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dbusiness.com
Biotech firms seek riches in the secret life of genes
Jul 28, 2000 07:21 AM ET
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By Karen Cohen, dbusiness.com
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NEWS ANALYSIS FORT LAUDERDALE, Florida, July 28 (dbusiness.com) -- It wasn't the incantation "open sesame," but billions of government and private dollars that pried open the DNA treasure trove. Now scientists, doctors, investors and gold diggers of all stripes stand before a heaping pile of biological gems, intoxicated by the riches that await those with the wit to cut and polish them.
Last month, the government-funded Human Genome Project and Celera Genomics Group (NYSE: CRA) of Rockville, Md. announced the all-but-completed decoding of the double helix that spells out human genetic language. Even before the announcement, companies were vying to isolate a facet for themselves, believing real wealth lies in creating commodities out of the secret life of genes.
While a gene itself can't be patented, a genetic treatment method or diagnostic process can be. A number of firms hope to do just that, then sell or lease the patent to pharmaceutical giants with the resources to turn them into drugs.
"We're all hot on positioning ourselves as information companies because it is generating a lot of value in biotechnology these days," said Dr. Lloyd Mitchell of Research Triangle, N.C.-based Intronn, which has developed an experimental technology for rewriting a targeted gene at the RNA level -- the structures that carry out the DNA programming.
The elegantly simple strategy keeps the startups out of the expensive drug-making process and avoids the 10-year slog through clinical trials to obtain U.S. Food and Drug Administration approval. However, that approach isn't a magic saber that instantly slays financing difficulties.
"One venture capitalist we approached recently in Boston said I shouldn't bother describing what we do in info tech terms because they were not going to fund a biotechnology anyway," Mitchell said. Other venture capitalists, however, said they would prefer to invest in just the information technology part of his company, and not fund its research.
"We might have to split Intronn into two companies and make one a straight information technology play," he said.
Portal to the brain
Max Wallace, president of Cogent Neuroscience in Durham, N.C., which is researching genes associated with brain function, said his company is using Yahoo as a business model. "If we can find the genes that prevent stroke and do that in a two-year time frame and patent the results, we have a portal to the brain. If they want to use it, they have to come through me. If they do that, I have value right now," he said.
"The data coming from Celera and the Human Genome Project is creating demand for companies to develop the information into usable form," said John Buchanan of San Francisco-based Burrill & Co., which just raised a $110 million biotechnology venture capital fund. "You are going to see a lot more companies jumping on the genomics information technology bandwagon and going public. It's a very hot thing."
However, as the gold rush intensifies, the field is becoming crowded and confused, said
Robert Burrows of Gene Logic (Nasdaq: GLGC), a Gaithersburg, Md., genomics information and development firm. "It's difficult to determine which companies have the long-term legs, which ones have the stronger business models," he said.
Biotech companies are working feverishly to stay on the winning side.
Burrows said the industry is shaking out along four main lines: information providers such as Celera and Gene Logic; drug makers that develop products; toolmakers such as software developers; and finally, fee-for-contract researchers. A report by the investment and merchant bank Oscar Gruss & Son Inc., said by some estimates, the total market just for bioinformatics -- the computer tools and databases genomic research depends on -- could exceed $2 billion within five years.
Staking claim
A company's challenge is finding a reasonable niche, staking a claim and figuring out how to exploit it.
One example is DoubleTwist Inc., of Oakland, Calif., that bills itself as an application service provider and plans to make money by selling access to its large database of genetic information. Founded in 1993 as Pangea Systems Inc., the company always was an information firm but in the past focused on providing enterprise software to large pharmaceutical companies. In December, the company changed its name to DoubleTwist and transformed into an ASP for academics, researchers and small firms as well as to the large pharmaceutical companies.
DoubleTwist recently created a splash by announcing that, using a Sun Microsystems supercomputer, it had used data from the Human Genome Project to pinpoint 65,000 individual genes out of the 100,000 or so in each human cell.
Further down the chain are companies that provide scientists with the raw materials they need for research.
"There is so much information out there," said Scott Hutton, president of San Diego-based ChemNavigator.com Inc.
ChemNavigator.com is a private company that sells molecular compounds to researchers over the Internet. "This is a great opportunity for the smaller companies to bring their information to the large pharmaceutical companies," Hutton said. "I don't think people will sell information as a commodity; they'll use it on a strategic level."
Drug discovery is a two-part phase, he added, comprised of finding out gene function and then looking for a drug target based on function. Others see the opportunity in the reverse order: discovering gene function by analyzing drugs already on the market.
DNAPrint genomics Inc., of Sarasota, Fla., is going the Sherlock Holmes route of deductive reasoning.
Founded by molecular biologist Tony Frudakis and mathematician Myung Ho Kim, the first step is developing a set of algorithms to isolate genetic patterns by examining the DNA of people with adverse drug reactions. With this information in hand, drugs can be made specific to a person's genetic map.
The company plans to make money by patenting the genetic pattern associated with each drug reaction. While these may be licensed to pharmaceutical firms, the company also will charge doctors a fee for running their patients' profiles through its database.
"A good analogy is that the human genome project is like a dictionary. It is up to each company to learn how to make sentences, paragraphs and books that make sense,"
Frudakis said. "The worldwide government made sure that no one can own the dictionary. But you can write a book, and it's your book."
Staff writers Ray Bolger, Donna Balancia, Allan Maurer and Jeff Shuttleworth contributed to this story. |
