Axon implements cost-cutting in bid to cushion losses

Salary freezes, a reduction in voluntary superannuation fund contributions and modest job cuts in the United States are among several cost cutting measures underway at Axon Instruments to pare back its losses over the coming year.

But the instrumentation and software developer said its main focus was now on generating revenue through new product lines and expanding its business area.

Axon (ASX: AXN) last month announced losses of up to $US4 million in the six months to June, blaming slower than anticipated growth in the global microarray genomics market.

At the time, Axon said the situation had led to delays to the introduction of several new products and that the company would act to reduce costs where it did not adversely effect future profitability.

Speaking with Australian Biotechnology News this week, CEO Dr Alan Finkel said Axon had begun to implement cost savings, but it was not yet known what the extent of those savings would be.

He said the company was more focussed on increasing its revenue in the current non-robust market by expanding its business laterally into new areas.

"We're taking a revenue-driven approach rather than just saving costs," Finkel said. "If you cut expenses beyond a certain point you are going to start to harm the future potentiality."

One of the new areas the company is exploring is cell-based screening, exemplified by the announcement this month of Axon's collaboration with Aviva Biosciences to apply the company's Patch-on-a-Chip planar electrode device to Axon's new PatchXpress ion channel drug screening systems.

Finkel said that less than 10 per cent of drugs currently on the market targeted ions, with 20 to 30 per cent of drugs in the pipeline now targeted towards ion channels as pharmaceutical companies became more aware of their value.

He said that while patch clamps offered a better way of methodically screening for ion channels, no one had yet developed an automated method of doing so. "We 're in the race with others to introduce highly parallel, automated patch clamp devices for early stage screening," Finkel said.

He said Axon had developed its own patch clamp to screen up to 16 cells at a time and was working towards a 384 well plate format for the device.

But while the company had achieved a relatively good 50 per cent success with its own patch clamp, Finkel said it made sense to work with Aviva, which had shown even better results with their own model.

"We feel that by working with them and incorporating their technology we will be offering a better product to the market because it will enable us to achieve a higher success rate product and to meet or beat our release goals," he said.

It is expected that the first PatchXpress will go into production by the end of the year.

Despite the focus on regenerating revenues through optimised product development, Finkel said some cost-cutting had been necessary.

He said this included some staff reduction in the US, delays in new hirings, reduced use of external consultants, a salary freeze for the coming year and a cut in voluntary contributions to super funds.

Axon had also recently finalised the sales of two dormant products, each worth less than $US1 million.

The first was a Parkinson's disease neurosurgery product, which was sold to competitor Frederick Haer and Co, while the second was a neuroscience imaging product that had been sold to an as yet undisclosed buyer.

"The market for capital equipment in health and biotech is just much softer than it's been in recent memory," Finkel said, adding that people were putting off buying equipment such as Axon's, which sold for $US5,000 to $US250,000.

"We truly believe that we have a robust product pipeline and that, at the very least, there will be long-term demand for it.

"For a short time, people can postpone capital purchases, but they can't for the long term because their R&D won't be efficient and so they will have to come back to purchasing it.

"I hope that by the end of the year, things will be turning around."

At the time of writing, shares in Axon were trading marginally lower at 31 cents, compared with a price of $1.09 at the start of the year.