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Incyte Develops New Strategies, Including Online Database Venture, as It Posts Loss

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ALO ALTO, Calif.--As the threat that Celera Genomics will dominate the genomic data market becomes increasingly formidable, Incyte Pharmaceuticals has unveiled several new strategies for capturing marketshare.

While maintaining its focus on selling database subscriptions to large pharmaceutical companies, Incyte is now pursuing relationships with smaller biotechnology companies and universities that are engaged in research partnerships with its existing pharmaceutical customers. Incyte also hopes to generate revenue by allowing customers to prepay royalties on drugs that will be developed using its databases. And the company has announced that it is seeking beta testers for an online database that it
plans to launch midyear.

In a conference call with industry analysts last month, Incyte’s summary of its 1999 revenues raised questions on Wall Street about its strategy for increasing its bottom line. Incyte had posted a $27 million net loss for 1999, compared to a net income of $3.5 million in 1998. Still, the company managed to bring in $46 million in revenues in the fourth quarter, bringing its total revenues to $157 million for the year, compared to $135 million for the same period in 1998.

An analyst told BioInform that in his estimations, the company hadn’t generated enough business to account for the stated revenue increases. But Roy Whitfield, Incyte’s CEO, said the company’s revenue growth has come from the expansion of its product line and the market for its information. He noted that Incyte’s patent portfolio had grown from about 150 issued and allowed patents to about 500 by the end of 1999. (According to a PricewatershouseCoopers study published in the Wall Street Journal last week, Incyte held 356 gene-related patents, second only to the US government, at the end of 1999.)

Incyte’s recent deals include gaining Eli Lilly as the first subscriber to its new SNP database. Lilly also extended its subscription to LifeSeq Gold. And AstraZeneca became first to subscribe to Incyte’s LifeExpress gene expression database program and expanded its access to LifeSeq Gold, ZooSeq, and Incyte’s bioinformatics tools and software.

In addition, in recent weeks biotechnology companies Biogen and Corixa have subscribed to Incyte’s LifeSeq Gold database and LifeTools enterprise data management software. Millennium Pharmaceuticals did the same in October.

Incyte is also pursuing academic collaborations through its In Silico partnership program, which would grant university research laboratories broad access to information and technologies. A caveat is that the labs must be engaged in research for an existing Incyte customer in the pharmaceutical industry.

In November, Incyte’s oldest customer, Pfizer, also became its largest in terms of committed revenues, Whitfield said. In the first arrangement of its kind, Pfizer paid in advance royalties on products it expects to develop using Incyte data.

Pfizer also expanded its 7-year old contract by extending its subscription to LifeSeq Gold, and purchasing rights to PathoSeq and ZooSeq. The contract also formalized a datamining arrangement by which Incyte scientists will deliver full-length clones of selected genes, seeking to produce clones for every gene identified as a drug target by the end of this year.

Whitfield described as "very minor" Pfizer’s upfront royalty payments. The Wall Street Journal last week reported that they amounted to more than $50 million, but Whitfield said that the royalty payment "was a specific detail of that deal that didn’t amount to a great deal, but we mentioned it because it was an important sign of the value of our patent portfolio."

Whitfield indicated that Incyte might encourage other pharmaceutical customers to make such advance payments too. "A prepayment of a royalty on an arrangement like that makes sense because their cost of capital is much cheaper than ours," he noted.

Incyte’s online initiative will be called iLifeSeq. Steve Lincoln, the company’s bioinformatics director who announced the plan at a genomics conference in Marco Island, Fla., last week, said that the site will offer access to annotated human genome data and other value-added data as well as to research services and supplies such as reagents.

Asked if the online venture would put Incyte into competition with other recently announced initiatives such as DoubleTwist.com and Compugen’s LabOnWeb.com, Lincoln said he didn’t think so.

--Matthew Dougherty and Adrienne Burke

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