Y2K: The Year Of The Genomic IPO
This year has already seen a record number of biotechnology IPOs, with
over half focused on genomic technology. To date, 49 new biotechnology
companies have gone public, raising more than $4 billion. This has already
broken the industry record established in 1996, where 44 companies went
public raising a paltry $1.4 billion. Over half of the biotechnology IPOs
so far this year specialize in niche technologies necessary to decipher and
exploit the information in the human genome for new drug development. There
is a very good reason for this. Genomics is the hot sector. This is where
the money is flowing because this is where the growth is over the next 10 years.
The deciphering of the human genome this summer was a landmark event,
opening up a new era of drug development toward the treatment of disease.
The work on the human genome has created an entire industry in
biotechnology, an industry that is just at the base of the growth curve.
Interestingly enough, the genomic industry has already grown to a point
where there are sub-industries developing, involving niche companies with
tremendous growth potential.
We already know about the companies providing
the genetic information, companies like Celera Genomics and Human Genome
Sciences. However, there are new, specialized companies involved in the
processing and management of this genetic information, an industry called
Bioinformatics.
There are also companies developing technology to mine the human
genome and define what genes do. There are companies involved in the
discovery of the protein products of these genes, an exciting field called
Proteomics. Proteomics is exciting because it will lead to the
discovery of proteins associated with disease, and these proteins will act as
targets for new drug development.
Another sub-industry under the genomics
umbrella that should experience tremendous growth deals with genetic
variation. Genetic variation in our DNA comes in the form SNPs or Single
Nucleotide Polymorphisms. SNPs make us all individuals and explain
why you are susceptible to a particular disease and I may not be. This is
very hot industry. SNP analysis and technology is vital toward our
understanding of developing new drugs from genetic variation. I liken the
impact of this niche technology in genomics to the potential of fiber optics
in the communication industry. It will enormously speed up the process of
new drug discovery.
Many of the biotechnology IPOs focusing on genomic technology have
enormous growth potential and are involved in any one of the three niche
industries mentioned. Let us see who they are.
Proteomic IPOs
Ciphergen (CIPH) made its debut last week and promptly doubled
in price. The company develops computerized systems for analyzing proteins
related to disease. The genetic data in the human genome is full of genes
which produce millions of proteins. It is up to scientists to identify and
exploit those proteins related to disease. This company’s proteomic
technology is vital for identifying important disease-related proteins so
new drugs can be developed from them. I look for this company to grow as
the field of proteomics grows.
Dyax Corporation (DYAX) is also in the proteomic business. The
company has developed proprietary technology used to rapidly identify
potential protein drug targets. It has licensing alliances with the likes
of Amgen and Human Genome Sciences. Like Ciphergen, this company has
technology that will be in demand as other pharmaceutical and biotech
companies look to exploit the information in the human genome.
Illumina (ILMN) is a recent IPO that develops tools to analyze
how genes function and what protein products they produce. The company
exploded on its first day of trading, increasing more than 100%. Again,
this is just another indication of the demand for proteomic technology as
more companies look to develop new genomically based drugs.
Genomic Solutions (GNSL) made its IPO debut in May and promptly
increased 250%. The company is based in Cambridge, England, and has offices
in the US and Japan. Genomic Solutions develops instruments and software
technology used to determine gene function and protein structure. The
company’s second-quarter revenue increased more than 50%, and it expects to
be profitable by late 2001. It has a major distribution alliance with
Perkin-Elmer Life Sciences to promote its automated analysis systems.
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Bioinformatics
Genomica (GNOM) is the most recent IPO in this newly developing
genomic industry. Bioinformatics encompasses the computerized processing,
storing, deciphering and management of the vast amount of genetic
information being generated from the human genome project. Genomica
develops software to help analyze and manage the genetic information
currently available to scientists and companies developing new drugs. It is
estimated that next year the pharmaceutical industry will spend $2 billion
on informational systems in the area of bioinformatics.
Rosetta (RSTA) is another company which provides software and
technology necessary to manage the wealth of genetic information being
produced. The company’s technology helps other pharmaceutical companies
mine the human genome for information that will speed up new drug
development. Rosetta rose close to 30% on its IPO and has Agilent
Technologies as a major investor. This company should be poised to reap
some of the growth next year in the field of bioinformatics.
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Other bioinformatic IPOs this year that have developed niche genomic
technology include Compugen (CGEN), PharSight Corporation (PHSTD), and Lion
BioSciences AG (LEON).
SNP Analysis
Variagenics (VGNX) is a recent IPO that rose close to 80% on
its first day of trading. The company develops technology that helps
determine why individuals with certain genes respond differently to drugs.
This is an exciting area, since we all possess individual genetic
differences, or SNPs, that make us respond to any drug differently or
experience side effects. Big pharmaceutical companies are very interested
in this technology, and it could easily help speed up new drug development.
By identifying those individuals with a unique genetic difference that makes
them very responsive to a cancer drug, a company will be able to include
only those individuals in a clinical trial. This would increase the chances
of that trial showing positive results and speed up the process for getting
FDA approval. This company will be very popular as SNP analysis matures.
Transgenomic (TBIO), a summer IPO, rose close to 50% on its
first day of trading. Like Variagenics, this company develops technology
which analyzes and finds the unique genetic variations that make people
susceptible to disease. This SNP technology has several major
pharmaceutical companies as clients, hoping to use Transgenomic technology
to speed up drug development.