Wrote this on Yahoo where someone "didn't get it" why INCY tanked with so many deals, thought you all on SI would enjoy it:
It's an over reaction, a classic buying opportunity, panic in the street, knee jerk reaction by a couple of analysts, hype by PKN and the NY Times (always known for the accuracy of their reporting ala ENMD). Basically, PKN is PLANNING to go from the instrument business and expanding into the information business where the real money is. I stress planning, because this is just a "letter of intent" that has been signed by PKN and Venter to start this new company - it is still a VaporBusiness using a VaporWare machine still in development. But, they are starting way late in the game for accumulating proprietary DNA sequences of genes. Plus, Venter doesn't like patenting everything (see his comments in the May 98 issue of Discover below), just the selected choice stuff. Unless they plan to keep all of these machines for themselves, which they don't seem to be planning, INCY and others will be able to sequence as fast (or faster) as they can. What one analyst feared is that Pharmas will delay signing up with INCY until they see how this plays out, that the Pharmas may just get the info from the public domain for free and that it will affect revenue possibly next year and beyond. But the later press releases stated that PKN will be selling subscriptions to the refined data, while just providing the raw sequence data to the public domain. Thus, it is a fear that the INCY growth won't continue at the same rate. All of the INCY dbase subscribers (except for one which has a clause allowing a 30 day notice to quit) are committed to minimum three year contracts, so the current income won't be going anywhere soon. Plus, INCY will have most of the expressed genes pretty well identified and sequenced and patents filed by the time PKN gets rolling good. Now, what INCY does really well with the public domain data is uses it for its own purposes, it all links into their dbases and has been useful for helping by analogy to figure out what they have discovered.
One big advantage that sequencing the genome end to end could give PKN is that they will get the genes that are really really really rarely expressed. But, how will they know when they have one of those??? INCY's Expression Profiling method of sequencing gives a lot more information than just the raw sequence. For example, they would typically run 5000 samples of expressed sequences from a certain tissue such as a resting state monocyte. The frequency that you see the same gene come up tells you how abundant that gene is in that tissue at that time in the tissues life. In the resting state cell, the abundant ones are the usual "housekeeping genes" that come up in virtually all cells. However, once they activate the monocyte the abundance of the housekeeping genes falls way down on the list and the genes that the cell uses to do its special business move up to a high abundance. These are clues as to what is important stuff in making monocytes work, and these are the types of genes that are then pulled out and sequenced in full length. The weakness in this method is the genes that are only expressed in such low number that it would take way too many samples to be practical to find them, something that would be one in a million say, versus one in 5000. Those can be missed by the INCY method, thus they have a hard time telling when they truly have genome closure and have found it all. So, they might leave a little bit on the table. But, there is plenty of DNA to go around! Also, many of INCY's partners are now signing up for non-human data anyway. In the meantime, who knows what will be happening with the PKN vs MDYN patent suits on the capillary sequencing technology. And, who knows when GeneTrace's really fast time of flight mass spec sequencing systems will be ready for prime time and blow capillary electrophoresis out of the water with its speed. Keep in mind that INCY has a long history of dealing with PKN, and had the first 10 Model 377 sequencers produced 4 months before their existence was even publicly announced. They were buggy as hell and their software sucked, but they were a vast improvement over the Model 373. Large numbers of INCY employees are former Applied Bio people who fled PKN too.
One weakness I see in this deal is Venter. While INCY and PKN are profit driven capitalist machines, Venter is more of an academic in his view of these things. His relationship with HGSI blew up because they were basically too dollar and patent driven, and the same thing could happen here again. Keep in mind that this is not a done deal, just a letter of intent. There is a long road between a letter of intent and a firm deal. Here's a couple of classic quotes from the article on Venter in the May '98 issue of Discover:
RE: the HGSI/TIGR deal "I would have my institute, and the investors promised they would file patents only on a limited number of genes. Later I learned that investors lie."
RE: the author of the article walking into Venter's office where he noticed: "On one wall of the vestibule to Venter's office hang his numerous awards, plaques, and medals of achievement.......On another wall, a cover of Business Week from 1995 blazoned with the title "The Gene Kings" shows Venter and Haseltine (CEO of HGSI) dressed in white lab jackets and posed against an iconic spiral of DNA. But someone has pasted a yellow Post-it over Haseltine's face. At TIGR these days there is only one Gene King"
This kind of sums up Venter's view of his deal with HGSI. Why should he have a better relationship with PKN??? Because they are nicer guys???
Rman
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