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Salomon Initiates Coverage of Genaissance with Venture, Buy Rating

NEW YORK, Sept 8 – Salomon Smith Barney initiated coverage of Genaissance Pharmaceuticals (Nasdaq: GNSC) with a Venture, Buy rating and issued a 12-month price target of $32 a share.

Genaissance of New Haven, Conn., was trading up 1 1/16, or 4.8 percent, at $23 in late morning trading.

In a report, analyst Meirav Chovav said that the company has shown that its HAP technology platform for identifying gene-specific SNPs can predict a person’s response to a drug or their predisposition to a disease.

“Genaissance has recently shown proof of principal by conducting its own genomic clinical studies on high cholesterol and asthmatic patients,” Chovav wrote. “The results from these clinical studies demonstrate that the haplotype of a patient can affect drug response and, moreover, that HAP markers have greater predictive values than individual SNPs.”

The company uses HAP markers for validated groups of SNPs that occur on particular chromosomes, or haplotypes, rather than individual SNPs to predict drug response.

Results from the asthma study will be published in a peer reviewed scientific journal, she wrote.

The company plans to generate revenues by charging subscription and fee-for-service dues for its HAP2000 technology. The company also intends to make money through licensing, milestone, and royalty payments on intellectual property it generates on HAP markers.

Chovav said she expects Genaissance to announce two partnership deals in 2001 for its HAP2000 technology.

She estimated losses per share of $2.59 for full-year 2000 and $3.16 for full-year 2001. For 2002, Chovav said she expects the company’s losses to drop to $1.73 a share. Genaissance lost $2.22 a share in 1999.

In the report, Chovav warned that Genaissance would face " significant" price volatility.

The company’s main competitors include CuraGen (Nasdaq: CRGN), decode Genetics (Nasdaq: DCGN) and Variagenics (Nasdaq: VGNX).

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