NEW YORK, May 29 – Over the past six months, with genomics companies scrambling over themselves to stake out a piece of the profits from drug discovery, it shouldn’t be too much of a surprise that Sequenom followed suit.
But Sequenom’s strategy for entering the drug discovery arena -- by acquiring British population genomics company Gemini Genomics -- is markedly different from other more recent mergers in the industry. While Aurora Biosciences and Rosetta Inpharmatics chose to allow pharmaceutical companies to acquire them, San Diego-based Sequenom stepped further up the drug discovery chain with its acquisition of Gemini.
The rationale, according to Sequenom CEO Toni Schuh, is that while the new combined company may still have to partner with big pharma to develop some of their candidate drug targets into effective therapeutics, Sequenom -- with the help of Gemini -- will be able to identify drug targets without big pharma’s help, giving them the fundamental intellectual property, and the option to develop a drug target alone.
When you partner with a pharmaceutical company, said Schuh, you leave the “fundamental decision whether or not to take [the drug target] forward with the pharma." If you are a genomics company with a strategy for discovering drug targets on your own, he added, you have a “trump card” that allows the genomics company to proceed with a target without having to ask the pharma’s permission.
“They’ve made a quantum leap in the implementation of their strategy [for getting into drug discovery],” said Winton Gibbons, an analyst with William Blair in Chicago. “This is about being in a position to control your own destiny.”
Schuh said a combined Sequenom-Gemini, when approved by the shareholders and the High Court of Justice in England and Wales, will “definitely take gene targets all the way to drugs by aggressively partnering on all levels of the drug discovery process.”
Partnering is necessary, added Schuh, because Gemini and Sequenom expect to identify 400 gene targets associated with certain disease by the middle of 2002. “So many targets [in that period of time] would swamp even Merck,” said Schuh.
Some analysts, at least, are confident Sequenom made the right move, given Gemini’s experience in identifying drug targets. The company’s scientists are good, said Eric Schmidt, of S.G. Cowen in New York, and its database of clinical information is “probably the best,” he added. “This is a merger that made a lot of sense.”
Gibbons said that given the current market conditions and the significant investment in time it would take Sequenom to build its own drug discovery capabilities it was prudent to acquire Gemini now.
Other companies involved in providing genotyping analysis and tools weren’t convinced that Sequenom had the only correct approach for harvesting revenues from the potential blockbuster drug.
A spokeswoman for Orchid Biosciences, which currently has an alliance with AstraZeneca, said her company’s priority was in patenting the usefulness of SNPs, and to use the resulting intellectual property position to garner royalties from pharmaceutical companies who use those markers for diagnostics or therapeutics.
Lance Fors, CEO of Third Wave, another provider of genotyping services based in Madison, Wis., said Sequenom’s move toward drug discovery may, in fact, remove one his competitors.
“There are only a few people who can dominate a few spaces,” he said. “And there are a lot of tools companies,” Fors said.