By Randall Osborne

West Coast Editor

SAN FRANCISCO - Genomics stole the show Tuesday at the 18th annual Chase H&Q Healthcare Conference, where a panel of heavy hitters from that fast-gaining sector drew hordes of eager listeners.

The crowd jammed itself into two large banquet rooms, with many attendees standing along the walls and some sitting cross-legged like disciples on the floor below the speakers' platform.

Although biotechnology stocks have not soared in value like the shares of certain Internet firms, a handful of genomics-based companies are proving their fitness for the race - and conference panel members foresaw a time when genomics and major pharmaceutical development will go together as naturally as AOL and Time Warner.

Robert Levy, senior vice president of science and technology for American Home Products Corp. (AHP), of Madison, N.J., said the company has established a division of genomics, "but that doesn't really do it right, in that genomics is the tool used everywhere, including toxicology, drug metabolism and in the clinical area."

AHP spends about 10 percent of its budget on genomics efforts, and that number probably will not rise soon - not because genomics research doesn't work, but because it works so well, Levy said.

"The tools and processes that became available with genomics have given us more targets and put pressure on other phases of the drug development process," which calls for more spending in those phases, he said.

Michael Hunkapiller, president of PE Biosystems, of Foster City, Calif., said genomics has caused changes in thinking at many pharmaceutical firms, but "a lot of that has not filtered down to the infrastructure within those companies."

Randy Scott, president of Incyte Pharmaceuticals Inc., of Palo Alto, Calif., said only in the past two years have titles such as "vice president of pharmacogenomics" begun appearing on the name plates at pharmaceutical companies. "My view is that these are in the early days, still," Scott said.

Not for long, panel members agreed. Levy said the main hurdle for pharmaceutical firms is teaching researchers how to use new methods. "As soon as someone sees they can answer a question they didn't know how to ask before, then they begin to use the technology," he said.

Joffre Baker, vice president of research and discovery for Genentech Inc., of South San Francisco, said the company spends about 20 percent of its budget on genomics, "but I expect that to blow up over the next five years."

Among Genentech's efforts in the field, Baker said, is the Secreted Protein Discovery Initiative, "which calls for us to identify, clone, express, purify and run through a battery of cell-based assays thousands of secreted proteins. That's a kind of approach, almost an hypothesis-free approach, to discovery that didn't exist a few years ago, and there's no doubt it's very powerful."

Key applications of genomics will arise in doing clinical trials, and "sweeping up in the aftermath of failed clinical trials" to identify responders and develop drugs for small but lucrative populations, Baker said.

"A classic example of a niche drug is Herceptin [trastuzumab, approved in September 1998], which targets a small subset - a quarter to a third of all breast cancer patients - as a result of a different gene expression profile," he said. "I think we're going to see that over and over again, not only in cancer, but in other diseases as well. That's going to cost a fair amount of money, but it's inevitable that it will happen."

More genomics-based test kits will enter the market, too, Baker said. "I don't think it's a question of whether companies are going to develop diagnostics, it's just a question of how fast that will happen," he said.

Scott acknowledged that more chances for patent fights come with the glut of data made available by genomics. But he said Incyte's position has been to make the data broadly available even while guarding the company's portfolio - that is, to avoid thwarting valid research in an Internet world of flowing information, and to make a profit within the conditions of that world.

"We apply what we call the Dolby stereo school of business," Scott said. "Instead of trying to be real exclusive, like a Betamax version, get it out there, license it broadly, and pretty soon everybody is putting the stamp of your name across their programs because you're licensing at very reasonable terms."

The conference continues through Thursday.