For Gene-Decoding Leader Celera, Next Challenge Is Making Money
By ROBERT LANGRETH
Staff Reporter of THE WALL STREET JOURNAL
February 3, 2000
Later this year, Celera Genomics Group hopes to complete one of the most remarkable scientific feats in the history of medical science: decoding the entire human DNA sequence. But even as it speeds toward the finish line, the company faces an even tougher challenge: making big money from its breakthrough.
Craig Venter, the president and driving force behind Celera, stunned the scientific world last month when he declared that his 18-month-old company was expected to outpace the government-financed Human Genome Project in the race to decipher the entire sequence of three billion chemical units that make up human DNA.
Already, major drug companies are betting heavily that this genetic blueprint of human life will eventually lead them to innovative medicines against cancer, diabetes and Alzheimer's disease and a host of other intractable ills.
Wall Street, at first uncertain of Celera's commercial value, now seems convinced that this unprecedented windfall of genetic information is a gold mine for Celera. Celera shares have rocketed from a low of about $15 last summer to a peak of $270 last month. At 4 p.m. Wednesday on the New York Stock exchange it was trading at $228.125.
But inside Celera's Rockville, Md., headquarters, Dr. Venter and his scientific staff are scrambling to figure out how to live up to investors' great expectations. While cracking the human genetic code is an extraordinary accomplishment, it's not clear how it will lead to big profits any time soon. In fact, the company's business plan doesn't call for it to make any money for at least another two years.
The thinking at Celera is that a giant market in selling gene information to drug companies, universities and individual patients will emerge sooner than most people think, in the same way that e-commerce is transforming business at a pace that nobody could have predicted a few years ago. Already, Celera has sold "subscriptions" to its gene database to several big drug companies such as Pfizer Inc. and Novartis AG for between $5 million and $15 million a year. Celera also hopes to sell the database to university-based gene hunters beginning later this year at much lower rates.
The company is also planning to sell the DNA-sequencing information to individuals, especially those who are at high risk of developing common diseases such as obesity, arthritis, heart disease, cancer and asthma, to name just a few.
However, even Celera concedes that transforming the gene information into medicine or truly useful disease-prevention strategies is still a largely unproven process. Dr. Venter says: "We are creating the business as we go because this is a field that hasn't existed before."
While many investors scooping up Celera shares clearly are being wowed by the promise of potential profits embedded inside the human genome, some remain skeptical. Stuart Weisbrod, portfolio manager for the Merlin BioMed Group, a New York-based health-care hedge fund, is short-selling Celera shares because he can't figure out how the company is going to turn the science into cash. Most significantly, Mr. Weisbrod and others say, once the government-backed Genome Project is completed, perhaps by 2002, drug makers and other researchers will have free access to the DNA sequence over the Internet. At that point, "I don't see what advantage Celera will have," he says.
(editorial note by JP: Danger Will Robinson, if Mr Weisbrod is right)
Decoding the human genome is comparable to a giant genetic land-grab -- an effort to lay claim to large segments of DNA that may contain valuable genes whose identity will some day help solve widespread health problems. Patent law allows companies to obtain intellectual property rights on genes.
The DNA sequence within a gene is what cells use to produce proteins, which perform the most important tasks in the body. By studying how genes work and understanding how they go awry, scientists expect to develop new medicines that attack the underlying cause of disease, not just symptoms. Makers of the new gene-based drugs hope they will offer advantages over existing treatments and command premium prices.
That's why drug makers are rushing to acquire rights to investigate as much of the sequencing information as they can, even before it's clear what specific genes lay hidden inside segments of DNA. "We see the genome as the most critical to making future medicines," says Tadataka Yamada, head of research at SmithKline Beecham PLC of Britain.
Dr. Yamada says the companies probably have a window of about two to five years to lay claim to the DNA sequences that make up important disease-causing genes. That's why some companies want to buy Celera's data now rather than wait for the free information that will be released by the Genome Project. SmithKline hasn't bought Celera's data, but has acquired DNA information from other companies.
Indeed, even before Celera was created in 1998, other "genomics" companies such as Incyte Pharmaceuticals Inc. and Human Genome Sciences Inc. had created databases containing thousands of genes and gene fragments -- stretches of DNA sequences that make up partial genes. The fragments are cataloged according to where in the body the genes are active and may play a role in causing disease.
These companies have licensed their databases to numerous drug companies. Pfizer and Glaxo-Wellcome PLC have acquired DNA sequences from Incyte, while SmithKline has used its stockpile of gene data from HGS to begin searching for new medicines for treating heart ailments and diabetes.
Celera joined the DNA-culling business when scientific-instrument maker PE Corp., which makes powerful gene sequencing machines used by companies such as Incyte, decided to try to exploit its DNA-deciphering technology for itself.
At a 1997 meeting inside PE to discuss an ultrafast new gene-sequencing machine the company was developing, a company scientist suggested that PE use the machine to decode the entire human genome quicker and more cheaply than the federal government's Human Genome Project. Executives were dubious at first, but eventually decided there was a business in selling gene information.
The idea is that the company will give "raw" human gene sequence information away for free on the Internet, but charge clients for data that interpreted the sequences, such as telling them what kinds of genes may lay hidden within the sequences.
PE recruited Dr. Venter, a flamboyant gene researcher who had helped develop the gene-finding method already being used by Incyte and Human Genome Sciences, to run the proposed business.
Last spring Celera was given to shareholders as a tracking stock by its parent, PE Corp. One advantage Celera has over its competitors: It gets early access to any new machines made by PE's hardware unit, PE Biosystems. PE, known as Perkin-Elmer Corp. until last year, is based in Norwalk, Conn.
In addition to its work on the human genetic code, Celera, in collaboration with academic researchers, already has determined the genetic blueprint of the fruit fly and is working on the DNA sequence of a type of laboratory mouse. Because these animals are easy to experiment with and have many genes in common with humans, studying the genomes of the different organisms is expected to yield insights in how the human body works.
For example, Novartis is using the Celera database to understand how genes in the brain malfunction in such maladies as Alzheimer's disease and depression, according to the company's research head, Paul Herrling. In the past, developing treatments for mental-health problems such as anxiety or schizophrenia has been a trial-and-error process because researchers' understanding of brain chemistry is relatively dim. Using Celera's database, Novartis hopes to uncover new molecular targets in the brain that could be affected by new drugs.
Celera's long-term plan is to sell ordinary folks information about their genetic code. One of the hottest areas of biological research is understanding how individuals differ from each other genetically. Researchers are attempting to uncover millions of minute genetic alterations sprinkled across the human DNA.
These alterations, dubbed SNPs (pronounced "snips") are believed to be the key differences that make some individuals more likely to develop certain diseases than others. Celera hopes to generate revenue by selling millions of the SNPs it uncovers as it unravels the human genome. But Celera has competition from a consortium of drug makers created last year, which also is racing to identify SNPs for its own use. The Human Genome Project is also expected to finish a rough draft of the human genome by this spring.
In the not-too-distant future, as more and more genetic risk factors are discovered, Celera figures there will be a growing market of individuals who want to learn about their genetic risk factors, perhaps even from the privacy of their own homes, over the Internet. Already, several risk-factor genes for obesity have been found, as well as a number of genes that elevate the risk of colon cancer or other tumors. Celera is betting that in order to help prevent disease or live a healthier lifestyle, a growing number of consumers will want to know whether they have these genes and numerous others yet to be discovered.
Celera hopes to provide tests providing this type of information for a modest price. Patients will send in some blood or swab of saliva as a DNA sample, and a few days later they will be able to access the results through a secure site on the Internet.
"I don't know how big the market is going to be [for individual gene testing] or when it is going to be big," says Tony White, chief executive of PE Corp. "But I don't think the technology is going to disappoint people."
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so how many companies will be able to provide this service and how quickly will it turn into a commodity business??
-JP- |
