Paradigm Genetics (Nasdaq: PDGM) used the “R” word – restructuring – to describe changes its board approved for a new strategy this week. But the company also says it hopes to accomplish the changes without layoffs.

Paradigm employs about 200 people at its Research Triangle facility, where it originally planned to “industrialize” the process of gene discovery focused on agri-biotech.

Paradigm’s President and Chief Executive Heiri Gugger said changes in the agri-biotech market and the economy in general required the company’s strategy shift. The company outlined its revised business plan in a conference call and Webcast Friday morning.

Gugger, who replaced founding Paradigm President John Ryals in July, said the company will cut non-strategic programs and costs but hopes to reassign rather than layoff workers. He said the company intends to refine its business plan from that of a contract research organization to selling software applications and providing “answers not just data.”

Paradigm’s Chief Science Officer John Hamner explained that the company now plans to sell integrated toxicogenomics information to pharmaceutical and chemical markets, among others.

Finding biomarkers

“This new strategy expands our reach to all stages of discovery and development,” Gugger said.

Hamner said the company plans to integrate cellular, genetic, and metabolism information into databases that help drug and chemical companies predict adverse or toxic reactions to compounds.

Hamner added that the company will build a system to identify biomarkers that “give early warnings of disease or toxicity or act as reassuring sentinels of positive response.”

The company said the $23.8 million contract it announced Sept. 30 with the National Institute of Environmental Sciences fits directly into the new strategy.

Gugger explained that the contract, focused on how toxic agents work and cause damage on a cellular level, validates methods the company refined in work with Agelent and Rosetta. The company said the research connects its agi-bio and human health endeavors.

The National Center for Toxicogenomics defines it as a scientific field that seeks to understand how the entire genome is involved in biological responses of organisms exposed to environmental stresses or toxicants. It combines the use of gene expression profiling, protein profiling, genetic susceptibility and computational models to understand the roles of gene-environment interactions in disease.

Paradigm has hired key science leaders for its new initiatives, which it said the NIES contract validates.

2003 Financial projections

Paradigm’s Chief Financial Officer, Andrew Graham, said the company expects to end fiscal 2003 with a cash balance of $8 million with a fourth-quarter burn rate of $2 million.

Graham said revenues for 2003 should total about $28 million, with first and second quarter revenue of about $5 million. He said expenses will be about $35 million. He projects revenue growth of from 20 percent to 25 percent a year after 2003, with expenses up about 10 percent yearly.

Graham said additional financial details would be forthcoming when Paradigm releases third quarter results Nov. 7.

For the second quarter ended in June, Paradigm reported revenue decreased 13 percent to $5.3 million for a net loss of $5 million or 16 cents a share. Revenue decreased three percent to $11.1 million from $11.5 million for the first half of the year.

The company said the revenue decreases came because its GeneFunction factory gave Bayer AG less data during the period.

Paradigm stock traded down 12 cents at 61 cents mid-morning Friday with a bit over 30,000 shares changing hands.

If a company’s stock price remains under a $1 a share for 30 days or more, the company could face delisting from the Nasdaq exchange, which would likely result in a move to the less prestigious Over-the-Counter market.