Unveiling the Human Genome Next Week
By Lissa Morgenthaler
Special to TheStreet.com
Originally posted at 6:18 PM ET 2/7/01 on RealMoney.com
Remember all the fuss June 26 at the White House, when scientists crowed over having sequenced the entire human genome?
Did you notice that despite all the whooping, you never actually saw the human genome? That's because it wasn't ready for prime time. But on Monday, the journal Science will publish it live and in color on the Internet. A genome that is better than 99.9% complete. And the following Friday, Feb. 16, a hard-copy version will come out just in time for Science's annual conference.
Now, I am an admitted genomics junkie. But nothing like this has happened in the history of man -- and it ain't likely to happen again. The comparison that is often made to man landing on the moon is a good one. It's that big a deal.
You will be able to look at the rows of A's, T's, C's and G's that comprise your chromosomes -- the recipe for you. You differ from an ape only by about 2% of those letters. Heck, you differ from the guy sitting next to you by less than 1%. (Is that a scary thought or what?) And you should start hearing about this Thursday or Friday because the news embargoes will expire and reporters can start talking about it.
Upshot: Will this stupefyingly seminal event lift biotech? I believe so. Will it shoot genomics stocks to the moon? Yes, some of them. Celera Genomics (CRA:NYSE - news) sure as heck ought to rise because it did a ton of the sequencing work, and it's largely the company's sequence that we'll be looking at. By Celera's count, human genes total about 40,000 -- far fewer than the number 100,000 that we were all taught in school.
But there will be plenty of arguments about how those 40,000 genes break down into "splice variants," which are snippets of genes. Genes are recipes for making the amino acids and proteins in your body. And strange as it sounds, the recipes seldom come in one piece. They often come in snippets called "exons" that number five or six pieces per gene. Each of those snippets will cheerfully recombine with snippets from other genes to make different proteins, and this is the magic by which 40,000 genes can hold the recipes for an estimated 1 million-plus proteins. (By the by, scientists have suggested that a mere 10,000 proteins in your body will be good targets for drugs. I find that view astonishingly limited. But that's another rant.)
What I can't tell is where the issue of who owns what will drive biotech stocks in the wake of the human genome publication. Darn near every biotech company worth its salt has filed patents on one or more genes -- but a few companies were there first and grabbed the lion's share.
Human Genome Sciences (HGSI:Nasdaq - news) has something like 16,000 gene patent filings. Incyte Genomics (INCY:Nasdaq - news) says it has more gene patents issued than anyone, including HGSI. But then, Incyte has said for some time that it has 140,000 genes cloned and sitting in its freezers. None of the scientists I know agree with that count, so I'm curious to see how Incyte resolves the discrepancy. I'm guessing we'll hear splice variant arguments out of Incyte, and that's one of many postpublication discussions I'm awaiting with interest.
Suffice to say that at the moment, the fundamentals in biotech are wonderful and the technicals are weird. If biotech doesn't blast upward in the next week, I will be absolutely flat-out amazed. But as Todd-o says, this is a minxy market. We'll soon see whether I'm right.
Still Bullish on Biotech
The Force may be with all of us in this duplicitous Year of the Snake. But when it comes to biotech, the Force has been with neither the technicals nor the fundies of late.
Fundamentalist par excellence Jim Cramer wrote a column on Jan. 5 -- and appeared on CNBC the morning of Jan. 9 -- and each time explained that biotech was going down.
It didn't.
Crames, God bless him, sort of marked a bottom in biotech -- by the time he penned his piece, the stage was set for liftoff. Biotech (last year's best-performing Nasdaq sector) was shelled in the first week of January as investors locked in profits they hadn't taken for tax reasons in 2000. (Ooooh, and the column I could write about the tax code yanking stocks around every year...) Anyway, that first-week-of-January selloff, aided and abetted by the favorable Amgen (AMGN:Nasdaq - news) court decision plus several brokerage conferences, powered a 30%-plus lift in biotech from its intraday lows on Jan. 8 to its peak on Jan. 30. (Under the heading of "I wuz wrong," the Amgen/Transkaryotic Therapies (TKTX:Nasdaq - news) court decision last month put to rest investors' fears of generic biotech drugs. I believed Transkaryotic might win the case but ventured little on the outcome because the odds were in Amgen's favor. Moreover, I still believe Transkaryotic may win on appeal, which would have far-reaching ramifications for biotech. But that's next year's story.)
So. An email I received after my wacky duel with Cramer sparked a follow-up column on Jan. 12. Reader Marc Gilman is a technical analysis kind of guy, and he said Crames was closer to right than I was. He also said the American Stock Exchange Biotech Index (BTK^X:Amex - news) would bounce to 630 around Jan. 16.
It didn't.
Credit to Marc, the BTK did hit 630 on Jan. 23 and indeed surpassed that level to peak at 667 a week later. But you see, Marc also forecast the BTK would "absolutely positively take out 380, and it looks like 300 is targeted by the last week of January."
Nope. It didn't.
At the time, I wrote: "I believe biotech will dip after this rally because the Nasdaq Biotech Index has bounced 15% and the American Stock Exchange Biotechnology Index is up 20% from its lows intraday on Monday ... That's a pretty righteous move, and I would expect a little retrenchment to consolidate. But that puts the BTK at 578 now, giving me a very hard time with the idea the BTK could dip to 300 by Jan. 31. Time will tell ... I'm a big believer the Nasdaq Composite will really start moving after earnings season proves not to be a disaster, and the Fed cuts rates a second time. (The old "two tumbles and a jump" rule.) I don't believe biotech will be left out of the fun. But the drug stocks did do very well over the past 10 months and I think for now you can kiss them goodbye."
No Biotech Wreck
The Amex Biotech Index has fallen off its highs but hasn't collapsed
the way some people expected
Hmmm. I was right about biotech, wrong about Nasdaq and neutral on the drug stocks. The Amex Drug Stock Index (DRG^X:Amex - news) is up 4% since that column, which isn't bad, though it's peanuts compared with the biotech move. I thought Y2K comparisons would be a bigger issue than they proved to be. (You know, patients stocking up on drugs a year ago for fear of Y2K disruptions, giving drug companies tough comparisons on the December quarter.)
OK. In the wake of that second column, other readers emailed me to say that Mr. Gilman was a tad bearish, but a drop to BTK 450 was a no-brainer.
Gotta tell you, I wouldn't bank on it right now, gang. Maybe later in the spring when technology starts getting its respect again and money flows that way. But not right now, thanks to next week's unveiling of the human genome.
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Lissa Morgenthaler runs the Monterey Murphy New World Biotechnology Fund and has written on biotech for various publications, including Barron's and Michael Murphy's California Technology Stock Letter for more than 15 years. At time of publication, Morgenthaler was long Celera and Human Genome Sciences,and held positions in biotech funds, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Morgenthaler appreciates your feedback and invites you to send it to Lissa Morgenthaler . |
