The fast changing world of bioinformatics.

The burgeoning bioinformatics market continues to grow, but this growth can no longer be categorized as it once was. The bioinformatics market has run into some of the realities from which the initial demand and dramatic need for such products once insulated it. Demand is not slowing so much as changing, and the hundreds of small- and medium-sized bioinformatics companies are trying to change with it. Major players are being established or expanding, the needs of the market are changing, and product offerings are multiplying faster than customers. Nonetheless, growth of the bioinformatics market, including hardware, software and databases, is expected to top 20% over the next few years. But it is clear that some of the enthusiasm for some segments has cooled, while other market segments have maintained their momentum.

As the "guts" for any major bioinformatics effort, the hardware segment of the bioinformatics market continues to show robust growth. Hefty investments from governments and academia have spurred sales for large systems worldwide as well as computing infrastructure. In addition, the aggressive pursuit of the market by established companies such as Sun, Compaq, IBM and Hewlett-Packard has lead to the rapid development of faster, more advanced hardware solutions for bioinformatic applications. Each company has pursued partnerships with software vendors and academia and government. In this way, the hardware companies have established much of the groundwork for bioinformatics developments and secured their roles as a driving and unifying force in the marketplace. In recent months, many of these hardware companies have embarked on new initiatives to drive sales and market development.

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Both IBM and Sun have sought new partnerships to increase their market shares. In February, IBM announced a drive to recruit new IBM Business Partners for the life sciences market over the next two years and increase support for life science companies using its IBM eServer platform. Since the beginning of the year, Sun has announced alliances with InforMax, Acero, Accelrys, Paracel and the University of Chicago. Last month, Hewlett-Packard partnered with seven research institutes from around the world to form the Gelato Federation, a consortium to develop open source, commodity software for the Linux-based Intel Itanium Processor Family. For Apple and SGI, the focus appears to be on making their hardware more cost efficient in an effort to seek a wider market. In February, Apple released Apple/Genentech BLAST for the Power Mac G4, emphasizing higher performance on a lower-end computer. At the ACS meeting earlier this month, SGI introduced its SGI high-throughput computing services to facilitate large-scale calculations on a single IRIX systems or a cluster of such systems.

In contrast to the bioinformatics hardware market, where a handful of well-known companies account for most sales, the software market is highly fragmented. However, a few companies have distinguished themselves from their competitors through the breadth of their product lines, the growth of their business as well as their heightened profile as public companies. Accelrys offers software for bioinformatics, cheminformatics, material sciences as well as consulting services. The breadth and depth of the company's offerings generate numerous revenue streams and emphasizes integrated solutions and generates a host of new product releases. Also, the company's relationship with IBM, AstraZeneca and GlaxoSmithKline has provided steady funding, while it research consortia has attracted companies such as BASF, Monsanto and Procter & Gamble.

From its SRS data integration system to microarray analysis system to enterprise wide solutions and consulting services, LION bioscience AG also offers a range of software products, but for a smaller set of applications. Its partners include IBM and MDL Information Systems and SGI. But the company has yet to break even and recently limited its employees to 500 in the face of increasing pressure from Wall Street for profitability, which is now expected in 2003-04.

Likewise Informax, which sells the Vector NTI Suite of sequence analysis desktop software and Genomax enterprise software, has yet to achieve profitability. The company recently replaced its CEO and reported a drop in first quarter sales and orders (see IBO 4/15/02). The company's relatively smaller number of partners and its emphasis on smaller scale solutions may have limited its growth for larger systems.

One bioinformatics company that is profitable is Tripos. Through its Discovery Software products, it offers software for cheminformatics and bioinformatics including molecular modeling, NMR analysis, virtual screening, and desktop data analysis. The company also provides chemical screening libraries as well as discovery research and consulting services. The company generates revenue through software licenses, including a global licensing agreement with Pfizer, compound library sales, research collaborations and software consulting. Multi-year agreements with large pharma as well as its expansive software offerings and alliances with both academic centers and private companies, such as Accenture, have allowed it to capitalize and expand on its chemigenomics offerings.

The mixed results of these companies are endemic of the bioinformatics software market as a whole. The number and variety of software products that are available have exacerbated problems of standardization and integration. Fierce competition from both competing products and from in-house development of software, as well as high R&D costs have hampered companies' profitability. Yet the ongoing evolution of software, including integration, upgrades and advanced analyses will continue to drive the market, making it a slightly faster growing segment than either hardware or databases.

The database market, like the software market, is crowded with product offerings and specialized markets. It has also proved a disappointment for some vendors (see IBO 3/15/ 02) as public databases have proven to be tough competition. For example, there are nearly 50 SNP-related public databases currently available on the Internet, including the databases of the non-profit SNP consortium and the Whitehead Institute/ MIT Center for Genome Research. To gain in this market, commercial database providers are targeting niche applications, packaging their data with value-added additions (such as Celera, see "Applied Biosystems Forms New Business to Distribute Celera Discovery Systems") or pursing new models of database integration. One company just entering the market is Confirmant, a joint venture of Oxford GlycoSciences and Marconi. It plans to release its Protein Atlas of the Human Genome database this summer. To differentiate its product, the company has taken a protein-centric based approach by including protein sequence tags and 10,000 protein-coding genes in its product.

Stepping up its presence in the database market is Oracle, which is pursuing a host of healthcare computing markets, including the bioinformatics market. According to Oracle, 65% of life science companies run on Oracle. Earlier this month, Oracle released its Information Architecture for Life Sciences e-business platform for integrating science and business applications to consolidate data. In addition, the company sites 15 products it currently offers for life science applications, including its Oracle9i Database and Application Server. With continued emphasis on databases, particularly in regards to pharmacogenomics and pesonalized medicine, the database market is expected to continue to accelerate, with growth in line with the hardware and software markets.