Paradigm Genetics, Inc. announced that CEO and President John Ryals has been terminated and John Hamer, chief scientific officer, has been appointed interim CEO while a worldwide search is conducted for a permanent leader.

A brief press release issued by Paradigm after stock markets closed on Tuesday said simply: “Paradigm Genetics, Inc. (Nasdaq: PDGM) today announced that Chief Executive Officer and President John A. Ryals was terminated.”

The company was scheduled to discuss fourth-quarter earnings today but rescheduled the report for Monday, March 4, at 9 a.m.

Hamer previously has served as professor of biological sciences and adjunct professor of microbiology and immunology at Purdue University.

In an interview with The News & Observer, Ryals said his dismissal was triggered by a dispute with the company’s board.

The company said in an annual report that Ryals was crucial to the company’s success, stating: “Our success depends on the continued services and on the performance of our senior management and scientific staff, in particular John Ryals.”

Apparently, Paradigm found Ryals so key to the company’s success that Paradigm holds a $2 million life insurance policy on the now former CEO, and the report states that the amount “may not be enough to compensate us for the loss of his services.”

Paradigm, a life sciences company that concentrates on discovering new agricultural products, has not disclosed why it made the split with Ryals, who founded the company in 1997 and has since remained CEO. Paradigm announced two recent deals, including one with Duke Medical Center, that seemed to indicate a new direction for the company with emphasis on life sciences.

Ryals, who remains a board member, did not walk away empty handed.

Even as the company’s stock as dropped to under $2 a share, Ryals has been executing options on a considerable number of shares at a much higher value.

Since Nov. 14, Ryals sold 108,000 shares of Paradigm stock at about $5 per share for proceeds of $543,280, and he has filed papers notifying the Securities and Exchange Commission of his intent to sell additional shares worth an estimated $550,000. So far, Ryals has sold 144,000 shares valued at $716,380.

Other company officials have been dumping shares of Paradigm since November – the first time company executives were legally able to sell their shares since the company’s initial public offering in May 2000. Paradigm went public at $7 a share. Ian Howes, chief financial officer, sold 112,000 shares worth $462,400. Craig Liddell, vice president, sold 255,307 shares valued at $535,700, and he intends to sell more shares worth an estimated $390,000. And Athanasios Maroglou, divisional officer, sold 120,000 shares. Marolglou has also filed intent to sell an additional 60,000 shares for a projected $300,000.

Reports indicate that a major stakeholder in Paradigm recently unloaded 2.5 million shares after the shareholder was forced to sell of his or her holdings in biotechnology companies, and that a Paradigm investor has purchased all of the 2.5 million shares. Company officials have yet to reveal the identity of the buyer or seller.

Paradigm’s share price hit an all time low of $1.50 on Feb. 22, but climbed to $1.70 before the opening bell of trading this morning. Paradigm’s three-month average daily volume, the number of shares sold during one trading session, is 244,000. On Feb. 22, more than 1 million shares traded hands.

Paradigm generates revenue through partnerships with Bayer and The Monsanto Company. A small portion comes through government grants. Bayer and Monsanto have committed to funding Paradigm through 2004 and 2005, respectively, but each company has a clause letting them out of the contract if Paradigm’s research and development effort prove unsuccessful. Both companies provided Paradigm with a total of $17.7 million through third quarter 2001.

Through last September Paradigm spent $20.7 million on research and development, which consisted mainly of personnel costs. General and administrative expenses increased 30 percent to $9.6 million during the same period. As of Sept. 30, Paradigm had a working capital deficit of $4.3 million, down from $16 million in the year prior, and long-term debt of $8.3 million.

Paradigm had $13.2 million of cash and assets totaling $62.7 million. Paradigm also had accumulated a working capital deficit of $45.3 million while stockholder equity totaled $28.6 million during the same period through last September.

The company’s annual report indicates that its executive team has doubts about Paradigm’s future. The report states: “We may never become profitable if we and our commercial partners are unable to develop or commercialize our technologies into products. We have no experience in manufacturing and marketing products, and we currently do not have the resources or capability to manufacture products on a commercial scale.”

The report also indicates that Paradigm wants to spend some of its existing cash to acquire other companies, even though it has no resources to manufacture a product. Paradigm officials acknowledge that if either Bayer or Monsanto cuts off funding the company will be in trouble, and the report indicates that Paradigm may be forced to seek venture funding or debt financing in the near future.