It’s official: Celera Genomics is no longer in the data-provider business.
As part of a broader restructuring among parent company Applera’s business units, Applied Biosystems will now market the Celera Discovery System through a newly created “Knowledge Business” within ABI. Celera will continue to receive revenue from existing CDS subscriptions and will realize royalties from ABI’s sales of the resource, generating an anticipated total cash flow of $200 million to $300 million over the next 10 years. In addition, Celera will maintain access to the CDS data for its internal discovery work and will retain all intellectual property associated with the system.
In short, all activities within Celera not directly associated with therapeutic discovery and development were handed over to ABI or halted, including grant- and contract-based sequencing projects.
In a conference call with analysts, Applera CEO Tony White repeatedly noted that the changes are in line with Celera’s newly clarified “core mission.” Marketing CDS via ABI “frees up Celera’s executive team to focus on building a successful drug discovery and development business,” he said.
But market realities also entered into the decision. Although CDS revenues have consistently comprised the bulk of the company’s cash flow — making up approximately 60 percent of Celera’s expected fiscal 2002 revenues — White conceded that the future value of the database is in question.
“There’s been a fairly significant change in the prospects for a pure-play information business,” he said. “Frankly, our friends in the public sector have been more successful than we expected them to be. There have been a number of examples of companies that have tried to make it on the information model that are no longer with us... We decided to try and get ahead of that curve and not wait for this thing to deteriorate.”
White said Celera considered selling the database to a third party or ramping up spending to add value, but ruled these options out in favor of using it to broaden ABI’s platform business. ABI’s web-based offering, which will first be available in early summer, will allow customers to design experiments using CDS content and ABI’s reagent products.
Tony White Can’t Wait
Wall Street didn’t find the new arrangement as favorable as White did, however. Celera’s stock dropped to a 52-week low of $17.90 on April 22, when the company announced its new strategy, and plunged again to a new low of $15.90 on April 25, when ABI and Celera reported their third-quarter 2002 earnings. Several analysts questioned the company’s wisdom in handing over its primary source of revenue before its drug discovery capabilities are fully in place.
White, on the other hand, dismissed all non-discovery activities as “distractions” that needed to be eliminated.
Analysts were also skeptical of White’s decision to place Kathy Ordoñez, head of ABI/Celera joint venture Celera Diagnostics, at the helm of Celera. While no one questioned her ability to run the medical diagnostics business, Ordoñez is not the “brand-name” pharma executive White was originally seeking to fill the shoes of former president and founder Craig Venter.
But Ordoñez, who will also continue to run Celera Diagnostics, is the right choice, according to White, who succinctly summed up her qualifications for the job: “Quite simply, Kathy has a track record of turning technology into money.”
Further Strategic Plans Still Fuzzy
The abrupt shift in focus will no doubt have a dramatic effect on Celera’s corporate culture. Many of the company’s senior scientific staff followed Venter from the Institute for Genomic Research, and other employees came from academic institutions with genome sequencing as their primary mission. With Venter gone, sequencing projects tapering off, and a full-throttle move into discovery on the horizon, it’s clear that further changes will continue to be made within the organization in the months ahead.
But it’s too early to tell what changes may lay in store for Celera employees, according to spokesman Rob Bennett, who said that around 30 percent of Celera’s current staff is devoted to the online/information business. Ordoñez plans to conduct a strategic evaluation to determine the specific steps necessary to make the company’s discovery plans a reality, and any staffing changes will be based on her findings.
Bennett noted Celera would continue to have plenty of work for its bioinformatics staff. Although its assembly requirements will diminish, “there’s a lot more focus on managing the proteomic data, so there’s certainly demand both for computing power and for the algorithms,” he said.
Bennett said that future plans for the Paracel division of Celera were still uncertain. The company wrote down $25.9 million in special charges related to Paracel in the third quarter, including $23.0 million for “impairment of all remaining goodwill and intangibles.”
Celera is collaborating with Baylor College of Medicine on the rat genome sequence, and Bennett said the company would fulfill its commitments under that agreement, although it is still unclear whether Celera intends to add the rat genome — or any additional organisms beyond mouse — to CDS.
Celera said it intends to “fully support” its current CDS subscribers. Those customers Bio-Inform spoke to were comfortable with the changes, and the majority said they’d continue to find value in the database even if additional organisms weren’t added.
“We’re mostly in there for mouse and human,” said Melvin Simon, group leader in the Caltech Genome Research Laboratory of Technology. “As long as they complete mouse … we’d continue to use it.”