THE SCOTSMAN: THE RUSH FOR 'GOD'S SOFTWARE'
The Scotsman - United Kingdom ; 11-Mar-2000 12:00:00 am ; s
UNLOCKING the secrets of the 100,000 or so genes that form the blueprint of human life, and discovering how faulty ones make people sick, has long been the holy grail of all scientists.
For years, men and women in white coats have been methodically slogging away in anonymous laboratories from Dundee to San Diego, trying to piece together nature's most complicated jigsaw.
ow, suddenly and much more quickly than expected, they are close to completion of this puzzle of genes that make up each person, known as the human genome. Some have dubbed it "God's software".
It is, in theory, opening the way for drugs to be developed that can precisely tackle the rogue genes that cause diseases from cancer to schizophrenia to asthma, rather than just their symptoms.
Previously, decades of research have produced only about 400 classes of drugs.
ow, scientists and analysts believe that the unravelling of the human genome could uncover about 5,000 much more specific new biological targets for which drugs may be developed.
The prospect of breakthroughs that could change people's lives forever is attracting investors who are swarming all over any biotechnology company with even the most tangential link to genomics, or research into genes.
In particular, those promising to pinpoint specific genes which cause disease when they become faulty are in huge demand.
But share prices across the sector generally have rocketed, with the trend starting in the US, where the Nasdaq biotechnology index is up 63 per cent this year, and spreading rapidly to the UK.
The magnetism of stocks in companies perceived as having seemingly unlimited growth prospects has led many in the City to dub them the new "dot-coms".
One analyst, Jack Lamberton, at Cape Bojador Capital Management, in New York, said: "Genomics is considered the really high-tech part of pharmaceuticals, so it has caught the fancy of technology investors.
"Portfolio managers are buying everything genomic, hoping for a home run and a few winners down the road, even though some may turn out to be losers."
In the UK, Cambridge Antibody Technology, a company developing antibodies to treat diseases like multiple schlerosis, has seen its shares rocket from 208p in November to a high of Pounds 53.00, closing at Pounds 42.37.5 yesterday.
The dynamite behind this rise was a deal announced earlier this month by which the US group Human Genome Sciences, one of several companies close to completing the human genome, will take a 6 per cent stake at Pounds 20.75p per share.
Oxford Glycosciences, a proteomics group, which identifies proteins and rents out vital databases of various proteins and genes to drugs development companies, has gone from a 12-month low of 252p to close at Pounds 32.45 last night.
Proteins, which are produced by genes, are important because they are the real targets for drugs.
All this is quite a contrast from the years the biotechnology sector on both sides of the Atlantic spent out in the wilderness, not helped by scandal ridden falls from grace of companies like British Biotech and Cortecs in 1998.
Other biotech companies with no real link to the so-called human genome project have also benefited from the new wave of expectation flooding the sector.
This, analysts believe, has been partly fuelled by investors who have made a fortune punting on internet stocks and are now seeking the next "hot" sector to reinvest their gains.
Firms to benefit include Axis-Shield, the diagnostics group based in Perth, which is developing tests for heart disease, and has seen its shares climb more than three-fold in recent months to Pounds 11.27.5.
Scotia, the Stirling-based group developing the Foscan cancer treatment, has risen from a low of 48.5p to 229p. Celltech Group, which last year bought Chiroscience, has just become the first company in the biotech sector to enter the FTSE 100 index.
And International Biotechnology Trust, the investment trust that specialises in the sector, has seen its share price rise more than three-fold over the last year.
But what was the trigger for this new gold rush? And more to the point, are biotechnology stocks really worth buying, or are we starting to see the same sort of apparent overvaluations we have witnessed in the internet sector?
It all seemed to start in January, when the US group Celera Genomics, based in Maryland, announced that it had sequenced 90 per cent of the human genome, covering 97 per cent of the 100,000 human genes found in the nucleus of every cell in the body.
These genes control the manufacture of the proteins which make up all the parts of the body - blood, sweat, tears, bones, flesh and nerves.
Celera is expecting to complete the sequencing job this year, beating university and government research groups engaged in the same task in the US and Europe.
It and other rival genomics firms, such as Human Genome Sciences, which is also based in Maryland, analyse genetic material, often identifying specific genes and their functions.
They then sell their databases to drugmakers, often the biotechnology companies, who can use the information to develop medicines against genes suspected of causing human diseases.
One analyst, Doug Lind, at Morgan Stanley Dean Witter, said: "Celera is going to be the first to sequence the entire genome and that will be the basis for information and product development of the genomic revolution."
It is also clear that developing drugs from all this information will probably be a much longer process than a lot of investors think.
Indeed, Craig Venter, the president of Celera, said recently: "Over half the genes being discovered are new to science. It will take decades and decades and decades of research to understand this vast quantity of information."
At pharmaceutical industry consultant Evaluate, the managing director Jonathan de Pass, said: "Genomics may revolutionise our lives, but the question is, when is it going to pay off'?
"The history of investing in the new biotech technologies is that it is very unpredictable, so people are having to take a lot on trust."
However, some of the feeding frenzy among biotech stocks has been on the expectation that they will become takeover targets for their bigger brethren, the pharmaceutical giants.
Many of these pharmaceutical groups badly need new potential blockbuster products to replace ageing pipelines of drugs on which patents are running out.
In the meantime, the race has begun among the biotech companies to obtain patents giving them the right to exploit specific genes. This costly exercise is already leading to new share issues to raise the necessary cash, and fuelling the boom further. All this has led to some disagreements over whether the biotech sector is becoming overvalued.
One bull, as you might probably expect, is Chris Evans, who founded Chiroscience a decade ago and has created a total of 16 companies -including PanTherix at the West of Scotland Science Park - most of them spin-offs from university laboratories.
ow he has raised about Pounds 125 million for his Merlin Biosciences investment fund, which will invest in 20 small unquoted companies in Europe, having combed through 1,100 companies in Europe. He believes about 200 of these have strong patents and potential.
He said: "This rise {in share prices} is on the back of people who have learned lessons. Today's managements know not to overhype stuff and they also have some good substance. It is not a bubble. In my opinion, people are bringing in far better quality science and package projects with good management to the market place.
"Of course, some of it will be euphoria, but in a high-tech sector you will expect to have a little bit of euphorial froth and there will be one or two disappointments. It is the name of the game."
Mr Evans pinpointed neuroscience, cancer, bio-informatics, proteomics and genomics as areas where stars will emerge. He added: "We find them sexy. That is where the big challenge is, but there is also a bigger prize if you get it right."
The next biotech surge will be in Germany, Mr Evans believes, where there are 378 unquoted biotech companies with promising research under way.
On the other side of the coin, John Savin, pharmaceuticals analyst at brokers Greig Middleton, said: "My worry is that a lot of these values {of biotech companies} are being driven not by realistic expectations on earnings, but by 'hot' money which is flowing out of internet profits.
"This is all very much linked to the dot-com boom. If this comes to an end a lot of these companies will be very badly damaged."
Whatever happens, the benefits for science from genomics are going to be enormous and investors certainly look likely to gain in the short term. The long-term prognosis, however, is anyone's guess. |
