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Myhrvold Warns Picks and Shovels Cos to Stay Out of Drug Discovery

NEW YORK, Feb 21 - Faced with growing concern from investors about prospects for future profitability, a number of genomics tool makers, large and small, have recently announced plans to refashion themselves as drug developers.

But Nathan Myhrvold, the revered software visionary turned biotechnology venture capitalist, on Wednesday warned genomics software and tool companies against rushing into the field of drug discovery.

"I think it's just ridiculously wrong. I think that's a terribly short-sighted thing," Myhrvold told attendees at the Biotechnology Industry Organization's CEO and Investor Conference in New York.

Myhrvold, Microsoft's former chief technology officer, recently co-founded Intellectual Ventures in Redmond, Wash., to help early-stage companies with strategy and financing.   

In the long term, Myhrvold said, picks and shovels companies have the potential to find new applications for their tools not necessarily connected with today's Holy Grail of drug discovery.

As an analogy, Myhrvold compared the current fixation with drugs to the California Gold Rush of 1849. The gold never amounted to much, he said, but the biggest business to emerge in the long term was Levi Strauss, manufacturer of jeans for the miners.

"The money wasn't in the gold; it was in the pants," Myhrvold said.

Myhrvold's comments are presumably directed at a host of companies that have recently announced plans to enter the drug discovery fray. Celera and Incyte, as well as smaller genomics companies like Lion Bioscience and Pharmacopeia have announced plans to turn to drug discovery in the hope of finding profitable medicines.

"We think there's a huge opportunity [to discover new drugs] because of genomics, and we think we know our technology better than anyone else," said Christian Marcazzo, director of product marketing at Lion. "It makes sense to diversify, to apply technology in as many ways as possible."

On Wednesday, Lion announced that it had acquired a 16.1 percent stake in Gesellschaft f r Medizinische Datenverarbeitung, a German developer of e-health data management software, in its latest move to expand its reach into medical research and diagnostics.

While this might keep investors happy in the nearterm, Myhrvold said that jumping into drug discovery might prove to be a flawed strategy later down the road.

"People get overexcited about the short-term, and underexcited about the long term," Myhrvold added.

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