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Citing Database Renewal Lull, Soft CRO Market, Gene Logic Lowers 2003 Revenue Outlook

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Gene Logic last week reduced its pro forma revenue predictions for the 2003 fiscal year by 10 percent, to a range of $72 million to $76 million from an original estimate of $80 million to $84 million.

The company said it determines pro forma revenue as if its April 1, 2003, acquisition of TherImmune had occurred on Jan. 1, 2003, so actual revenue for the year is expected to be in the range of $65 million to $69 million.

At the UBS Global Life Sciences Conference in New York on Sept. 23, Gene Logic CEO Mark Gessler said that the revised revenue outlook represents a “qualitative shift to a more conservative outlook” for the company following its acquisition of TherImmune. Indeed, in its second-quarter earnings report in July, the first to include results from TherImmune, the company’s outlook was quite optimistic despite a quarterly revenue fall-off of 7 percent for its information business year-over-year. At the time, Gene Logic predicted that a pick-up in sales for the information business in the second half of 2003 would add around $40 million to the $25.8 million in database revenues and $13 million in CRO revenues it had booked to date, putting the $80 million mark within reach without a significant increase in revenues from TherImmune.

However, sales in the contract research area have proven to be slower than expected, particularly in the biotech market, which will make it “difficult to reach our original objectives,” Gessler said. This trend “seems to be tracking with our competitors in the CRO space,” he added.

On the information business side of the equation, Gessler noted that “uncertainty with regard to certain renewals,” along with a delay in some service contracts, contributed to the lowered expectations. In addition, he said, Gene Logic has yet to book any sales for the Ascenta system it launched in June. Gessler said that the company expects to report sales of the system — which he described as a pre-formatted “BioExpress Light” for the biotech market — by the end of the year.

Addressing the seasoned biotech investors who make up the majority of attendees at the UBS Warburg meeting, Gessler stressed that Gene Logic’s bioinformatics and genomics capabilities make it “very different from the CROs you’ve seen in the past.” Gessler said that the company’s wealth of toxicogenomic data, coupled with its ToxScreen algorithm for predicting toxicity for candidate compounds, “differentiate us from the rest of the CRO pack.”

Despite the company’s current sales slump, Gessler said he remains optimistic that the best days for genomics — and, by association, Gene Logic — lie ahead. Genomics is being pushed farther along the drug development pipeline and Gene Logic is tracking that progress every step of the way, he said. As salient evidence of this trend, he pointed to the company’s recently announced collaboration with the FDA [BioInform 09-01-03] to evaluate microarray data to help create standards for future submissions as part of the drug approval process.

— BT

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