Gene Logic stock drops 35.6% on lowered sales projections

June 23, 2006|By TRICIA BISHOP | TRICIA BISHOP,SUN REPORTER

In the latest sign that the genomics revolution trumpeted several years ago hasn't proceeded as planned, a Gaithersburg biotech company suffered the largest percentage loss yesterday on the Nasdaq as it lowered sales projections and announced the resignation of a top executive.

Gene Logic Inc., which started a dozen years ago as a company hoping to make its mark by trading in genetic information, announced yesterday that it expects "significantly lower" revenue than expected from gene data, sending its stock tumbling 35.6 percent.

The company also revoked earlier financial guidance for this year and next and said it's "conducting a thorough review of its Genomics Division strategy." The company is trying to broaden its business model and rely less on a plan to sell subscription access to gene data.

"All that takes time," Gene Logic spokesman Robert G. Burrows said. "I've been telling people increasingly that this is a transition period and, as such, it does create unpredictability in terms of the time and the quantity and the size of the kinds of contracts we are now able to sign."

The company expects to report the review findings within 90 days, according to a statement. Gene Logic's stock, already a tiny fraction of its $144-per-share high in March 2000, closed down 72 cents yesterday to $1.30.

Burrows said the resignation reported yesterday of Dennis Rossi, who headed the company's genomics division, was unrelated to the poor performance.

In a filing with the Securities and Exchange commission yesterday, the company said Rossi, who was hired in late 2004, left "for personal reasons and to pursue other career opportunities."

Gene Logic's turbulence was the latest evidence to dampen the genomics revolution predicted in 2000 - when the race to map the human genome was in full swing and drawing praise from then-President Bill Clinton and British Prime Minister Tony Blair.

Many had thought that the human DNA code drafted then would translate quickly to a huge demand for paid access to the information and personalized medicine based on individual genes. But several companies that once placed genetic data at the center of their business models have had to retool their focus over the past few years to stay afloat.

Celera Genomics of Rockville has reinvented itself several times after leading the way to mapping the genetic code.

After the company realized it couldn't make money selling its gene data because much of it was available for free from the National Institutes of Health, it tried to move into drug development and then early this year into developing tools to diagnose disease and proteins for use by other companies.

"That's been one of our problems with Celera all along, ... it's been hard for investors to track and see the business model and particularly the associated timing with it," Tony White, chief executive of Celera's parent company, said during a conference call yesterday morning.

Celera announced yesterday new collaborations as well as a prediction that it would become profitable by 2008, a decade after its founding.

Gene Logic also has shifted gears in recent years. It revamped its genomics division and developed another department that uses its genetic data to help other companies find new uses for stalled or failed drugs.

The company has drawn several customers for that "drug repositioning" service, including Viagra maker Pfizer Inc. and Roche Holding Ltd. of Switzerland.

Performance for that division remains on track, the company said. Its preclinical division, which includes testing drug candidates for toxicity, is doing better than expected. Still, of the $79.4 million or so in revenue the company recorded last year, the bulk of it - $56.6 million - came from genomics, and $22.2 million from preclinical services, Burrows said. The repositioning program, still in its infancy, brought in $588,000.

In a research report this spring, Edward Tenthoff of Piper Jaffray & Co. in New York wrote: "It remains to be seen how sustainable [the drug repositioning] business model will be."

Said Gene Logic's Burrows: "We clearly continue to have some challenges, so we're doing everything we can."

tricia.bishop@baltsun.com

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