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Celera Shares Soar on Genome Prospects

The firm will shift its focus to turning its genetic discoveries into drugs. It's a riskier but potentially more rewarding realm.

February 13, 2001|From Bloomberg News

Shares of Applera Corp.'s Celera Genomics unit surged nearly 15% Monday as some investors bet the company will be able to translate its analysis of the human genetic code into new drugs and vaccines.

Biotech stocks in general rallied, though most remain far below the peaks they reached in 2000.

Celera and the publicly funded Human Genome Project on Monday formally presented their two versions of the human genome. Their findings suggest that humans have fewer genes, with more complex functions, than had previously been thought.

Celera now plans to use its $1 billion in cash and short-term investments to begin turning the genetic information it has discovered into drugs. That will move it away from its current focus of selling its gene database to other companies and researchers.

The shift will take Celera into a business where the rewards--and risks--are greater, analysts said.

"It makes them look smart; they made a good move to reinvent themselves," said John McCamant, editor of the Medical Technology Stock Letter. But "I don't think that we are going to know who is well-positioned until further down the road."

Shares of Rockville, Md.-based Celera (ticker symbol: CRA) rose $6.15 to $47.75 on the New York Stock Exchange.

Investors' excitement over biotech had lifted Celera as high as $276 a share a year ago.

Also rising Monday was Celera rival Human Genome Sciences (HGSI), which added $2.88 to $53.94. It peaked at $116.38 last year.

The map of the human genome by Celera marks a milestone in the company's 18-month effort to understand the human genetic sequence by tearing human DNA into tiny pieces, decoding each piece and reassembling those strands of information into the full genome using powerful computers.

The unexpected finding that humans have only about 30,000 genes, just a third more than a common type of roundworm, suggests that scientists are not likely to find many diseases that can be traced to a single gene.

"People had thought that . . . by virtue of having the human genome at our fingertips, we'd be able to answer the most complex questions in human disease," said Lance Willsey, who runs a health-care fund for DCF Capital. "It's going to take a much deeper understanding to translate the potential of this raw genetic information into a tangible health-care benefit."

But, already, companies are rushing into position to use the growing wealth of information. Companies including Sangamo BioSciences Inc., Variagenics Inc. and Biosite Diagnostics Inc. have begun work on ways to use genetic information to improve diagnosis, speed drug discovery and fine-tune which patients will benefit most from a particular drug.

Sangamo (SGMO) rose $2.75 to $19.25 on Monday, while Variagenics (VGNX) fell 25 cents to $6.88 and Biosite (BSTE) gained $1.63 to $37.50.

Celera is building a facility for research into proteomics, the study of the body's proteins and how they interact, which could use the company's computing power to tease information out of the gene databases and speed the discovery of new drugs. If the company can use that knowledge to beat out rivals in the drug development business, analysts expect revenue from drug sales to quickly outstrip revenue from the database business.

Celera had revenue of $20 million in the quarter ended Dec. 31.

Still, profits remain far in the distance for these companies. Celera is expected to lose $2.11 a share in its fiscal year ending in June, according to the average estimate of analysts surveyed by IBES International. The following year, Celera is expected to lose $1.47 a share.

Analysts warn that by searching for new drugs, the company will be entering one of the most competitive areas in biotechnology, challenging large, established companies such as Amgen and Genentech.

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Long Way Back

Celera Genomics' shares jumped after the firm unveiled its decoding of the human genome. But the stock is one-sixth its price of a year ago.

*

Celera shares on the NYSE, monthly closes and latest

Monday: $47.75, up $6.15

Source: Bloomberg News

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