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Celera: Will the Metamorphosis Produce a Butterfly?

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Not often does a company go through so many changes in so little time, from acquisitions to novel businesses to management changes. But if there is a company that can go through restructuring and come out on top, it’s Celera Genomics. Celera has made noticeable progress of late on its path from genomics database provider to fully integrated drug discovery company. And it has become a favorite of investors as its foray into drug development and molecular diagnostics has begun to crystallize.

Celera has one of the strongest discovery engines in the sector with unique, albeit late, genomic intellectual property, novel targets coming from the proteomics factory, and new genetic variance data. Further, Celera has put in place the biology to validate these targets on an industrial scale.

Celera finally has a business plan to develop these targets commercially: Its online information business continues to grow and could turn profitable in FY2002; Celera Diagnostics offers intermediate-term revenue potential; and it seems promising that Celera will be successful in developing therapeutic products, both biologics and pharmaceuticals.

As the company evolves from genetics powerhouse to drug development engine, the management structure has changed accordingly. By now the changes at the top are old news: Founder and Chief Business Officer Peter Barrett left the company to pursue venture capital; David Block, a guy with more than 12 years of large pharmaceutical drug development expertise, was appointed executive VP and COO of the company’s therapeutics business; and, of course, Craig Venter stepped down from his presidential post.

While this news was initially a psychological negative, we think it will prove to be good for the company as it moves into product development. Celera will move expeditiously to fill Venter’s position with individuals possessing drug development business experience who can quickly leverage the company’s novel proteomics and chemistry capabilities into therapeutics.

Celera has also made some significant deal-making progress over the last 12 months. It brought in therapeutics experience and capabilities through its Axys acquisition, which is beginning to bear fruit. And Aventis paid Celera its fourth research milestone for the selection of specific Cathepsin-S inhibitors as early development candidates, marking the final step prior to preclinical development.

We expect to see further success from the preclinical portfolio Celera acquired from Axys exemplified through additional milestones this year. These include the Cathepsin-K partnership with Merck in osteoporosis, as well as new potential partnerships for Cathepsin-F in inflammation and factor VIIa in thrombosis.

We anticipate Celera to leverage its technology with Celera Diagnostics, enter into large-scale antibody collaborations using targets found through the proteomics factory, partner two small-molecule programs, and enter into collaborations with big pharma companies in disease-focused areas beginning with cancer. Celera has the scientific prowess that will prove that its metamorphosis is sure to produce a therapeutics butterfly.

 

The views expressed in this article are those of the authors. Robertson Stephens has not independently verified the information contained in this article.

Michael G. King, Jr., is a managing director and senior biotechnology analyst focusing on the genomics sector for Robertson Stephens.

Robertson Stephens research analyst Edward Tenthoff and research associate Ellen Lubman also contribute to GenoMoney.

 

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