>>Can anyone . . . . . comment on how bad this news is? <<
AJ,
Rocketman is the better guy to comment (but between moving house, new job, kids that take him on horses on mountain trails, etc., we haven't heard much from him lately). Dave?
Here's my quick take, some details from fallible memory.
Although the market will no doubt overreact on Monday, the decision relates to only a fairly small portion of INCY's business, and one that has been shrinking lately, while the core database/database management business has been growing. And I don't believe it affects the potentially huge royalties (years from now) from sales of drugs developed with INCY's data and reagents, for which INCY has a contract right under 14,000-plus (?) licensing agreements, unrelated to the alleged infringements.
From the July 14 INCY earnings press release:
"For the quarter ended June 30, 1999, database revenues increased 19% to $30.8 million compared to the same period in 1998. Reagent revenues generated by the Company's genomic services subsidiary were $2.4 million and microarray service revenues were $1.9 million. The remaining revenues [of the total of $37.9 million] were attributed to contract sequencing, software and bioinformatics fees, clone fees and intellectual property related license fees." biz.yahoo.com
The decision affects, I believe, only the microarray portion of the business, which produced $1.9 million (5%) of INCY's revenues. (This number is down from an earlier 7%(?) or so, presumably because of the cloud hanging over INCY/Synteni's microarray patents.)
Worst case - INCY and AFFX can't cut the cross-licensing deal most of us want, AFFX gets an injunction, and all this survives appeal -- INCY is out of the microarray business (this is a lengthy legal process, of course). Dropping this $1.9 million out of the income statement would have increased INCY's loss to $9.3 million from $7.4 million (to $0.33/share from $0.26/share). And INCY may well have to pay some damages. Not a happy result, but not a disaster.
The worst case is possible, but my guess is that it's unlikely. More likely, I hope, is a settlement with cross-licensing. AFFX's bargaining position just got a lot better, but it still makes business sense for both AFFX and INCY for them to cut a deal and get on with it, if they can get beyond the bad blood between them. There's plenty of room for both companies.
--RCM |
