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The changing fortunes of bioinformatic database companies.

The bioinformatics database market has racked up sales, launched new companies and was the starting point for the bioinformatics era. In 2001, the database market for genomic, SNP and expression/protein databases totaled approximately $379 million. But for many companies, the database market was simply not enough to sustain them. Recent reports indicate that database companies DoubleTwist and Entigen are near closing, and that others face an increasingly adverse investment environment. For three leading bioinfonnatic database companies, revenue as well as database size have grown quickly, yet the value of these businesses has been reevaluated. The progress and setbacks of these companies illustrate the dynamics of the bioinformatics market and the challenges that lay ahead.

The database segment of the bioinformatics market presents several challenges for vendors. Most notably, the market is crowded with competitors, ranging from vendors that specialize in bioinformatic applications to drug discovery companies that sell database information to fund their own drug development. Such competition is complicated by the number of database products that are commercially available and the many types of content available in databases. Also, many databases are sold with software for searching and analyzing database content, creating an additional cost for vendors that must compete not only in the database segment but also in the software market. In addition, commercial databases face an even tougher competitor in the form of public databases which are available to researchers free-of-charge. Likewise, questions of standardization and annotation have arisen, lowering the value of a database or requiring even greater costs to produce and maintain those databases. For companies that sell database information as well as use it to develop drugs, conflicts can develop over what proprietary information to keep for their own drug development efforts and what to sell in order to generate short-term profits.

Companies once closely identified with the market have moved beyond it. But the transition can be tricky and these companies must work at forging new identities. Both Celera Genomics and Incyte Genomics initially made their names as database companies. But 2001 found both companies readjusting their strategies in search of greater revenue opportunities and a more attractive business model for long-term growth and diversified revenue sources. Celera was founded to sequence the human genome and sell this information to subscribers. The Celera Discovery System includes the company's Genome Reference, SNP Reference Databases and access to 34 additional public and private databases, as well as information on proteins and comparative genomics, search tools and algorithms. For the fiscal year ended June 30, 2001, Celera Genomics posted sales of $89.4 million, a 109% increase in revenue over the year before. For the first six months of FY2002, Celera Genomics reported sales of $62.3 million, a 61% increase in revenue, with a total of 19 commercial and 180 academic and institutional subscribers. But the company also recorded a net loss of $133.5 million. These numbers include revenue from database subscriptions, as well as income from grants and sequencing services.

In 2001, Celera expanded into therapeutic discovery, acquiring Axys Pharmaceuticals, and also formed Celera Diagnostics, a joint venture with its sister company Applied Biosystems. These ventures will benefit the database business by contributing SNP and haplotype information and attracting new database customers through drug discovery collaborations. The company's proprietary database information will be invaluable to its drug discovery efforts. But the transition has been awkward so far. Earlier this year, Celera's president and founder Craig Venter resigned (see IBO 1/31/02) and a replacement has yet to be named. Wall Street has raised questions as to the sustainability of the company's database business and the timeline for profits from its drug development business, an even more competitive market. It will be interesting to see if the company's database investment pays off in therapeutic and diagnostic product development.

As with Celera, Incyte Genomics altered its course in 2001. In October, the company announced it was leaving the microarrays, public domain clones, transgenics, and contract-sequencing services businesses, citing increased competition and margin erosion, and discontinuing its therapeutic SNP discovery business. In 2001, Incyte's database and partnership programs accounted for over 70% of its revenue. The company also replaced its CEO and turned its focus to therapeutic discovery and development, emphasizing the utilization of its intellectual property. Incyte's revenue from its database and partnership program totaled $174.0 million in 2001, increasing 19% from the year before. The company's net loss, including the non-recurring charges, for the same period was $183.2 million. The company's LifeSeq Gold database integrates expressed sequence tag (EST) and full-length gene sequence information, mapping data and public genomic sequence information. In addition, the company offers six other databases, ranging from ZooSeq which features gene sequence information for laboratory animals to its new DrugMatrix chemogenomics database. As of the end of the third quarter of 2001, the company reported more than 30 database agreements. The company faces many of the same questions about its future that Celera does. Both companies sell premium products with high costs to develop and maintain, yet they are also building businesses in another high cost, R&D intensive, and highly competitive area.

One database company that has hot developed a drug development strategy is Gene Logic. Gene Logic provides gene expression databases through its custom discovery research databases and its GeneExpress Suite of databases. Its custom business relies on collaborations with pharmaceutical companies to develop databases for specific drug targets or validated genes from which it can earn milestone payments and royalties, in addition to annual access fees. The GeneExpress Suite more closely resembles Celera and Incyte's model of providing subscriptions to its databases, which consist of three database modules, BioExpress, ToxExpress, Pharm Express, and its recently released GeneExpress CNS (Central Nervous System) DataSuite. Database subscriptions are for three years with annual subscriptions costing between $1.5 million to $4.0 million, and individual products available for lesser amounts. For 2001, revenues increased 61% to $43.3 million and net losses increased to $33.2 million. R&D costs increased 34% to $59 million. The company may have carved out a niche in the database market through its use of primary tissue samples for gene expression analysis, which no other public or private database offers. In addition, unlike Celera, which competes in the genomic and SNP databases market, and Incyte, which competes in the genomic and expression/ protein database segments, Gene Logic has stayed focused on the gene expression database market. However, the company recently announced that it will integrate Compugen's human Gencarta genomic and proteomic database into its GeneExpress suite, perhaps reflecting the demand for more comprehensive product offerings.

These three companies offer only a glimpse of current developments in the bioinformatic database market, but they illustrate the different strategies at work and how three of the top database companies have persevered. The databases of each company hold a wealth of information that can play a significant role in drug discovery and development, and life science research in general. However, the economics behind the creation and sale of these databases may be the most important arbiter of the influence of this information.
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Title Annotation:Incyte Genomics, Celera Genomics report sales, change strategies
Comment:The changing fortunes of bioinformatic database companies.(Incyte Genomics, Celera Genomics report sales, change strategies)
Publication:Instrument Business Outlook
Article Type:Statistical Data Included
Geographic Code:1USA
Date:Mar 15, 2002
Words:1188
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