Corrections or additions?
This article by Barbara Fox was prepared for the
December 11, 2002 edition of U.S. 1 Newspaper. All rights reserved.
Life in the Fast Lane: Orchid BioSciences
The founding CEO of Orchid BioSciences, Dale R. Pfost,
has lost his job, and so has Donald R. Marvin, senior vice president.
The stock price on Nasdaq had fallen to 50 cents from its last year’s
price of $4 to $7, and the company had severe financial difficulties.
In the first nine months of this year it made $50 million, lost $45
million, and had $12.5 million in cash. The two resigned on December
9.
George Poste, who had been installed in October as chairman of the
company, promises to “further strengthen our cash position and
to augment our senior management team.” The company is seeking
a line of credit to pay its bills, and it also hopes to sell a
division that makes equipment for analyzing genetic differences.
Orchid was one of Sarnoff Corporation’s early spinoffs. Sarnoff’s
semiconductor expertise helped develop “miniaturized”
microfluidic lab processes for what has affectionately been known as
the “lab
in the palm of your hand” (U.S. 1, January 29, 1997).
Pfost majored in physics at the University of California at Santa
Barbara (Class of 1980) and has a Ph.D. from Brown. In Great Britain,
he was CEO of Oxford Glyco Sciences, and he came to Sarnoff in 1996
(U.S. 1, January 29, 1997).
Marvin went to Ohio State, Class of 1974, and has an MBA from Iona
College. He has worked at Miles Laboratories (now Bayer), Abbott
Laboratories,
Pepsico, and Boehringer Ingelheim in California, where he helped sell
off the diagnostic division. As a consultant at Sarnoff, he helped
hire Pfost.
After Orchid’s IPO in 2000, the stock price jumped from $8 to $57
and had 250 employees. Pfost (pronounced “post”) spoke at
U.S. 1’s Technology Forum that year and predicted that Orchid’s
technology could “change the way medicine is practiced.”
Sarnoff made its money. “During the first several years of
Orchid’s
existence Sarnoff had a significant ongoing revenue stream from
research
work, and Sarnoff did have an equity position which it liquidated
by the spring of 2001,” says Anne Van Lent, former vice president
of ventures at Sarnoff, now CFO at Barrier Therapeutics at Princeton
Overlook. By the time Sarnoff sold the stock, it was priced between
$4 and $7 and would have been worth from $7 million to $11 million.
As Van Lent points out, Pfost and Marvin shifted strategies quickly.
“Dale and Don were very creative in looking for strategic
corporate engineering opportunities to reposition the company as the
market evolved and the need for high throughput research tools
declined,” she says. They moved into the DNA area by buying such
companies as Molecular Tool, Genescreen, Cellmark Diagnostics, and
Lifecodes Corporation. Now the high-margin business of gene testing
services including a major contract for identifying individuals at
Ground Zero provides most of Orchid’s revenue. Paternity testing
(especially for race horses), gene testing for agriculture, and
forensic testing are profitable.
This year, 180 of Orchid’s 700 jobs were cut, and at the College Road
headquarters the headcount dropped from 180 to 100. A search committee
has been appointed to replace Pfost but not Marvin, and Tracy
Henrikson, Orchid’s spokesperson, says that the board feels the
company can be profitable by the end of 2003.
Among Orchid’s institutional investors are Orbimed Advisors,
Wellington Management, Morgan Stanley, and Calpers, the California
pension fund, which owns 2.7 percent of the firm. Nasdaq threatens to
de-list the stock unless the price goes up to $1 by January 8.
— Barbara Fox
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