Celera Genomics Leads Charge in Biotech Sector

Thursday's rise was a continuation of a recent surge in the volatile sector.
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Burgeoning enthusiasm for the race to map the human genome reached a fervor Thursday as investors poured money into biotechnology stocks.

Celera Genomics

(CRA)

, of Rockville, Md., led the pack, surging 32 7/8, or 30%, to close at 144. The company's stock was the top percentage gainer on the

New York Stock Exchange

.

The company, spun out from

PE Corp.

in early May, said it had purchased a software tool called

Panther

, which determines the functions of genes and proteins, from closely held

Molecular Applications Group

of Palo Alto, Calif. The company's stock is up more than 900% since it debuted May 6.

If the news drove the stock, though, that was merely because it arrived as part of a recent juggernaut. Across the biotechnology industries, stocks have made triple-digit gains in recent months. Those include

Human Genome Sciences

(HGSI)

,

CuraGen

(CRGN)

and

Gene Logic

(GLGC)

. Shares of bigger biotechnology companies also made gains Thursday:

Genentech

(DNA)

shares rose 6 1/4, or 5%, to close at 139 1/4 and

Amgen

(AMGN) - Get Report

issues rose 1 1/4, or 2% to close at 54 3/16.

The

American Stock Exchange Biotechnology Index

gained 3.76% during the day. The index has surged to 368 from 288 on Nov. 30.

The moves took place on a record-breaking day, where the

Nasdaq

flirted with 4,000.

Although Celera shares jumped on the announcement, "the news this morning was minor," said Eric Schmidt, analyst for

S.G. Cowen

, which hasn't done underwriting for Celera. Schmidt rates the stock a buy. "I don't think it impacts their business."

Winton Gibbons, analyst for

William Blair & Co.

, which also hasn't done underwriting for Celera, said the purchase could be helpful because several scientists from Molecular Applications will join the company. Those scientists are in short supply, and Celera needed to make or buy the technology to grow its gene-mapping project, he said. Gibbons rates the stock a strong buy.

A spokeswoman for Celera, Heather Kowalski, declined to comment on the stock's move Thursday.

The company seeks to build a database of information about genomes and related medical information. As such, it is in a race with the U.S. government.

"They don't have to win that race to be a successful company," Schmidt said. "Celera will benefit by offering access to the human genome."

The company's current project will be a blueprint, Schmidt said, predicting demand for far more detailed maps in the future.

Small investors may understand that concept better than the Wall Street giants, Gibbons said.

The stock run this week has come from retail buyers, including those who read recent articles in

The New York Times

and the

Motley Fool

mentioning the company, he said. While small trades drove the price from 40 to 70, institutional buyers pushed it up to around 110. Now, Gibbons said, the little guys are back in the stock.

"There are enough institutions that don't get the story," Gibbons said. Eventually, though, "they start realizing it's not a one-act company."

Harold Bowen, chairman of money manager

Bowen, Hanes

of Atlanta, which owns around 2 1/2% of the company's stock, said he bought Celera shares as a way to invest in biotechnology stocks without taking a risk on the fortunes of one scientific theory.

Celera "will be a reference source for the biotech industry, drug companies," he said. The stock may be popular because "it's a brand new industry and you don't have many ways to participate."

The sector's recent performance has surprised analysts, for better and for worse.

"In terms of volatility and performance, the only thing I'd compare it to is the Internet," Schmidt said.