By Randall Osborne

Editor

From the start, Celera Genomics has been a phenomenon. Lately, for many, it's been something of a riddle, too. And, almost since day one, Celera has been "the high-flying vanguard of the industry," in the words of Eric Schmidt, vice president of SG Cowen Securities Corp. in New York.

"The stock's up 600 percent in the last year," Schmidt said. "I don't think they have too many disgruntled investors."

The government's DNA-mapping effort, called the Human Genome Project (HGP), seemed to be churning along at a respectable pace in 1998, when Craig Venter, director of the Institute for Genomic Research, said his group and Perkin-Elmer Corp. would form a private company, called Celera Genomics, with the same goal.

Celera would get there faster, Venter said.

So confident were the company's founders in the power of their sequencing computers to achieve a picture of the entire human genome in three years thus far outpacing the federally funded push, which initially was due to finish in 2005 that they named the firm using the linguistic root for "swiftness."

A new arm of biotech began to take shape. Much earlier, speculators had begun to notice the emerging field of genomics, but the wild momentum investing spree was yet to begin. It was the formation of Celera that helped make this new realm of money-making possibility more identifiable than ever before, and went a long way toward setting the stage for the boom.

Congress took notice of Celera, too. Legislators began to regard the HGP suspiciously. If private enterprise could do what it promised, they asked, why pump more money into the project which already had cost $1.9 billion and duplicate the research?

Together, Venter and leaders of the federally funded project rushed to calm lawmakers. Both efforts were needed, they insisted. Getting the sequence is only a start, they said, and anyway the scope of the Human Genome Project is wider.

And there were hints of a collaborative arrangement, although how such a deal would work was never quite explained. Some skeptics said Celera would be foolish to share.

"They're trying to avoid others repackaging and reselling the data," Schmidt said. "They're acutely concerned about that."

Harder-core skeptics maintained the private firm's method, which does no preliminary mapping of genome sections but takes on the whole genome in a single bite, is flawed. Sharing a sequence that's potentially full of holes would be helpful for no one anyway, they said.

Celera charged ahead. In late February, capitalizing on what by then had become a genomics boom, the company garnered $855 million in a public offering, after having said it planned to raise $300 million.

The following month, a shadow fell over the company and, to some degree, over the human genome mapping efforts and even, to a certain extent, in the minds of some investors, over genomics as a solid bet. Word leaked that talks between Celera and HGP had faltered.

Francis Collins, HGP director, said in a letter to Celera that the company's aim to keep commercial rights to the fruits of any collaboration and establish "a monopoly on commercial uses of the human genome sequence may be in Celera's business interests, [but] it is not in the best interests of science or the general public."

In its letter, the HGP said it was miffed that Venter did not respond to requests for meetings. The letter gave Venter a deadline by which to answer. Paul Gilman, director of policy planning for Celera, said company officials were on a road show and could not reply immediately.

HGP released to the news media its letter to Venter, before the deadline arrived, Gilman said. "We did respond," he added. But, by then, the damage had been done.

"It was not one of the brighter moments in collaboration history," Gilman said.

There was more general bad news during the same month. President Clinton and British Prime Minister Tony Blair gave forth a joint statement on gene patents, which seemed (to many investors, anyway) to threaten the market that gene-mappers such as Celera hoped to corner. Clinton and Blair said data from gene-mapping efforts should be made public and freely available.

Biotech stocks plummeted. Later, Clinton sought to clarify the statement, pointing out that if a company discovers a gene-related finding's "specific commercial application," a patent should be granted. Stocks recovered somewhat.

In the midst of it all, Celera kept going. In April, the company said it had finished one person's genome and was annotating the data gathered, while collecting more. Celera's stock soared by almost 22 percent. But the picture darkened more. Also in April, a class-action lawsuit was filed against Celera on behalf of those who had bought stock in the whopper offering two months earlier.

The complaint alleges Celera's registration statement and prospectus related to the offering were false and misleading, since they failed to disclose the HGP talks or the fact that the talks were terminated in December, because HGP opposed Celera's demand for five-year exclusive rights to the mapping data.

In the prospectus, Celera noted it was well ahead of schedule in sequencing the human genome, data from which will be used to create diagnostic tests using information on single nucleotide polymorphisms.

Lawyers filing the lawsuit invited buyers in the Celera offering to take part within 60 days.

HGP and Celera already are "collaborating" in a way, since Celera will use data made publicly available by HGP to help create the map that also incorporates the company's own, privately gathered information.

But the lawsuit alleges that the undisclosed breakdown of talks geared toward a more extensive team-up may have made Celera stock a somewhat worse deal, unbeknownst to those who bought into the massively successful offering.

No one from several firms involved in the class-action lawsuit returned phone calls. Gilman declined to comment on the litigation. Schmidt shrugged it off.

"There are a lot of unscrupulous lawyers out there," who pounce on companies that lose value after an offering, Schmidt said. "It's a sad fact of Wall Street life, and they're something we all have to live with. [The lawsuit] is a non-event. My guess is that it will be dismissed out of hand."

In other legal action, Amersham Pharmacia Biotech has named Celera in a patent litigation over patents related to the use of energy transfer dyes, which have been fundamental in enabling high-throughput DNA screening. London-based Amersham is attempting to enforce its patent in an action against both PE Biosystems and the affiliated Celera, but Schmidt said the fight more involves PE Biosystems.

"They have about six lawsuits in total going back and forth between them," he said.

As for Celera hooking up with the HGP is some form, Gilman said a partnership is still not out of the question.

"There are always talks going on, obviously; it's science," he told BioWorld Financial Watch. "Through time, we'll find things we can work on jointly. It may be as simple as coordinating publication dates, or it may be something more substantial in terms of a research collaboration."

Meanwhile, Celera's position on sharing data is unchanged, Gilman said.

"We've said all along that we're going to make the consensus genome available at the time of publication, and we're still focused on that by the end of the year," he said. "What we're currently working on is assembly, taking all the fragments and putting them in the right order."

This spring, Celera upgraded its Internet infrastructure, where the fruit fly genome already is available for non-subscribers and where subscribers get human genome data. Last week, Celera said it has sequenced approximately 1.15 billion base pairs of mouse DNA. The company began to sequence the mouse genome on April 6, in a project that will be significant for comparative genomics, Gilman said.

"Mouse is key to understanding human," he said.

Comparative genomics, and analyzing human-genome data, are the areas where Celera's future lies and where the company has an edge over firms with access to the HGP data as it's gleaned, Gilman said.

"The approach [HGP has] chosen won't get them there in the next couple of years," Gilman said. "That's just the way it is. So there's this '90 percent draft' notion they've been pursuing. Does it give you something? Yes. But it does it give you the tools you need? No."

HGP said it will have 90 percent of the genome on the Internet soon.

He said the full human genome comprises "so much information that, really, as soon as people have it, they'll understand the real business plus is providing software tools, expert annotation and computer power to work with that data," he said.

"It's fun to follow the progress of what the media has billed as a race," Gilman said. "We've consistently said it's not a race, because the sequence itself is not the full value. We're working an ordered, assembled genome. [Subscribers will] see full genes in the proper position. When they look at SNPs, they'll have them matched to the exact location."

"Would we be very intelligent if we thought the major selling point was the human genome sequence data?" Gilman said. "Obviously, through time, the public project would make the sequence available. If our differentiation came in just the sequence, we wouldn't have had a long life."

Gilman said he expects to have the ordered genome available this month. But having the sequence, he said, "is not the end of biology. It's the beginning." *