Ciphergen Ready to Capitalize on New Protein Research

Nadine Wong is the editor, publisher and co-founder of the monthly BioTech Sage Report. Wong writes a weekly column that appears on this page as part of her business relationship with TheStreet.com.
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During the past few days, optimism about a recovery next year has helped carry Wall Street through a tough third-quarter reporting season. For many sectors, corporate earnings have been down, so if hope is the driving force, it's a sure sign we're in for a tough market.

I think the picture will be very different for biotech companies, though I should warn you that my perspective may be skewed. That's because for the past week, I've been listening to one biotech conference call after another. They're all starting to sound alike, with each spewing an upbeat outlook, promising the future is on track, reporting solid growth, etc.

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The company that stands out among these, even though it might be a bit of a gamble, is

Ciphergen Biosystems

(CIPH)

. Ciphergen is heavily involved in genomics, but in a highly focused and novel way. It manufactures instruments for protein discovery, identification and analysis, and its products provide researchers with a better understanding of biological functions at the protein level.

Ciphergen reported strong third-quarter results, with total revenue of $5.4 million, up from $2.3 million in the third quarter of 2000. But the company still reported a loss of 26 cents per share. Ciphergen remains upbeat on the progress of its business, though, and so do I.

Proteomics, as Ciphergen's field is known, is an emerging technology that will enable researchers to decipher the human genome and will also have an impact on drug development, since it helps scientists understand how proteins, the target for all drugs, interact with other proteins and/or the drugs themselves. And the collaboration Ciphergen recently entered into with

Pfizer

(PFE) - Get Report

to design and discover proteins in serum from rat models further confirms the importance of proteomics.

In the next several years, I expect Ciphergen will build an installed base of customers for its ProteinChip Systems, which are designed to identify and analyze specific proteins from biological samples. The company's goal is to derive increasing revenue from the sale of its disposable ProteinChip Arrays and service contracts based on previously installed systems.

Investors can also expect the opening of additional Biomarker Discovery Centers where customers can receive service and advice, the launch of next-generation product lines and the signing of collaborations, all of which should help boost Ciphergen's stock.

With proteomics research growing rapidly, Ciphergen could well be in the right place to reap substantial rewards from this new technology. The company's sales are on the rise, and its management is upbeat and confident. With this week's release of a slew of economic data, a pullback in Ciphergen's share price could occur. If so, a dip in its share price would represent a good chance to get in because the business fundamentals for this company are strong and intact.

Nadine Wong is the editor, publisher and co-founder of the

BioTech Sage Report

and contributes a weekly biotech column to this site. At the time of publication, Wong had no position in any of the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While she cannot provide investment advice or recommendations, Wong invites you to send comments on her column to

Nadine Wong.

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