Celera Genomics Group
and other genomic companies fell Monday despite Celera's announcement that it had completed, along with the publicly financed international
Human Genome Project
, the first-ever sequence and assembly of nearly all of the human genetic code.
The much-anticipated announcement marks the end of a decade-long process and holds widespread implications for the treatment of disease in the future. Drug companies already spend money and time researching genes that affect disease, but they have never had a full-scale model of the 3.12 billion nucleotide compounds that make up the human genome. With the various components of the human genetic code identified and sequenced, researchers should be able to more easily locate disease-linked genes to help identify a patient's risk of certain diseases and tailor drugs to each individual's needs.
Still, despite the significance of the medical breakthrough, shares of companies specializing in genome-related research and development suffered sharp losses after the announcement. Industry analysts attributed the selloff to profit-takers eager to cash in after weeks of anticipation, and concerns that potential ethical and legal issues over the use of the newly available genetic information might hinder the profit-making prospects for biotechnology companies specializing solely in genomics.
Even as executives at Celera announced their historic discovery, shares in the Rockville, Md.-based company began falling as investors scurried to sell the stock. Celera's shares closed down 10%, or 13, at 114. It had fallen to a session low of 108.
In a report issued Monday, Douglas Lind, an analyst with
Morgan Stanley Dean Witter
, said he wasn't surprised by the decline. He pointed out that the stock had more than doubled over the past month, "and equities in the (biotech) sector typically decline in the summer months."
Nonetheless, Lind maintains an outperform rating on the stock, which has jumped more than 1600% over the past year. His firm has done underwriting for Celera.
Many stocks in the volatile biotechnology sector that had surged in recent weeks in anticipation of the announcement fell almost immediately after the news before recovering in the afternoon.
, a Palo Alto, Calif.-based provider of genomic information-based products and services, finished down 3%, or 2 5/8, at 89 5/16 after reaching a session low of 82 1/2. Shares of Gaithersberg, Md.-based
, which develops and markets proprietary genomic information products, software, and research, fell 4%, or 1 11/16, to settle at 37 1/16 after reaching a session low of 33 1/2. Similarly, Rockland, Md.-based
Human Genome Sciences
closed down 1%, or 2, at 143 3/8 after reaching a session low of 126.
"The big question becomes whether or not the publicly available information will cause a slight slowdown in the rate of subscriptions for companies such as Celera Genomics Group ... or whether it will cause an acceleration," said Todd Nelson, an analyst at
, in a report issued Monday. He's betting on the latter, anticipating that increasing time and money spent on genome-related drug development and structural genomics will draw additional subscribers to genome-related content provided by companies like Celera.
"Through an ability to effectively offer real-time access to information that may be crucial to the drug discovery process, these companies (like Celera) are uniquely positioned to both contribute to and benefit from an increased demand for value-added sources of bioinformation," Nelson wrote. The firm initiated its rating of the stock on May 25 at near-term to long-term accumulate.
Despite its potential medical benefits, the prospect of being able to access and use human genome information has raised a number of ethical and legal issues. Critics warn that the information could be used by insurance companies and employers to discriminate against people who are genetically predisposed to certain diseases.
Investors also worry about the long-term profit-making potential of companies specializing in such a narrow niche. But Merrill Lynch analysts cautioned against cashing out too soon.
"A common misconception is that with the completion of the rough draft sequence and assembly of the human genome comes the end of opportunity for genomics companies. In fact, there could be nothing further from the truth," Nelson stated in the report issued Monday. "As we see it, content flowing from the human genome and related projects will create demand long into the future."
A spokesman at Merrill Lynch said he was unaware of any underwriting relationships the firm might have with Incyte Genomics, Gene Logic or Celera Genomics -- each of which were mentioned in Nelson's report.