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For Gene Logic, the Biorepository--Not Drug Development--Is King

NEW YORK, Jan. 30 - As genomics companies hustle around the country to serenade investors during the year's financial conferences, Gene Logic's pitch strikes a different chord.

 

It wants them to know that plodding downstream with the rest of the tool and tech herd is not in its playbook.

Gene Logic's tissue biorepository of more than 50 organ types is its core technology. The company has gambled that, in contrast to well-organized public efforts to map the human genome and proteome, public funds to build a universal tissue biorepository are scarce, diffuse, and likely to remain flat.

Collecting samples involves recruiting physicians and surgeons, and monitoring patients' progress as they wend their way through clinical trials. It's a labor-intensive task that many of Gene Logic's peers passed over in favor of other avenues.

Yet since 1996, Gene Logic has ignored its peers and spent some $150 million to collect a mammoth 10,000 tissue samples. Whoever wants to play catch-up will have a long way to go, says Gene Logic Chairman and CEO Mark Gessler.

"The game is far from over as far as understanding biology, and our subscribers know it," says Gessler. "It won't be over in three years and it may not be over in 10 years. We're drilling down in [analyzing] human disease at a very refined level ... [and] developing [gene-expression] information that is not available elsewhere."

Rosetta Inpharmatics and Incyte Genomics at one time were two companies perhaps best positioned to make a run at Gene Logic: Both companies had strong gene-expression technology but were missing the biorepository complement. 

Incyte chose to spend its money on developing an internal drug-discovery program, and Merck bought Rosetta for a hefty premium. To date, neither Merck nor Incyte have indicated a desire to build a biorepository that can be accessed by other customers.

Some industry analysts believe that Gene Logic has only CuraGen to keep an eye on as a competitor in gene-expression services. CuraGen has linked its services in gene expression, toxicity studies, and pharmacogenomics to specific drug-development efforts by partner pharmaceutical companies. But the company has also begun courting drug development.

In contrast, Gene Logic's current and future revenues--about $42 million in 2001 and $65 million projected for this year--are expected to come almost exclusively from subscriptions. In spite of recent price declines for genomic content, Gessler, the chairman and CEO, believes Gene Logic's market position and breadth can mitigate even steep discounts. 

The company also plans to bolster its database: This spring it will be the first to measure the effects of samples against the entire genome, using the new whole-genome chip from Affymetrix that was released last week. Also, by December, Gene Logic expects to own an additional 10,000 tissue samples through collection efforts at teaching hospitals and medical centers around the United States.

Gene Logic, based in Gaithersburg, Md., has trolled elite medical centers for disease-specific tissues linked to cancer, Alzheimer's disease, schizophrenia, bipolar disorder, ALS, and cardiovascular disease. To get its hands on these samples, Gene Logic offers doctors and researchers--a group accustomed to all types of perquisites--the special carrot of free access to its databases.

While these researchers get a free peek at the databases, Gene Logic's traditional customers pony up between $2 million and $16 million a year to subscribe to one of its databases. Some limited reports, though, are available for as little as $250,000. GlaxoSmithKline, Pfizer, and Vertex Pharmaceuticals are among Gene Logic's annual subscribers.

"You're seeing many of the large pharma and biotech companies signing on for [Gene Logic's] services," observes analyst Bill Baker of GARP Research. "Some drug companies are just blown away with the results of ToxExpress. [But] a lot of the company's [research] just flies under the radar screen."

Earlier this month, Gene Logic formed a joint venture with Compugen to integrate Compugen's human Gencarta annotated genomic and proteomic database with the gene-expression information in Gene Logic's GeneExpress Suite. The deal is a complement to Gene Logic's databases, says Gessler, and more database content opportunities may arise from companies like Compugen that see drug development and database generation as ancillary revenue products.

For 2002 and 2003, Gene Logic intends to focus on retaining and upselling customers by enhancing the breadth of its GeneExpress and ToxExpress products. Gessler says the firm's customers recognize it has "wrestled" to develop the right content model for its flagship databases.

Because Gene Logic's content serves customers at various stages of drug development, Gessler doubts subscribers like GlaxoSmithKline and Pfizer will forego renewing once their subscriptions expire at three-year intervals. Besides, these companies have so many compounds in development, they constantly need to validate and integrate new gene expression information. And as Gessler likes to point out, there is no public alternative to force steep price discounts.

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