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Bioterrorism: Platform Technologies Fuel the Government’s Need


By Michael King

In August, we expected a strong finish to the year for the biotech sector. Obviously, the Sept. 11 attacks have significantly altered investors’ attitudes about the market and economy. Most recently, many have remained wary as fears of a silent, stealthier weapon, against which we have little defense, have spread across the country.

While jittery investors had already begun to return to biotech stocks, the ability of some companies to develop technologies that may potentially fight bioterrorism has added fuel to the genomics fire. In the post-Sept. 11 environment, the biochemical warfare scare may bring billions of dollars to biochemical, pharmaceutical, and medical equipment manufacturers over the coming years, but that doesn’t mean that all of these technology plays are good investments.

Shares of some GTI companies that make products to detect bioweapons have soared. One such company, whose stock climbed 38 percent between October 1 and 24, is Luminex, the developer of a bead-based technology used primarily for genetic analysis and drug discovery by research labs. The technology enables 100 biological and genomic tests to be conducted simultaneously on a single lab specimen and can be deployed to detect some microbial substances linked to bioterrorism.

Another focus company, whose stock soared as much as 86 percent on October 9, is Cepheid, which has a new portable, battery-operated instrument that uses sensitive PCR to detect DNA and identify bioterrorism agents. It has also developed a device to prepare a biological sample for analysis, which can be used to help identify organisms. Though sales for Cepheid’s devices have historically been slow, the recent interest from the government may cause the trend to change.

Another play at the crossroads of genomics technology and bioterrorism is Nanogen, which recently received a three-year, $1.5-million grant — its second such grant — from the US Army for continued development of biological warfare detection systems. As part of the agreement, Nanogen is developing miniaturized electronic devices for isolating and detecting dangerous agents in human blood samples.

Another biotech company that has recently received some attention and is a big player in the genomics era is Orchid Biosciences. Orchid leverages its proprietary detection technology, used to identify SNPs, within its GeneScreen genetic testing business, which is in collaboration with Luminex. Orchid’s SNP gene assays can be run on the Luminex LabMAP platform, thus making the company a potential player in bioterrorism detection and testing.

Finally, we have been impressed with Bruker Daltonics, which has created a chemical biological mass spectrometer already in use by the military, literally trucked around by US troops. This mass spec can detect anthrax and a whole host of toxins and spores in the air in three minutes and sounds an alarm if the air is dangerous.

With dozens of military labs involved in bioanalysis and Congress adding an additional $175 million to boost preparedness for bioterrorism, including money for locally based testing labs and early disease detection, we believe the strength in some of the above companies continue for a while. Nevertheless, the timeline from an investment perspective is yet to be determined.

Robertson Stephens, which has not independently verified the information contained in this article, maintains a market in the shares of Orchid Biosciences and has been a managing or comanaging underwriter or has privately placed securities of this company within the past three years.

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