Washington Post: Celera Changed, Venter Couldn't
Hi Raymond,
Here's some more analysis on Venter's departure from CRA:
washingtonpost.com
Analysis Celera Changed, Venter Couldn't
Departure of Genomics Pioneer Was Sealed When Company Shifted Focus to Drugmaking
By Justin Gillis Washington Post Staff Writer
Monday, January 28, 2002; Page E01
On a golden June morning less than two years ago, a pair of rival scientists stood on a dais at the White House and bowed their heads slightly as the president compared their work to some of the great explorations of American history.
That celebration of the first human genome maps was a glittering moment for all involved, but outside the White House East Room that day, a colder reality was dawning for one of those scientists.
John Craig Venter stood next to the president as founder and representative of a company called Celera Genomics Corp. It had raced to a tie with a publicly funded group, led by Francis Collins, to compile the first maps of the genome, the molecular instructions that encode the biology of the human race.
The president, Bill Clinton, singled out Venter's "truly visionary pursuit of innovative strategies to sequence the human genome as rapidly as possible."
Many investors were expecting a boost in the Rockville company's share price that day as the president lavished praise on the field and on Venter. But even as Clinton spoke, the price was starting to fall. On the day of Venter's greatest professional triumph, the stock fell 10 percent.
In retrospect, the moment was an omen.
Venter was forced to resign last week as president and chief scientific officer of Celera, his pride and joy. In the immediate sense, the cause was an irreconcilable difference of strategy and personality with his boss, Tony L. White, chairman and chief executive of Celera's parent company.
But in a larger sense, Venter appears to have been a victim of the soaring expectations that he and other scientists in his field helped to raise. When they said their science, "genomics," had the power to transform human life, Wall Street naturally thought that meant lots of money. What Venter apparently didn't bank on was that Wall Street would want it to happen overnight, and would punish him if it didn't.
Now, with Venter out as head of a company imbued from top to bottom with his personality and style, Celera is charting a new course.
A primary difference between White and Venter was over how hard and fast to wrench Celera away from its original business plan, which involved selling access to genetic data and tools to researchers and drug firms, in favor of the tougher but potentially far more lucrative task of developing new drugs.
That difference was resolved with Venter's exit, and White has vowed to bring in a superstar president who will focus on drug development. So far, Venter is not commenting on the events of last week, beyond a few statements in a news release that hewed to the official story.
It is unusual, of course, for the visionary founder of a business to wind up running it for the long term, and Venter's departure is an example of the transition to more button-down management that has played out at many other young companies. But the tale of his rise and fall as a businessman also offers a lesson in the perils of becoming a Wall Street darling. It may be fun while it lasts, but it rarely lasts for long.
He Knew He Was Right
By the time Celera was founded in 1998, Venter already had a long history of defying convention. Through a career at the National Institutes of Health and at a private research institute he founded, Venter repeatedly backed ideas to speed genetic research, only to see them dismissed out of hand by other scientists.
Time and again, he was proven right, and he was rarely reluctant to remind people of it. Over two decades, he became one of the most innovative scientists in modern biology -- and one of the most polarizing.
"The people who don't like him would say he's arrogant," said Gerald Rubin, a top genetic scientist who does like him. "He basically said to the world, 'I'm so sure I'm right and you're wrong that I'm going to prove it to you by doing it.' "
Venter was running his Rockville institute, making news by mapping the genomes of various bacteria, when he got word in late 1997 that two industrialists, Tony L. White and Michael Hunkapiller, had cooked up an audacious plan.
They were the key figures in a company then called Perkin-Elmer Corp., now called Applera Corp., with headquarters in Norwalk, Conn., and significant operations in California. The company, an instrument maker, was putting finishing touches on a new machine that promised a radical increase in the speed at which scientists could read the chemical letters of an organism's hereditary material, its DNA.
Instead of just selling the machine to laboratories, White and Hunkapiller wanted something extra. The stock market was becoming fascinated with technology companies. They decided to start one that would use the machine to rapidly finish the map of all 3 billion genetic "letters" of the human genome.
A publicly financed effort to do that, under way for years, was moving at a stately pace in laboratories around the world under Collins, director of the National Human Genome Research Institute. White and Hunkapiller called Venter to tell him they planned to beat the government to the punch. "He said, 'You guys are certifiable,' " White later recalled. "'You're crazy. But I'll come listen.'"
A few months later, Celera was born, with a business plan that called for the company to become profitable within a few years by selling genetic data and, more significantly, software tools to analyze it.
Celera -- the name is taken from the Latin word for speed -- launched a crash building program in two office buildings off Gude Drive in Rockville. In short order, Venter installed hundreds of the new machines to create the largest genetic sequencing laboratory in the world. Star researchers who shared his distaste for scientific niceties rushed to Rockville to join the cause.
Wall Street took notice, too.
Genomics Superstars
The contest between the public and private genome groups was the subject of frenzied attention from the moment it began. Despite protestations from Collins and Venter that their goals were different, the press portrayed it as a horse race.
Neither man shied from the limelight, both of them working the press brilliantly. In trying to get across why genomics was important, they helped to raise ever-spiraling expectations about its power to transform human life by curing disease and combating age.
Their faces on television and magazine covers, Venter and Collins became the most visible figures in a biotechnology frenzy that swept the stock markets in late 1999 and early 2000. The run-up had many causes, but the excitement of the genome race was certainly high on the list.
People couldn't buy shares in Collins's venture, but they could in Venter's. Celera was represented on the New York Stock Exchange by an Applera "tracking stock." As the frenzy intensified, those shares rocketed from $7.34 to $247 apiece, a gain of 3,265 percent, in nine months.
As all that was happening, people who know him say, White, Venter's boss, was getting grumpy. He well knew that Celera, under its original business plan, could not deliver long-range earnings growth that would justify what the market was paying for Celera shares. One top genetic scientist said White snapped to him in the midst of the publicity barrage, "'This is all nice, but we need a business plan.'"
To be sure, Celera took full advantage of the situation, selling new shares into that overheated market to raise nearly $1 billion, amazing for a young biotechnology company with a few hundred employees. But in the management suites of Celera and Applera, people were forced to rethink their business model.
They quickly came to the same conclusion as many minds before them: In biology and medicine, the only business plan that offers the potential of extraordinary profits is drug development. All the biotechnology superstars have been companies with hit drugs.
Venter is an accomplished scientist, but pharmaceutical research is not his thing.
The strategy shift was announced to investors in early 2001. Venter publicly embraced it, but by all accounts it was a reluctant embrace. He had found his greatest success by unraveling and publishing genomes, and colleagues say he wanted to keep his focus there.
It's clear now that in that strategy shift of a year ago -- a shift Celera made to appease public markets demanding that it live up to lofty share prices -- the die was cast. Venter was not an expert in drug development and did not aspire to become one, and from the moment the company switched gears, his time at Celera was probably limited.
Colleagues say Venter made an effort to adapt his methods to discovering new drugs, but was never aggressive enough about it for White's taste. Two sources said this substantive difference was greatly exacerbated by along-running ego battle between the two men. White was annoyed by Venter's skill at attracting the limelight and felt overshadowed by a subordinate, the sources said.
In mid-2001, Celera bought out a small California biotech company with drug-development expertise, a signal to Wall Street that it was serious about the new strategy. That deal distracted everyone for a while, but people close to the situation say tensions rose recently as White demanded a far more intensive focus on drugs at the Rockville headquarters, where Venter reigned.
The precise details of the argument that led to Venter's abrupt resignation have not come to light, but White has not minced words in describing the larger problem. He could have tried to bring in a designated successor, he said, to pull off a smooth transition a few months from now. But anybody smart enough to be considered for that job would have worried about Venter's continuing influence, White said.
"We just kind of concluded that the best way to get the talent we need was to clear the decks."
A strange twist is that the original business plan -- the one to which Venter committed himself at the outset -- is bringing in money. White disclosed in an earnings conference call last week that the business of selling genomic data is drawing more than $100 million a year in revenue and will show a profit for the budget year that ends in June.
But it's far too late for that to matter. Celera's share price has collapsed along with the rest of the market and has been trading in the $20 to $30 range for months. Many investors, still holding on to shares they bought at rich prices, can only wait to see if Celera makes good on its promise to develop drugs.
It may take 10 or 15 years for that to pay off, but if it does, the rewards could be rich indeed. Some of the investors holding Celera shares from the genome mania of 2000 might even make money.
On Wall Street, where every day is a new day, those bruised investors are old news, of course. A price of $22.36 a share, Friday's close, doesn't sound so high on the Street for a company with Celera's talent and technology, a company that still has close to $1 billion in cash.
Several analysts who have looked at Celera recently are rating its shares a buy. |
