Gene Logic sells signature gene-mapping division

October 16, 2007|By M. William Salganik | M. William Salganik,SUN REPORTER

Gene Logic Inc., a Gaithersburg biotech, said yesterday that it will sell its genomics information division, officially exiting the gene mapping business the company was founded on more than a decade ago.

Ocimum Biosolutions, a life sciences company based in Indianapolis with operations in the Netherlands and India, is buying Gene Logic's unit for $10 million in cash. Gene Logic's shareholders will have to vote on the deal before it can close.

Selling genomic information was once a hot business and helped propel Maryland's biotechnology sector. But that business model foundered once the National Institutes of Health began providing some genomic information free.

Rockville's Celera Genomics, a data-seller, and drug developer Human Genome Sciences, also of Rockville, joined Gene Logic as Maryland-based companies focused on the science of gene mapping and the riches it could provide in medicine and on Wall Street.

Shares in Gene Logic, for example, traded at $144 a share in March 2000 when public interest was high in the race to map the human genome.

But once the map was completed later that year and the information was more readily available, many of the biotechnology companies that were built on the gene mapping model changed strategies. Celera, which along with NIH researchers, first mapped the genome, got out of the information business in 2002, shifting to drug development.

Gene Logic is now focused on "drug repositioning," performing research for pharmaceutical companies to find new uses for drugs they have already developed.

The company started moving toward that change in emphasis a year ago, when it completed a strategic analysis and decided to look for sales or other options for some divisions, including genomics.

Gene Logic was able to keep selling its gene information longer than some of its peers because it was more detailed and better documented than what was available free, said Christopher Culotta, Gene Logic's director of strategic communications.

The company generated $56.6 million in genomics information sales in 2005, and the division was profitable in all four quarters, a first.

Then, however, the pharmaceutical companies that were buying gene mapping data changed their own business strategies, according to Culotta.

Instead of making big bets on early steps in drug development, he said, they were "shifting dollars to later-stage development," investing in taking drugs already in the pipeline and getting them to market.

"Our subscription and licensing revenue dropped precipitously," Culotta said. Just one year after the profitable 2005, revenue for the segment dropped by more than half, to $24.3 million.

Gene Logic's share price plummeted as well. The company initiated the strategic review. "The prior strategy for its Genomics business," the company conceded, "will not reverse the recent sales trend."

Gene Logic cut more than 80 jobs, more than half of the genomics division, and closed an office in Berkeley, Calif.

Now, Culotta said of the genomics information business, "I don't know of anybody that's in it in the same way."

By the time Gene Logic announced last year it was reshaping its business, shares traded for $1.30. Yesterday, shares lost 11 cents, to close at $1.04.

As part of its new direction, Gene Logic also sold its "pre-clinical" division in December.

Now, it has about 65 employees in genomics. If the sale is completed, Culotta said, they will become employees of Ocimum, but remain in Gaithersburg.

In a statement, Ocimum said it believed Gene Logic's data and samples fit in with its business of providing software and services to biotech companies.

Gene Logic's work force now includes about 40 employees in repositioning, and about 35 in administration, Culotta said.

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