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Ocimum Buys Gene Logic’s Genomics Arm To Ramp Up Service Offering, Target Pharma

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Stepping in to save another genomics business with an unknown future, Hyderabad, India-based Ocimum Biosolutions last week agreed to buy Gene Logic’s genomics assets for $10 million in an effort to expand its reach into the pharmaceutical outsourcing market.
 
Citing poor sales performance, Gene Logic originally announced its intentions to sell off the unit and refocus on drug repositioning in August 2006. The business includes three databases of gene expression profiles that were initially positioned to serve the company’s largely pharmaceutical clientele (see BAN 8/8/2006).
 
Now Gene Logic has agreed to sell the assets to Ocimum for $10 million in cash, of which $7 million is to be paid at closing and $3 million is payable pursuant to a promissory note due 18 months from the date of closing. Aquilo Partners aided Gene Logic in the sales agreement, while Ocimum was advised by O3 Capital Ventures, a Mumbai-based venture capital boutique.
 
The deal, which Ocimum expects to close in two months, is the latest in a series of acquisitions for the Indian company, which is seeking to be a one-stop genomics resource for pharma customers. Ocimum CEO Anuradha Acharya told BioArray News that the buy “fits in very well with the vision for the company as we move towards becoming a preferred partner for genomics outsourcing.”
 
In 2005, Ocimum acquired a line of microarrays from the German firm MWG Biotech. It subsequently re-branded the platform as OciChip and added it to a hybrid business model that already included a bioinformatics group, called the BioIT Division, and a research services group, called the BioResearch Division (see BAN 3/2/2005). The array business fell under a third business unit, called the BioMolecule Division.
 
Last year the company snatched up Isogen Life Sciences, a Dutch reagents shop and oligo manufacturer, to round out the BioMolecule offering (see BAN 11/21/2006). Terms of both deals were undisclosed.
 
Acharya wrote in an e-mail to BioArray News last week that Gene Logic’s assets complement its business. “Gene Logic has a great track record in genomics databases and performing specific services in the toxicogenomics space and has a wonderful team,” she wrote.
 
“Ocimum's capability to build great tools and perform data-analysis services and building custom arrays when combined with Gene Logic's strength allows customers to work with us as a preferred partner since we are now giving them access to the same technology [and] people, but an added advantage of getting cost-effective solutions with an excellent BioIT support team,” Acharya said.
 
According to Acharya, the Gene Logic acquisition is also strategic in nature. She wrote that Ocimum, founded in 2002 and privately owned, has been building up its business in stages. For example, the purchase of MWG’s array business coincided with the development of Ocimum’s product-based offering.
 
Now, with Gene Logic in hand, the company is looking to partner more frequently with pharmaceutical companies on research projects.
 
“Ocimum has been going through phases,” she wrote. “The first was the ‘product phase’ where we built products, created IP and domain expertise,” wrote Acharya. “Now we are in a ‘solution selling‘ mode, where we string in our capabilities in software with [the] services component.”
 
According to Acharya, Ocimum will next move into a ‘partner phase’ where it “can create long-term relationships with our customers to outsource genomics R&D.” She added that the Gene Logic acquisition helps it move toward this phase and to be able to “provide more specific services to the pharma and biotech industry.”
 
Ocimum plans to maintain Gene Logic’s facility in Gaithersburg, Md. Services will also be extended to Ocimum’s headquarters in India to “provide large-scale outsourcing options for companies doing high-throughput work.”
 
The company will retain the use of Gene Logic’s name in its business, although the group will function as part of Ocimum. Ocimum already has a US office in Indianapolis, as well as an office outside of Utrecht in the Netherlands that it gained through its purchase of Isogen.
 
The Databases
 
Ocimum will now be able to offer its pharmaceutical partners Gene Logic’s two large databases of expression profiles: BioExpress, for human biology, and ToxExpress, for response to treatment. Both are configured for use with Gene Logic’s Genesis software system. Additionally, Ocimum customers will have access to web-enabled products like the Ascenta data-analysis system, which provides microarray gene-expression profiles from more than 1,500 tissue sample sets from human and animal disease models.
 
Gene Logic said in a statement that it will retain “full rights in perpetuity” to use the information from its genomics assets as part of its remaining drug-repositioning business. The company also said that it “will retain specified assets related to molecular diagnostics and will continue to explore strategic alternatives for these assets.”
 

“The Gene Logic acquisition helps us in moving towards the ‘partner phase’ and be able to provide more specific services to the pharma and biotech industry.”

Just over a year ago, it appeared that Gene Logic’s genomics business was poised for growth. As late as the spring of 2006, the business was profitable on a quarterly basis and the company was investing heavily in genomics product development.
 
Loralyn Mears, Gene logic’s former vice president of alliances and marketing, told BioArray News in February 2006 that $9.5 million the company agreed to pay for Affy products, disclosed in a December 2004 SEC filing, was spent entirely on the genomics half of its genomics and toxicogenomics business unit (see BAN 2/28/2006).
 
Mears also said at the time that the $7.6 million the company will spend for Affymetrix products and services in 2006, disclosed in an SEC filing in January 2006, would be spent on upgrading ToxExpress. Specifically, the company generated data using Affy GeneChips that was then used to expand the databases.
 
However, Gene Logic was discouraged by the performance of the unit in the first and second quarters of that year. In August, it laid off 80 staffers in the genomics business and begen strategically evaluating the unit.
 
A Gene Logic spokesperson told BioArray News’ sister publication Pharmacogenomics Reporter last week that the decision to sell the genomics division was precipitated by the drop in revenue from subscriptions and perpetual licenses to its databases. Annual revenue for the genomics division fell to $24.3 million in 2006 from $56.6 million in 2005.
 
In a statement, Gene Logic said it will continue to focus its efforts on drug repositioning, specifically on a clinical-stage small-molecule drug candidate called GL1001 that it has repositioned to treat gastrointestinal disease.
 
Gene Logic President and CEO Charles Dimmler called the sale of the firm’s genomics business a “transforming event of significant strategic proportion" that “stands as another major milestone on the company's path to build a drug repositioning and development business.”

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