Gene Logic Has It
By Nadine Wong
Special to TheStreet.com
5/24/01 12:07 PM ET
Wong has been the weekly biotech columnist for worldlyinvestor.com since September 1999, and also is the editor/publisher and cofounder of the monthly publication, BioTech Sage Report.
It's best to ignore rumors and not buy a stock based on pure speculation. In biotech, investors should focus on companies with decent products, science, management, and technological advantages, just to name a few things that make it worthwhile to have in your portfolio.
Without a doubt, rumors can have an impact. Gene Logic (GLGC:Nasdaq - news - boards) has had a nice run in the past couple of weeks, gaining 30% to 34% on buzz that it might be a takeover candidate. Company officials declined to discuss the matter when I called, but there are pretty good reasons why big a pharmaceutical company or another biotech would have a keen interest in Gene Logic -- not to mention why investors might keep an eye on it.
What is Gene Logic?
The Gaithersburg, Md.-based company collects high-quality tissue samples and performs gene expression research using a proprietary process employing GeneChips to populate its database.
With its GeneExpress databases, Gene Logic offers subscriptions of its genomics-based information to biotech companies or big pharma. Gene Logic sells the differences in gene expression between diseased and normal tissues that are likely to play an important role in disease pathways. As a result, these genes and the proteins that they code for become targets for drug development.
There is considerable interest in what Gene Logic has to offer to drug development companies. Gene Logic has signed 17 GeneExpress subscribers since its launch in 1999, and the company has the ability to keep signing up new subscribers.
Gene Logic has a strong cash position and will be able to spend this money to speed up the content generation for its GeneExpress database. Furthermore, the company intends to offer parts of the GeneExpress database focused on specific diseases to smaller companies, expanding the number of potential subscribers. Gene Logic also is exploring ways to use the GeneExpress database to offer customers synergistic products such as full-length gene clones and customized GeneChips from Affymetrix (AFFX:Nasdaq - news - boards), a DNA chip-technology company.
Gene Logic recently launched a product that should generate enthusiasm from drug discovery and development companies. Focused solely on cardiovascular disease, the product is called the GeneExpress Cardiovascular DataSuite.
The DataSuite includes a diverse set of normal and diseased human cardiac and vascular tissues from a broad cross-section of individuals, races, medication regimens, lifestyles, disease stages and other demographic and/or clinical parameters. Interest from big pharma should abound, as cardiovascular disease is one of the leading causes of death.
In my opinion, Gene Logic offers the most impressive collection of gene expression data, which in turn provides the answers subscribers need to advance the large number of drug targets coming from the genomic efforts.
Need convincing? In March, Procter & Gamble (PG:NYSE - news - boards) announced it had identified 63 gene targets through its collaboration with Gene Logic. Even though the gene targets have not yet been validated, this provides support for the inherent value of gene expression information and the underlying appeal of Gene Logic's products.
This genomic company will add value to the drug development process, because its databases are tools that can reduce the time, risk and cost involved in developing drugs against human disease. As Gene Logic continues to find customers, the value of its GeneExpress databases will be validated. Thus, I expect it to grow, which should enable it to meet the Street's revenue forecasts for the year 2001. The company had sales of $26 million last year and is expected to hit $41 million this year. Earnings per share were minus 90 cents last year and are expected to be minus $1.29 this year.
Unfortunately, Gene Logic did not participate in the biotech rally on Monday, which was spurred by excitement over cancer research. That doesn't mean the company has lost luster, but it may mean the rumor mill has run its course. If so, when its share price dips, there could be a buying opportunity. |
