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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: Biomaven who wrote (3766)	5/11/2001 4:59:17 PM
From: Biomaven	Read Replies (1) \| Respond to of 52153

And here's a piece that disagrees with my take and suggests GLGC may also be in play: Friday May 11, 4:22 pm Eastern Time Gene Logic May Be Next After Rosetta Buy By Toni Clarke NEW YORK (Reuters) - Gene Logic Inc. (NasdaqNM:GLGC - news), a seller of information about genes to pharmaceutical and biotechnology companies, could be next on the block following Merck & Co. Inc.'s (NYSE:MRK - news) acquisition of genetic research company Rosetta Inpharmatics Inc., (NasdaqNM:RSTA - news) analysts say. ADVERTISEMENT Gaithersburg, Maryland-based Gene Logic's shares closed up $2.20, or 11.7 percent, at $21.05 on Friday amid expectations the company will attract a buyer. Rosetta's soared 75 percent, closing up $7.43 at $17.34. ``We believe the Rosetta acquisition has the greatest impact on Gene Logic,'' said Edward Tenthoff, an analyst at Robertson Stephens. ``Gene Logic is now the leading provider of disease-related gene expression information.'' Tenthoff said that based on the 26 times projected 2001 revenue that Merck will pay for Rosetta, Gene Logic would be worth about $1.1 billion, or $43 a share. Others valued Gene Logic equally highly. ``Clearly, if Rosetta allows Merck to come up with one new blockbuster drug the acquisition would probably pay for itself,'' said Winton Gibbons, an analyst at William Blair & Co. ''If Rosetta is worth $620 million, Gene Logic is probably worth just as much.'' Gene Logic collects, stores and analyzes pieces of human tissue, helping it determine how genes function, or express themselves, in a particular disease. It sells access to its databases to drug companies who hope the information will help them develop new medicines faster. Gene information companies have found it hard to make money by selling data alone. Incyte Genomics Inc., (NasdaqNM:INCY - news) Celera Genomics Group (NYSE:CRA - news) and others have tried and failed. Now they're diversifying into diagnostics, drug discovery and drug development. Gene Logic, a company with a market cap of about $500 million, is determined to stick to its core business. But analysts say it is only a matter of time before the company is forced either to diversify or merge with a bigger partner. ``I don't believe information is enough to create real shareholder value,'' said Tenthoff. ``At some point Gene Logic will either need to add capabilities or integrate closer to the product in order to continue growing its revenue base.'' In the meantime, Gene Logic is building one of the industry's most comprehensive databases. The company collects samples of diseased human tissue from 100 operating rooms and analyzes the data using chip technology. Seventeen pharmaceutical and biotechnology companies have signed up as subscribers, each paying on average $2 million a year. LOGICAL TAKEOVER TARGET Still, the company is a long way from making a profit. It expects its loss to widen to $33.6 million in 2001 from $24 million in 2000. Mark Gessler, the company's chief executive, predicts revenue will rise to $41.2 million this year from $26.8 million last year. He estimates, however, that revenue will need to rise to between $100 million and $150 million before the company breaks even. The elusiveness of that target could spur the company toward a sale, analysts say. ``Within the genomics space, bioinformatics companies are the ones most likely to be acquired because it's difficult to run a standalone business,'' said Gibbons. ``The logical acquirer for Gene Logic would be a pharmaceutical company that doesn't have many deals under its belt.'' Gene Logic doesn't rule out the possibility of being acquired and says it's open to talks. ``We would consider being acquired as much as we would consider acquiring somebody,'' said Robert Burrows, a Gene Logic spokesman. ``Today's announcement on Rosetta is getting people's imagination going on the M&A side. The acquisition validates the importance of genomics, and specifically gene expression information, to the pharmaceutical industry.'' Gene Logic's future will likely depend on whether a pharmaceutical company considers it more valuable to own Gene Logic's data than to pay an annual subscription. Merck, in the case of Rosetta, evidently feels it is.