By Randall Osborne

With an intent to standardize the technology platform used in the burgeoning science of array-based genetic analysis, Affymetrix Inc. and Molecular Dynamics Inc. have founded the Genetic Analysis Technology Consortium (GATC).

Affymetrix, of Santa Clara, Calif., uses its GeneChip technology with various collaborators to acquire, analyze and manage complex genetic data. Its systems consist of disposable DNA probe arrays containing gene sequences on a chip, and software with which to process the information.

Molecular Dynamics, of Sunnyvale, Calif., develops, manufactures and markets systems for discovering and studying genes.

Together, the companies will create and publish a set of standards so researchers can more easily process arrays made from multiple sources. The standards will cover DNA arrays, reagent kits, instrumentation, software and database architectures.

Edward Hurwitz, vice president and chief financial officer of Affymetrix, said standardizing the systems "should benefit everybody. The customer will not be forced to make decisions about systems that are not compatible, and it will be easier for people to use all the technologies, wherever their competitive advantages lie."

Along with the benefits of an agreed-upon system for array-based genetic analysis, GATC offers the advantage to members of avoiding the inevitable legal skirmishes that arise when more players enter the field, said David Crossen, an analyst with NationsBanc Montgomery Securities Inc., of San Francisco.

"There's definitely that aspect to it," Crossen said. "The consortium is creating the opportunity for everybody to make friends and avoid the incompatibility issues that, by definition, increase competition and raise more specters of the fighting that may go on."

One fight already is going on. In March, Hyseq Inc., of Sunnyvale, Calif., filed a lawsuit in U.S. District Court in San Jose, accusing Affymetrix of infringing on Hyseq's patents related to sequencing by hybridization. Hurwitz said the lawsuit is still in its early stages.

The question of GATC flattening out competition "becomes meaningless after a while, because the consortium will be managed by a third party," Hurwitz said. That party has yet to be appointed.

"As GATC exists right now, it's an embodiment of a set of intentions," Hurwitz added.

Crossen said the GATC concept is more an indication of Affymetrix's self-assurance than worry about its competitors. "My gut feeling is that they're operating out of tremendous confidence that their patent position will get stronger and stronger," he said, adding that he expects Affymetrix to be issued more patents and consolidate its position.

Molecular Dynamics, "with their low-density chips, is in a different business," Crossen said. "They entered into this to get an assist."

The companies also signed a nonexclusive license agreement that gives Molecular Dynamics the rights to some Affymetrix technology for commercializing low- and medium-density DNA arrays.

Focused on gene expression research with mechanically spotted arrays, the licensing deal does not include Affymetrix's technology for light-directed synthesis. Under the terms of the agreement, Affymetrix will get royalty payments on products sold.

Additional Agreements Expected

More licensing deals will be made as the company can find them, Hurwitz said. Those deals should be easier to negotiate as the idea to standardize systems catches on. Patent lawsuits may subside, too.

"This is going to be a complicated field, with respect to intellectual property," Hurwitz said. "Would you rather spend $2 million per year, times 20, fighting and trying to shut everybody down, or accept license fees?"

Affymetrix also has signed a three-year, nonexclusive worldwide sales and marketing agreement with Amersham Pharmacia Biotech, of Uppsala, Sweden, for selected GeneChip products.

In August, Affymetrix signed a three-year, subscription-based supply deal worth at least $15 million with Hoffmann-La Roche AG, of Basel, Switzerland, and its subsidiaries worldwide. (See BioWorld Today, Aug. 27, 1997, p. 1.)

Affymetrix's stock (NASDAQ:AFFX) closed Friday at $35, up $1. Molecular Dynamics' shares (NASDAQ:MDYN) ended the day at $17, down $0.125. *

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