INCY Highlights from their Annual Meeting 6/15/98, as presented by CEO Roy Whitfield. Some of this went pretty fast and was hard to get down in my notes, but, it is close. It was a much better attendance than previous years (quite a few people were standing) and there were lots of good questions at the end. Y'all should have been there!
Titled: "Driving Incyte's Growth", covered:
1) INCY database business: new partners, new dbases
2) New Businesses: microarray (Synteni), software & bioinformatics
3) INCY Genetics
4) Patent Updates
5) Questions (which I tended to incorporate into what was said during the talk)
Currently have 21 dbase partners: 19 Pharmas and 2 biotechs (Ariad & Genentech). Have increased number of dbases to customers, for example when Pharmacia/Upjohn added more dbases, revenue from deal doubled. Have expanded 4 deals by adding dbases (not sure if this is in 1998 or cumulatively???). First 4 customers have all renewed, no others up for renewal until 1999.
Have committed 1998 revenues of $105M, but projecting $140-$145M in revenues for '98.
Have penetrated with LifeSeq 38% of the top 50 Pharmas (representing about 2/3 of the industries R&D budget), and about 10% penetration with the other dbase products.
For market penetration of top 50 Pharmas, they showed a graph, and I made estimates from the graph which are +/- a couple of %:
38% Life Seq.
18% for LifeSeq FL (full length)
13% for PathoSeq
11% for Gene Album
8% for Satellite dbases
6 % for LifeSeq Atlas
5% for ZooSeq
They plan to still increase market share and go more after the larger biotechs (say 300 of the 1000 biotechs out there). They also want to sell more of the "Full Monty" (which is when you subscribe to all the dbases). They plan to leverage their proprietary GEM microarrays with the biotechs, where they can provide you with, for example, the Rat Liver Chips, but to get to the sequence data on your hits, you'll then need to subscribe to the ZooSeq dbase. They have an 11 person group focused on Sales, who are fully occupied dealing with new potential customers.
SYNTENI GEM MICROARRAYS:
The Synteni GEM microarray focus is greatly increasing and they are ramping it up. They put 10,000 DNA probes on each array, which holds more genes than any other arrays on the market (read as AFFX). Plus they have access to the INCY DNA archives as opposed to the public domain DNA most others are pretty much limited to using.
Synteni has deals with: Monsanto, Novartis, Pfizer, Pharmacia/Upjohn, Roche and 3 other Pharmas, AND Amgen, Genentech, Geron, Scios, Tularick, and 9 other biotechs.
INCY's Pharma customers were encouraging them to merge with Synteni as they were getting sequences from INCY in Palo Alto, shipping them to the Pharmas in the East and Europe, who were shipping them back to Synteni in Fremont to make custom arrays for the Pharmas. The Pharmas want standard chip arrays to work with. This cuts the cost due to economies of scale, etc.
Progress on GEM chips:
Have completed one for Human Secreted Proteins.
7/98 will complete for 20-30,000 unique rat liver genes.
7-9/98 six chips totaling 60,000 of the most interesting human genes in the dbase on six chips.
9/98 Staph aureus
10/98 Candida albicans
Also working on plant chips too.
I think I missed one other one that was described???
They will be the first to offer whole genome scanning.
The INCY/Monsanto deal involves half a billion datapoints, ie) 50,000 microarrays of 10,000 probes each within two years, and they are ramping up their capacity way beyond that and would like to do several more 10,000 plus microarray deals. The Monsanto deal covers software/bioinfo, and whole genome scanning of: human, rat, pathogenic microbes & plants. They will also do custom experiments for Monsanto. This Monsanto deal is the biggest microarray deal that they know of.
While microarrays have previously focused on the Discovery phase of R&D (which has a modest market size), Synteni is moving it into the whole genome scanning phase based on volume, and it will be utilized in the Development phase by the Pharmas (preclinical, pharmacology, toxicology, etc.), which has a large market size.
From a question at the end: On a 1 chip basis, would cost $10,000 (or $1 per probe) for a GEM, but they give a BIG volume discount.
Also from questions at the end: Comparing AFFX and Synteni microarrays:
AFFX uses ~20 bp probes on the chips built up with photolithography/masking technology. Synteni uses 1000 bp probes which are spotted down on the GEM chips. While both companies can put 10,000 probes on a chip, they estimate AFFX can only cover ~1500 genes on a chip because they need more probes for each gene because redundancy of ESTs from the same gene needed due to the non-specificity of the short probe length.
Regarding the microarray patents (and the disputes between INCY and AFFX and AFFX and Hyseq). They feel that no 1 patent dominates microarrays, and they feel that INCY has the strongest IP position across the whole field (mentioned that some Synteni patents to soon issue). They feel that their microarray software is far more advanced than others. I got the impression that they expect ultimately that much of the IP in this field will get cross licensed, but one never knows how IP disputes will be resolved.
INCY has world's largest bioinformatics group of 170+ staff. They have their commercial grade bioinfo software installed at 60 sites worldwide. LifeTools which Novartis, Monsanto and Bayer have taken are a new revenue stream. Their LifeArray software is "universal" and will work with competitors array systems. They then had a demo of LifeArray by Julie Klemm, which was VERY COOL STUFF!!! It was very obvious that these are powerful tools for R&D.
INCY GENETICS:
They have at least a 1 year lead on industrial high throughput sequencing technology over any other company (ie. PKN). They feel that PKNs new capillary sequencing system (which is still in development) isn't innovative, but is PKN playing catch-up with others doing capillary electrophoresis (read this as Molecular Dynamics MegaBACE). INCY will be first to capture commercial returns.
Have 30 staff in technology development, ~200 in sequencing, 150 in software development (not sure if this is counted in the 170 bioinfo people described above), 50 researching new products, 100 @ Genome Systems in St. Louis.
Tech Development has allowed INCY to run their PKN:ABD Prism 377 sequencers on a 96 lane format for about 2 years now, PKN still only offers this on a beta test basis. They think PKN has lagged on tech development because PKNs goal has been to sell boxes not to facilitate faster, better, more efficient sequencing, which is what INCY's goals have been.
INCY has been developing high throughput capillary electrophoresis sequencing capabilities for 2 years and have had a high throughput capillary electrophoresis sequencing line running for 6 months now, and have medium term goals of completely switching over from the PKN 377s to the capillary systems. (They didn't mention it, but the capillary systems are the MDYN MegaBACE systems as far as I know). They have fully depreciated all of their 377s. They expect that PKN will have lots of hurdles to get beyond besides just developing their new sequencers, hurdles which INCY has already crossed in the past two years.
Most of their sequencing efforts to date have been expressed genes, but about 15% of capacity is towards whole genome sequencing, mostly microbial and fungi. Finished full genome of Candida albicans in May 98, have 15 microbial genomes 95% complete (2-3X coverage), and are still cranking them out.
Their highest priority has been getting 95% of genes discovered with at least pieces of each. Medium priority is sequencing the human genome with 1-3X coverage for a 95% completion by 10/99 (I'm not sure if this is total genome or expressed genome, I think expressed???). They see this as valuable for genome closure, discovering SNP mutations, and possible disease markers. They view total genome sequencing as a low priority. While they see PKNs plan to sequence the total genome with complete coverage as interesting to academics, they don't see the commercial value in it, and don't feel that it makes economic sense to pursue it.
They have also found 10,000 human SNPs (single nucleotide polymorphisms) in the database to date. Tissues sequenced have come from over 500 different individuals.
PATENT UPDATE:
55 US patents issued on full length genes, over 1000 filed for and are generating at the rate of 1-3 per day with the 30+ person internal patent group. Have filed on 1.2 million ESTs Also rat, dog, mouse and microbial patent filings (might be included in the 1000 total???). While the full length patents are issuing nicely, the ESTs are still in limbo. Roy discussed briefly the recent article in Science on patenting ESTs and stated that if the issue is decided upon as described in Science that it would be very favorable for the company.
Regarding having all the pieces to offer full service genomics to their customers (this was hard to take notes on and thus is somewhat incomplete):
Pharmas spend 20% of R&D $ on Discovery, and 80% on Development. Most genomics in the past has been focused on Discovery, but INCY is now allowing focus on Development.
For Product Development have:
Unique Sequences Biggest Full Length Gene IP portfolio
Sample Prep Have RNA Amplification IP
High Quality Reagents LifeSeq GeneAlbum
MicroArray Synteni IP
Data Analysis Biggest bioinformatics group
For Discovery have:
LifeSeq, LifeSeqFL, LifeSeq Atlas, LifeSeq GeneAlbum
For Preclinical have:
ZooSeq, SNPs, Rat Liver and other microarrays..
While historically revenues have been from Discovery, they expect revenues to start kicking in now from Preclinical, in 3-5 years more so from Development, and in 7-10 years from Royalties.
RE: Licensing deals:
Licenses are for experimental use of genes, or if they ship a gene to the customer. No license for just computerized dbase manipulations. Nearly 8000 licenses have been issued to Pharmas (almost all in the last two years).
Licenses divided into fields of use: Research: for example a receptor used to find a small molecule therapeutic, they only will license out non-exclusively. For therapeutic molecules, they will license exclusively. Also have diagnostic and antisense fields of use.
In response to a question about diaDexus, they expect a prostate cancer screen to be launched as a product in 1999.
Well, that's all I can remember or decipher from my notes. I regret not having tape recorded the proceedings so that I could be more accurate.
Overall, INCY is doing a GREAT JOB!!! Now, if only the markets would recognize this (and realize that they have absolutely nothing to do with Asian markets), maybe we can see some appreciation on the street.
GO INCY GO!!!
Rocketman Out..
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