Today's Real News: Government Supports
Gene Patents
How investors are misunderstanding biotech
By Jeff Fischer (TMF Jeff)
March 14, 2000
People fell all over themselves to sell biotech shares today, even though many
of these same people had rushed to buy the shares only recently. Human
Genome Sciences (Nasdaq: HGSI) , Celera (NYSE: CRA) , Millennium
Pharmaceuticals (Nasdaq: MLNM) , Incyte (Nasdaq: INCY) and many other
young, leading biotech stocks fell 20% or greater. The culprit?
The media is pointing to Bill Clinton and the U.K.'s Tony Blair. The two men had
the "audacity" to propose that raw human genome sequencing information
should be shared with the public. That is not new information, however. The
Human Genome Project was created long ago to do this very thing (share its
information), and since its inception Celera stated that it would likely share its
raw data for free or at very little cost to subscribers. So, in fact, the only
novel news presented today was good news, thus it is baffling that biotech
shares got stomped.
This evening I spoke with Human Genome Science's President and CEO, Dr.
William Haseltine, and he happily pointed out that today was the first time in
history that the government publicly stated that it supports gene-related
patents. Dr. Haseltine said, "Read the quote from Clinton," and then he read it
aloud. Today Clinton said, "Intellectual property protection [i.e., patents] for
gene-based inventions will... play an important role in stimulating the
development of important new health care projects.' Dr. Haseltine said that if
he wanted to, he could begin his next annual report with this monumental
statement, and quote today as a monumental day.
Investors apparently misunderstood the meaning and implications behind
Clinton's statements, however, sending almost all biotech stocks sharply lower.
How could Wall Street misunderstand so badly? Perhaps because today the
government also stated that scientists cannot get patents for human genes
themselves. This, however, should not be a surprise to the industry or to
investors, either. Any biotech company with patent attorneys worth their salt
would not attempt to randomly patent human genes.
As Dr. Haseltine has said in the past, "Trying to patent a human gene is like
trying to patent a tree. You can patent a table that you build from a tree, but
you cannot patent the tree itself." With genes, you can patent specific uses
that you discover regarding a gene, but you cannot patent the gene itself.
(After all, you didn't create the gene. Just like you didn't create the tree.)
Human Genome Sciences has been issued 117 patents on specific uses for
genes in the body. These are the kinds of patents that have value and that
should, almost without a doubt following today, stand up in a court of law. Dr.
Haseltine said, "Raw genomic data is not patentable because it is not useful [or
original]." His company, instead, has focused on isolating genes and turning
them into forms that can be used to make a protein for the body. This practice
is original and patentable.
So, today the business of patenting information regarding the use of isolated
genes was blessed by two key leaders of the Free World. Biotech companies
such as Human Genome Sciences and Millennium Pharmaceuticals, both of
which have been obtaining patents on this very premise for several years, have
been vindicated, as has the entire gene-based drug industry of the future.
Celera and Raw Genome Data
"Part two" of today's news was that, according to Clinton and Blair, all raw
human genome data should be shared with the public.
From the start, Celera has planned to make much of this information widely
available without cost or at very little cost. This month, Celera will publish the
fruit fly genome free of charge. In the future, Celera will share sequencing data
from the human genome as well. As today's detailed press release from Celera
reminds, this has always been the plan.
Celera is interested in sharing information with the world, not locking it away.
Will all of Celera's information be freely shared? Well, most likely much of its
"raw data" will be shared openly, and this raw data is what the government
was naively clamoring for today -- "naively" because the value of the raw data
(the genome itself) is limited anyway. When Celera adds additional expertise to
its genomic information, however, it will almost certainly patent (when
possible) and sell that value to subscribers. It is, after all, a business.
Understand, though, that having the human genome sequenced alone will not
answer many questions or create much value by itself. This is only the
beginning of the work. Isolating and discovering what each gene does in the
body is where actual medical solutions can be discovered. Companies that
discover these solutions deserve rewards for their labor and expense, and they
will be rewarded -- as the government stated today (although the message
was lost in the noise). Admittedly, most of the potential reward for young
information gathering companies lies far down the road, but that has always
been the case. Celera is in "phase one" of its business plan. (Biotech
companies that have patented uses for isolated genes for years are
considerably further along.)
So, the real culprit behind the tumble in biotech shares today was not Clinton
or Blair, but investors who do not understand the business models that many
young biotech companies are trying to create, and it was investors who may
not understand how the patent process works and is enforced, either. These
are complex topics and admittedly a great deal of uncertainty exists. However,
companies such as Human Genome Sciences, Millennium Pharmaceuticals, and
others that have filed patents for specific uses of isolated genes received
excellent news from the government today, while genome sequencing
companies, such as Celera, were merely reminded that leveraging raw genome
data into dollars will meet much resistance. However, the real value has always
been buried far beneath the raw genome data, and don't think that Celera
didn't already know that.
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