Monday, May 14, 2001

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Red Herring Rosetta translates bioinformatics for Merck
" Given the overwhelming amount of genomics data now in need of interpretation, bioinformatics companies like Rosetta are in great demand. Specifically, Rosetta designs and develops gene expression software, which helps scientists understand how and why genes are "turned on" or expressed. To be sure, the identification of a gene's function enables pharmaceutical companies to determine potential drug targets. Currently, the predominant means of analyzing gene expression is with microarray technology.

So why did Merck buy Rosetta? Mr. Clulow says Merck was already negotiating an increasing number of collaborative deals with Rosetta in order to capitalize on Rosetta's various microarray technologies like Rosetta Resolver and FlexJet DNA. But now that Merck is buying Rosetta, Merck can prevent its competitors from using the same technology, which can save significant amounts of money and time."

GenomeWeb Merck Acquires Rosetta for $620 Million in Stock
" Currently Rosetta has licensed the Resolver technology to a number of pharmaceutical and biotechnology companies, including GlaxoSmithKline, Biogen, Immunex, Paradigm Genetics, and Merck.

However, Michael Clulow, an analyst with UBS Warburg in New York, questioned Merck's commitment to selling high-tech life sciences technology to its pharmaceutical rivals.

"Merck is not going to support the greatest high-technology just to sell it to its rivals," Clulow said."

Yahoo! Finance Gene Logic may be next on block after Rosetta buy
"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.''"

Fool.Com Celera at a Crossroads
"Companies choose to adopt a product that is perceived to give some advantage over their immediate competitors and would like to see that protected in some way by the platform vendor (Celera) not running around selling it to everyone else, if they can avoid it. This is perceived to diminish the window of opportunity of the platform adopter to gain a lead over their immediate competitor. It is an element of sustainable advantage.'"

"Celera is certainly at a point of transition. It must either decide whether or not it wants to get into this collaborative, more vertical model of integrating itself with certain customers in big pharma or try to make its data and knowledge of it so valuable that big pharma of all walks of life simply has to have access to Celera data. I don't think the company has the time and money to do both. I don't think, for competitive reasons that I've explained earlier, big pharma is going to align itself, in large numbers, with a company that is selling the same applications to its immediate competitors."

redux [03.10.01]
eCompany Future Boy: We've Mapped the Human Genome. Now What?
"With information on the genome now rapidly becoming available, the business models for companies that sell information about the genome, such as Celera and Incyte, may soon be outmoded. Biotech companies will then have to earn their stripes the old-fashioned way: by developing blockbuster drugs. Of course, proteomics companies could arise to sell information about proteins to other drug companies, but Strosberg thinks this is a flawed approach. Given his history, he should know. "Incyte's business model," he recalls, "was originally to be an information provider. That period is over. People will not pay as much for information as they used to because so much of it is now publicly available. Information is becoming a commodity." Instead of selling information about proteins, he is focusing Hybrigenics on using its proteomics information to develop drugs, either alone or in partnership with larger pharmaceutical companies."

redux [01.11.01]
Fool.Com Do Biotech Data Deals Mean Real Money?
"Biotech deals announced in the last few days highlight the hottest debate in the biotech world: If and how bioinformatics companies -- the likes of Gene Logic (Nasdaq: GLGC), Incyte Genomics (Nasdaq: INCY), and Celera Genomics (NYSE: CRA) -- can sustain long-term business success. Can they sell their information alone, obtain future milestone payments and royalties on drugs or diagnostics produced from their data, or must they become drug development companies themselves?"

Fool.Com: Message Boards Re: Are royalties the key?
"Currently, big pharma subscribers are paying several million dollars per year, for several years, on a non-exclusive basis. Now if we assume you are correct in that unvalidated targets are worth MUCH less than validated targets (and I'm correct in assuming that first generation genomics targets are evn more likely to be "low margin") then, considering the time it will take to bring an unvalidated target to market, Celera is ripping these guys off (well, that's a little extreme). There's absolutely no guarantee any of this data will yield blockbuster drugs and yet they can charge tens of millions of dollars for it on a non-exclusive basis. Why does pharma buy it? Because several million a year is pocket change for a lot of these companies. Why risk missing out? Suckers.;-)

I realize I'm taking an extreme stance, but it's only to make a point: Celera is making a lot of money from their subscribers. The big question is can they continue to sign companies up at a rate sufficient to fund expansion of an internal drug discovery platform. Here we may have a problem. The subscription rate has been, for most of us, disappointing. Either Celera is going to have to start validating targets (or annotating or value-adding) to attract more customers, or they are going to have to enter into significant collaborations. I think they're going to do both."