's Lion Bioscience AG (Nasdaq: LEON), the U.K.'s Oxford Molecular Group, DoubleTwist (private), NetGenics (private), and Israel-based Compugen (Nasdaq: CGEN). Most are newly public or planning IPOs:Company IPO date $ raised/proj.
InforMax 10/03/00 $80 mil
Compugen 08/11/00 $53 mil
DoubleTwist regist'd proj: $86 mil
NetGenics regist'd proj: $61-$72 mil
Lion Bioscience ADRs began U.S. trading on 08/11/00.
Meanwhile, companies such as Celera Genomics -- in which I'm an investor -- and Incyte Genomics are trying to build bioinformation empires, leveraging their prime genomic sequence databases into one-stop shop analytical tools for all life-science research. Their subscription-based model depends on snaring big drug makers who pay large fees. While both companies have their own proprietary software tools, they recognize the power of other specialized software products. Celera has expanded its alliance with Lion Bioscience, integrating Lion's software into Celera's subscription-based portal. And Incyte offers InforMax software, sharing revenues from reagents sold through the software links.
Investors in biotech have been swept up in a wave of stock-price mania and news in the last year. They would do well to focus on the companies with the largest potential markets or those with leading indispensable niche products. The market for bioinformatics software is limited to researchers at drug companies, other biotechnology firms, and other research institutions. It's still unclear how many winners this market will support -- and whether InforMax and other nimble newcomers can survive on their own, or if they'll require the largesse of the big but also unprofitable Celera and Incyte.
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