Celera primes for key change

Tough competition, lengthy tests ahead as focus shifts

Drug discovery is goal

New chief is under gun to find new strategy

April 28, 2002|By Julie Bell | Julie Bell,SUN STAFF

In some ways, it seems like an odd time for Celera Genomics Group to switch gears and become a drug company.

The competition is intense. Investors are skeptical after some highly promoted biopharmaceuticals failed to work. And pharmaceutical companies that often bankroll development of small-company drugs are balking at paying big money for anything that hasn't shown promise in human trials.

But the Rockville company is changing strategies largely because it must.

Celera used cutting-edge computers and brilliant scientific minds to sequence the human genome, unraveling the sequence of DNA that pilots the development and genetic destiny of the human body. Along the way, it achieved rock-star status among investors and made some of its executives, including former President J. Craig Venter, rich.

But new Celera President Kathy Ordonez, named last week, confronts a different reality. The strategy of selling databases of information about the genome to scientists hasn't yielded a profit; the company's stock is trading in the $15 range, a dramatic comedown from its high of $138.50 in June 2000, when the genome's sequencing was announced at a White House press conference; and while many analysts believe developing drugs is a better strategy than solely selling information designed to discover them, there's no guarantee Celera will succeed.

"It's bombastic and arrogant to imply and suggest that, because we've completed the human genome, because we have advanced technology, that we're going to miraculously cure disease," said Aaron Geist, a Robert W. Baird & Co. analyst who downgraded his recommendation on the stock last week and no longer recommends that investors buy it. "Diseases are not cured in quarters."

Even Ordonez's appointment as president was greeted with disdain by some on Wall Street, who had expected Celera to name an executive with drug-development experience after Venter resigned in January. Ordonez has none. But during an interview sandwiched between meetings last week in her Rockville office - still devoid of all but the furniture, computer and phone Venter left behind when he vacated it - Ordonez seemed to take the criticism in stride.

"I think I can figure out how to build a strategy," she said, noting she had done so in previous jobs, including as chief executive officer of Roche Molecular Systems Inc.

There, she oversaw 800 employees in three countries, as well as the commercialization of a tool now used worldwide to replicate small fragments of DNA for research, crime lab and medical diagnostic tests.

Though she did her undergraduate work in chemistry and physics and doesn't consider herself a scientist, Ordonez has authored scientific papers and holds five patents. Her background also includes working with regulatory agencies in various countries, including with the U.S. Food and Drug Administration, though the experience comes largely in medical diagnostics and not in medicines.

Ordonez, 51, has been with the company as head of Celera Diagnostics since December 2000. The diagnostics unit is a 140-employee joint venture between Celera and its sister company, scientific tools maker Applied Biosystems of Foster City, Calif. The unit is charged with finding and developing molecular "markers" that can be used to diagnose medical conditions and diseases, as well as to tailor medicines to individuals based on their genetic makeup.

Ordonez said she was surprised when Tony White, chief executive officer of both Celera and its parent company, Applera Corp. of Norwalk, Conn., called her on her cell phone, interrupting a business meeting, to tell her he was thinking about her for the job.

White initially had considered only candidates with drug-development experience but said he changed his mind.

He had found, in general, that pharmaceutical company candidates tended to be accustomed to slow decision-making. Candidates from biotechnology companies tended to be scientists with little business experience or "serial entrepreneurs" not particularly good at science.

Some on Wall Street have interpreted the change of heart to mean that White had to settle for Ordonez after key candidates turned down Celera, a conclusion at which White bristles. "If it were to give the appearance that Kathy is a compromised choice," he said, "that's inaccurate."

For now, Ordonez will continue to run both Celera and Celera Diagnostics, splitting her time between Rockville and Alameda, Calif., where the diagnostics unit is based.

The complexity of Ordonez's task is apparent even in a quick visit to Celera Genomics Group's Rockville headquarters, where about 600 of its 820 employees work. The first floor still houses 200 of the sequencing machines used to decipher the order of the human genome. But Celera now leases or owns only about 75 of them for its own work, spokesman Robert Bennett said.

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