Biotech Executives Say Investors Overreacted to DNA Declaration

Executives of the biotech companies that hold patents on human genetic data said they welcomed a joint British-American government declaration Tuesday on the need to keep raw genetic information freely available to the world’s scientists.

The officials, along with some Wall Street analysts, said investors overreacted in selling off their companies’ stocks, arguing that the statement represented no change in the policies of the two governments.

Share prices in Celera Genomics, Incyte Pharmaceuticals, Human Genome Sciences and other biotech stocks took a beating after the announcement by President Clinton and British Prime Minister Tony Blair called attention to an ongoing controversy over ownership of the information contained in human DNA.

Analysts who follow the genomics companies said that share prices, which have soared in recent months, will suffer in the short term. The analysts and industry officials agree that many investors who are new to biotech are too easily frightened and don’t make distinctions among companies that have varied business strategies and that will be affected in significantly different ways by government policies.

The Clinton-Blair statement called for “unencumbered access” to fundamental genetic information--the spelling out of the 3 billion chemical letters that make up the human genetic code.

The political leaders noted that this information is changing scientists’ understanding of “the causes of human disease” and will lead to “a new generation of effective treatments, preventions and cures.”

While they applauded the decision by scientists participating in the publicly funded Human Genome Project to share the information widely and without restrictions, they also reaffirmed “intellectual property protection for gene-based inventions.”

The statement by itself does not change government policy in either country, but it does call attention to a growing divide that separates government-funded scientists from their counterparts in industry over free access to such fundamental scientific information. And it seems to have contributed to confusion over what kind of patents would be allowed.

“It is not clear from the statement what they are trying to do,” said Winton G. Gibbons, an analyst with William Blair & Co.

But the immediate effect, he said, is to dampen the demand for shares in the genomics and related biotech companies, bringing share values down amid concerns that “companies won’t be able to keep their efforts proprietary.”

Biotech analyst Kevin Tang of Deutsche Bank Alex. Brown said: “The Clinton-Blair statement doesn’t change anything . . . but people are jittery. The sector has performed well and people are looking to take their chips off the table.”

The impact of the joint statement was indeed dramatic.

Trading in Celera on the New York Stock Exchange was briefly interrupted and then resumed Tuesday as the company’s shares plummeted. After a rally, it ended the day at $154, down 19% for the session.

Celera officials said they welcomed the Clinton-Blair statement. The company’s mission, said a Celera press release, “is completely consistent with the goals of assuring that the world’s researchers have access to this important information to enable advances and discoveries that will improve the human condition.”

However, Celera has been embroiled in controversy over its announced aim to complete the sequencing of the human genome before the publicly funded genome project. Negotiations intended to work out a collaboration between the competitors disintegrated amid charges that the company wanted to maintain a monopoly over distribution of the information until the year 2005.

Officials at Incyte argue that their company has benefited by the decision to make the public projects’ data available to all scientists.

The Clinton-Blair statement “is actually extremely positive to us,” said Incyte CEO Roy A. Whitfield. His company, which has applied for thousands of patents on genes and gene fragments, takes the raw data provided by the public effort and adds value to it, he said.

“What Clinton has said is not news,” Whitfield said. “It’s what the rules were all along. . . . We hope it puts to bed the idea that the human genetic data could be controlled by anyone before entering the public domain.” Incyte shares closed at $143.50 Tuesday, down 27%.

Human Genome Sciences’ chairman and CEO, William A. Haseltine, also described himself as pleased with the joint statement. “Basically what the President and prime minister have reaffirmed is something we knew and that’s that the raw genetic data inherently is not useful and not patentable. It’s reaffirmed the importance of patents.” Company shares closed at $123.52, down 19% for the day.

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Bashing Biotech

Biotechnology shares have plunged in recent days after soaring since the start of the year. A look at how some of the stocks have fared:

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Dec. 31 Recent Tues. Decline Stock (ticker symbol) price peak close from peak Isis Pharm. (ISIP) $6.25 $39.00 $18.44 -53% Incyte Pharm. (INCY) 60.00 289.06 143.50 -50 Human Genome (HGSI) 76.31 232.75 123.52 -47 PE Celera (CRA) 74.50 276.00 154.00 -44 Alkermes (ALKS) 49.13 197.00 113.00 -43 Protein Des. (PDLI) 70.00 338.00 195.00 -42 Imclone Sys. (IMCL) 39.63 171.94 105.00 -39 Immunex (IMNX) 109.50 250.81 153.94 -39 Affymetrix (AFFX) 169.69 327.00 203.06 -38 Amgen (AMGN) 60.06 76.50 52.25 -32 Amex biotech index 391.44 806.37 550.24 -32

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Source: Reuters, Bloomberg News