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Biotech / Medical : Incyte (INCY) -- Ignore unavailable to you. Want to Upgrade?

To: Rocketman who wrote (829)	2/3/1999 1:18:00 AM
From: Techperson	Read Replies (1) \| Respond to of 3202

Earnings come after the close, should be 97¢. Conference call is at 2 PM PDT. Word is the company will announce they are canceling plans to create a separate company (Incyte Genetics) to finance their effort to map the human genome. Fear is the whole $200 million cost now will hit INCY's income statement and destroy earnings for 2 to 3 years.

To: Rocketman who wrote (829)	2/3/1999 5:18:00 AM
From: Rocketman	Read Replies (3) \| Respond to of 3202

I got the following question by private email, but figured the question and answer would probably be appreciated on the thread in general: <<<<<<<<<< Rocketman, I hope you could answer a few questions about Incyte for me. I have a position in HGSI and I've decided to look for another genomics company to invest in. I noticed INCY on a "top 10 losers" list tonight and I've been checking into the stock when I came across your excellent post. How does INCY make money? Do they get the patent on a gene/protein and license it out, or do they actually develop them like HGSI? I noticed you wrote they have over 10,000 full-length genes sequenced-- do this mean they have applied for 10,000 patents? (I know HGSI has over 2,500 genes/proteins under patent protection or patent application status) Finally, how would you compare INCY to HGSI? Thanks for your time. >>>>>>>>>>> My response: I'm going to bed in a minute, so you get the short answers. 1) Read the HGSI thread for the dates around March-May of 1997 and check out my several long postings I did then. They pretty much still apply. 2) Read the INCY thread. It actually goes faster than you think, much can be skimmed through, but I and others have got some longer analyses buried in the thread. 3) Get an annual report from the company. Also read their 10K filings from last year in the SEC Edgar Database. 4) If you are going to get in INCY, you ain't going to get a better buy in price IMHO than where it is right now. 5) Pull up and surf the INCY website at www.incyte.com 6) INCY makes their revenue by having non-exclusive 3 and 4 year contracts with Pharmas (and a couple big biotechs) for access to their software, databases and sequencing capabilities, with lots of extra fees for extra services (training, clones, custom sequencing, etc.) They have about 22 pharmas signed up including I think 9 of the top 10 pharmas. The deals are typically in the $2-$10 million per year per customer, and the prices keep going up. They have not lost a customer yet. Once you find something insilico you want the actual clone for, then you do a licensing deal that has milestone and a low single digit royalty fee. I'm not sure if they've applied for 10,000 patents for full length genes or if they can combine multiple genes in one patent, but you can be sure they are taking steps to protect the intellectual property. They know that full length genes are the gold nuggets while the ESTs are the gold flakes. They have the inhouse equivalent of a decent sized law firm doing patent work. They have also submitted something like 2.5 M EST sequences (starting back in about 1992), the first of which were issued last year. HGSI wants to be a drug company and seems to have quit growing their genomics business and put their efforts in drug devo. I don't even really see them as an INCY competitor. I also expect at sometime for INCY and HGSI to work out some kind of deal to work out the inevitable patent interferences they will have. INCY is a pure genomics platform company and I do not see them ever doing drug devo. Their view has been that drug devo is best done by deep pocket pharma companies and not biotechs. INCY is more of a pharma consortium model. They also have Synteni, which is poised to control the biochip market. If you follow the VDXXX Biotech model, we used to have both HGSI and INCY once upon a time. We dumped HGSI a long time ago when they became a high risk drug developing company. We keep increasing our INCY holdings and view it as the most undervalued company in our portfolio. See the VD Model Portfolio and Discussion Thread: Subject 14492 Anyway, hope that helps. I'm going to bed. Rocketman out!!!