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And FDA approvals on these things take lots of time and lots of bucks. While the royalty streams will be great gravy down the road, I think their value is discounted by the market. As far as HGSI being profitable soon, I seriously doubt it. Their losses deepened in the last quarter and were much worse than expected. Back in '93 when INCY and HGSI both did their IPO's, INCY used to trade at about half of what HGSI did - few thought that the INCY business model of non-exclusive access to their database and a low 1% future royalty on products would work. Well, the tables have turned and now INCY trades at about 50% higher than HGSI (keep in mind that as far as market caps go, it is much closer as HGSI has significantly more outstanding shares). Even though they are commonly refered to as competitors, they really have quite different approaches. INCY is a service company to the bio/pharma industry and no longer wants to be an drug company (as was their original business model in '91 when it was formed from the liquidated remains of Invitron's west coast R&D lab). They are more like a consortium. IMHO this will work well in genomics because as the drug companies are realizing, the vast amount of genomic information out there is far more than any one company can use - there is no value in trying to hold on to all of it. Also, the more who work with it, the better the techniques for using it become. HGSI wants to be a drug company and mine their database for potential products to take through clinicals, etc..... This is a long costly road fraught with many potential pitfalls, albeit with a potentially BIG pot of gold at the end of the road. However, I can think of many, many more clinical trials that have failed than have succeeded - and they always take many years and huge amounts of capital. Now, Smith Kline, HGSI's partner has tried to adopt a similar business model to INCY and sell access to the data they get from HGSI (and consequently TIGR), and have done a few deals. But, if I were a Bio or Pharma company, I would rather get my access to data from a consortium run by a service company who doesn't want to compete with me selling drugs and not from the discards of one of my competitors (SKB) who has already potentially cherry-picked the data that they are making available. Or, maybe be really smart like Upjohn-Pharmacia and play both sides of the fence and do deals with both and have access to it all. In reality, the first major product royalty revenues from either of these companies will more likely be in diagnostics which has a much shorter, cheaper, easier development path than therapeutics. The drugs will come on line later in the game. |
