Sermo Changes Strategy to Gain More Pharma Business, CEO Declines to Discuss Layoff Talk

12/7/09

Sermo, provider of the nation’s largest online community of doctors, has had a tough year in getting financial services firms to pay for access to its physician network and has decided to shift its strategy more toward serving drug and medical devices manufacturers, CEO Daniel Palestrant tells Xconomy. The change comes amid talk of layoffs circulating at Cambridge, MA-based Sermo, according to a source familiar with the matter.

Xconomy has learned, from a source who asked to remain anonymous, that Sermo could be letting go more than one-third of its staff as soon as this week. Palestrant would neither confirm nor deny the possibility of layoffs, or say how many workers the firm employs. He did say, however, that Sermo has had to adjust its plan because the company has been affected by turmoil in the financial services sector and widespread consolidation and staff reductions in the pharmaceutical industry.

“We have to look at ourselves less as a startup company and more as an operating company,” Palestrant said. “That has all sorts of ramifications in the kinds of people you leverage, making cash flow-positive and profitability a tremendous priority.” He noted that Sermo is doing better than many other Web startups focused on health care—or so-called Health 2.0 firms—some of which have either folded or have been consolidated.

Sermo, which has raised more than $39 million in venture capital since its founding in 2005, allows physicians to circulate questions among their peers about how to best diagnose and treat patients with certain symptoms. The insights from this professional social networking are thought to be valuable not just for the physicians themselves, but for investors and drug companies that want to better understand how physicians use certain medical technologies. Sermo aims to sell subscriptions to those clients who want access to its database, but evidently, Wall Street wasn’t in a position to widely adopt this new tool for research this year.

Sermo’s online community has grown to more than 110,000 physicians. Last year, Sermo vastly expanded the access of financial analysts to its physicians-only community with the firm’s highly publicized partnership with New York-based financial information giant Bloomberg LP. Palestrant said the Bloomberg partnership remains intact, but he declined to provide details on whether it’s been a moneymaker … Next Page »

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