PART-5
Later the statement was modified, clarified, and massaged. It didn’t make any difference. The genie was already out of the bottle. Waves of panic selling instantly engulfed the market and continued for weeks to come. Caliper and Sequenom dropped over 85 percent in six weeks. Declines of 60 percent to 80 percent were commonplace, even among well- financed industry leaders such as Celera, Human Genome Sciences, Affymetrix, and Millennium Pharmaceuticals. In the summer the genomics stocks rallied briefly only to decline again, many to new lows, by late fall.
THE PRESENT: 2001 brought renewed investor interest in the industry. Many genomics companies are exceptionally well financed as they opportunistically raised capital in the white-hot heydays of early 2000. Celera has almost $1 billion in cash and both Human Genome Sciences and Millennium Pharmaceuticals have over $1.5 billion. The financial strength of the sector is validated by the recent M&A activity.
Vertex Pharmaceuticals is acquiring Aurora Biosciences for $592 million (a 44 percent premium), and pharmaceutical heavyweight Merck intends to acquire Rosetta Informatics for $620 million (an 82 percent premium). The scientific advances in the biotech industry, coupled with its financial strength, have resulted in alliances with the pharmaceutical industry never possible before. More deals are built on co-development – Vertex’s $815 million deal with Novartis and CuraGen’s $1 billion deal with Bayer – which provide the biotech industry with greater downstream profits, albeit with increased upfront risk.
Investors sense that the pace of development is quickening. Headlines from the recent American Society of Clinical Oncology highlighted a number of new therapies that specifically target cancer cells – such as Millennium’s Campath, Imclone’s IMC-225, and Novartis’s Gleevec. These drugs specifically target cancer cells, and avoid the pitfalls of traditional chemotherapy and radiation treatment that kills healthy cells. IMC-225 is a monoclonal antibody that blocks the epidermal growth factor receptor. Nearly two-thirds of all cancers have the receptor on their surface, and blocking the receptor prevents cancer cells from growing and dividing. Gleevec also works on EGF, but blocks an enzyme involved in a signaling pathway.
THE FUTURE: Investors are now seeing that the genomic leaders have exceptional intellectual property in the form of patents, licenses, and know-how, providing substantial barriers to entry. Most importantly, many new genomically derived drugs and therapeutics are making their way through clinical trials. As the pace of discovery quickens, drug development, especially monoclonal antibodies, will be augmented by the use of genomics technologies. Target selection and validation will continue to improve, and the increasing number of sequenced organisms will allow comparative genomics to elucidate functional understanding of the human genome.
Tomorrow’s headlines about life-changing medical breakthroughs may well reignite interest in this sector. We’re just beginning to explore this new genomics frontier. And we’re just getting out of the neighborhood.
Steve Newby is the portfolio manager for GeonomicsFund.com, a no-load mutual fund. Currently the fund is fully invested in a $25 million portfolio of 24 leading genomic companies. Regular contributor Ira Leiderman will return next month.
TrendSpotter is a weekly column that focuses on how trends in politics, patent law, and the US and European markets affect the genomics industry. The column appears every Friday. Next week Robert Goldberg, a senior fellow at the National Center for Policy Analysis, will offer his thoughts regarding genomics and Capitol Hill.
To access previous columns just enter the word "Trendspotter" in the archive search window on the homepage.
Copyright © 2001 GenomeWeb LLC. All Rights Reserved
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Breaking News on GMED
12:17 EST Thursday
St. Louis genomics company gets funding for 'revolutionary' research
Beth Miller
GenoMed has completed its acquisition of St. Louis-based Genomic Medicine LLC.
As part of the deal, Genomic Medicine, backed by venture capital firm Research Capital in Sarasota, Fla., will get an initial investment of $2 million to $6 million in the first year, based on the performance of the company. In addition, Genomic Medicine's sole shareholder, Dr. David Moskowitz, a St. Louis-area nephrologist, receives 12.5 million shares of GenoMed's common stock (Pink Sheets: GMED).
The company currently employs six scientists, mathematicians and business people at its facility on Clayton Avenue, and plans to add at least six more employees over the next year.
In addition, GenoMed will give additional stock based on certain performance incentives, including achieving certain profit levels, becoming listed on the Nasdaq stock exchange, or being acquired by a biotech firm for at least $100 million in cash or stock.
Craig Hall, of Research Capital, and the company's investor relations representative, said Moskowitz was not necessarily interested in money. "He was looking for venture capital to make his dream come true - of helping people," Hall said.
Hall said Moskowitz is working to develop a "genomic chip" that would contain all disease genes and eventually be used to identify diseases in people before they develop, and potentially delay or prevent the disease from developing. Moskowitz worked for several years at the Veterans Administration Hospital with patients with type-2 diabetes, hypertension and renal disease.
"I think that this is a company that will cause ripples throughout the whole medical community," Hall said. "With the information about the human genome discovered, we are set for a revolution and a whole new era in medicine."
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