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By Malorye A. Branca

February 10, 2003 | Mark J. Emkjer joined Accelrys Inc. as president because of its balance sheet, the 200-plus Ph.D.s on staff, and its “very good technology vision,” he says. “Accelrys has tremendous products.” He says he can bring it to profitability.

It’s not a completely rosy picture. Accelrys, a wholly owned subsidiary of Pharmacopeia Inc., veered off financial course when sales of its software grew only 5 percent from Q2 2001 to Q2 2002. Accelrys sells applications for discovering new biological targets and designing drugs against them. It also does a bit of consulting. The company started out in molecular modeling but expanded into new businesses, including bioinformatics.

Blaming market conditions, Accelrys slashed about 80 positions last summer, which will  save an estimated $8 million a year in operating expenses. Sales did perk up in the third quarter, growing by more than 7 percent over the corresponding period in 2001, but losses  were still more than  $6 million. The Discovery Studio suite, which launched in mid-2002, needs to make a big splash to lift those numbers.

Emkjer brings deep experience overseeing the development of software that has been profitable, although it was for clinical services such as medical labs, pharmacies, and radiology departments.

He says he’s getting into bioinformatics at just the right time: “This situation is not atypical in small markets where there are a lot of startups. People get an idea, and they have a programmer create some software.”

But selling software requires attention to many factors. “Companies that can gain scale, put in the necessary processes, and apply the discipline can succeed in this type of environment,” he says. As the economy recovers, he expects Accelrys’ position to improve.

He’s particularly proud that Sunquest Information Systems, where he last worked, was ranked tops in client satisfaction during the three years he ran it. “Getting software clients is very costly,” he says. “You need to do everything you can to keep them.”

No one seems to doubt Emkjer’s the man for the job. It’s the market that analysts are worried about.

“That’s the right approach [focusing on software business basics], but the real issue is, are companies buying this stuff and finding it useful?” says Edward Tentoff, senior research analyst at ThinkEquity Partners in San Francisco. “Nobody’s expertise will change that.”

Tentoff points out that Gene Logic, for example, “is just now starting to face subscribers [to its databases] terminating. Now, they need to sign even more new subscribers to fill that hole.” It’s not clear whether or not those clients exist. “I’m wondering about that, let alone whether it has been a problem with the selling approach,” he says.

Emkjer says Accelrys’ renewal rates are up. “I don’t think they are where they need to be, and something will be done about that.”

He’s also betting he can get at least some new clients by rescuing them from uncertain relationships. Revenue is growing, even if slowly, and Pharmacopeia has $140 million-plus in the bank. “We could last 12 years at this [financial] rate, and we will be profitable in 2003,” he says. “Doing business with us is a long-term relationship.”

 


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