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Can Data Banks Tally Profits?

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Science  16 Feb 2001:
Vol. 291, Issue 5507, pp. 1203
DOI: 10.1126/science.291.5507.1203

Celera's high-powered sequencing has achieved impressive results, but it hasn't yet translated into a healthy bottom line. Like most biotech start-ups, the nearly-3-year-old company has yet to turn a profit. And, although the company's stock rocketed after going public in May 1999, its price tanked over the past year, along with that of other biotechs, from a high of $275 a share to about $50 today.

Although the red ink—$234 million so far—is not unusual, Celera Genomics of Rockville, Maryland, faces a long-term problem, according to analysts. Much of the raw data its sequencers have churned out is, or soon will be, freely available in public databases. All of which leads to the question: Just how is Celera going to turn a profit? That's still a big unknown, says David Molowa, a biotech analyst with J.P. Morgan Chase in New York City: “Celera's business model continues to be in flux.”

Celera officials originally suggested that the company would make its money by selling subscriptions to its genome databases, which now include genomes of the human, fly, and parts of the mouse, along with a catalog of more than 3.5 million single-nucleotide polymorphisms, spots where the “letters” of the DNA sequence differ among individuals. Celera's president, J. Craig Venter, also said early on that the company would patent about 300 genes linked to diseases and make money by licensing rights to pharmaceutical companies to speed the discovery of new drugs (Science, 15 May 1998, p. 994).

That plan is making headway. Celera signed up its first set of database subscribers in early 1999. Since then, the company has made about 30 deals with pharma companies, universities, and research institutes, says Paul Gilman, Celera's head of policy planning. The terms of specific deals remain private. But Gilman says pharmaceutical companies pay from $5 million to $15 million a year, whereas universities and nonprofit research outfits typically ante up $7500 to $15,000 for each lab that is given access. In its 2000 annual report, Celera said it earned $43 million, primarily from subscription deals. And in a conference call with reporters last month, Celera Chief Financial Officer Dennis Winger suggested that the company could pull in twice that amount this year. As for patents, Gilman will say only that the company has filed for “some” and that it expects the eventual number to remain in the 100 to 300 range.

But even if Celera manages to keep adding new customers, many analysts question how long its trove of data will retain its value if much the same information is available elsewhere for free. Celera intends to retain subscribers, says Gilman, by staying one step ahead of the academic competition. That means designing a simple computer interface to access the human genome data and integrate them with data from other genomes and information on the proteins the genes encode. That way, even if the raw data are available elsewhere, Celera will still have an edge, says Gilman.

In any case, Celera is already looking beyond sequencing to a new horizon: proteomics. Last year, the company raised about $1 billion in a stock offering for a major new research effort to understand the role of the proteins coded for by genes. Although this is intended in part to feed new information into the database business, Gilman says the efforts will likely lead to discoveries of drug targets or new drugs that Celera will attempt to commercialize either in collaboration with pharmaceutical and biotech companies or possibly on its own.

That's a clear indication “that they want to get into the drug business in a limited way,” says Franklin Berger, also a biotech analyst with J.P. Morgan Chase. And that, he says, would make Celera look more like a genomics-based pharmaceutical company like Millennium Pharmaceuticals of Cambridge, Massachusetts, than simply a data provider. Gilman agrees to a point but insists that unlike straight drug-discovery ventures, Celera will still be “grounded” in the online business. Berger, Mollowa, and other analysts applaud the shift toward drugs, as it proposes to exploit whatever moneymaking opportunities arise from the genome. But it also moves Celera into another arena with plenty of competition.

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