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Out of Sequence

Executive Summary

Applied Biosystems' unexpected last-quarter drop in earnings and revenues, which caused its stock to tumble, were due to an 80% drop in revenues from sales of its high-end sequencing system, and market uncertainty due to a longer-than-usual delay in setting the 2002 NIH budget. But most troubling was the company's comment that "We are just not able to forecast the way we used to." What is certain, however, is that the drop in sequencer sales shows that most of the largest genome centers and commercial genomics companies have adequate sequencing capacity for their near-term needs as they shift from Big Biology whole genome sequencing to Small Biology genome analysis applications.

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Disco(very) Dancing to a Slower Beat?

SARS. Iraq. Recession. Terrorists. Risk aversion is in the air, and it hardly seems surprising that leading suppliers of discovery tools for studying gene expression are warning that their own businesses may suffer going forward. Roche and Merck say it's discovery-business-as-usual in Big Pharma, despite the fact that capital spending in the biotech sector has slowed. But some Wall Street analysts contend that customers are moving away from gene expression as a discovery vehicle. And such a point of view creates disturbing implications for the still unprofitable Affymetrix, which has yet to demonstrate that selling gene-based microarrays and related instrument systems is a model for a sustainable business.

Disco(very) Dancing to a Slower Beat?

SARS. Iraq. Recession. Terrorists. Risk aversion is in the air, and it hardly seems surprising that leading suppliers of discovery tools for studying gene expression are warning that their own businesses may suffer going forward. Roche and Merck say it's discovery-business-as-usual in Big Pharma, despite the fact that capital spending in the biotech sector has slowed. But some Wall Street analysts contend that customers are moving away from gene expression as a discovery vehicle. And such a point of view creates disturbing implications for the still unprofitable Affymetrix, which has yet to demonstrate that selling gene-based microarrays and related instrument systems is a model for a sustainable business.

Terra Infirma: Pharma Dealmaking 2001

With Big Pharma still trying to figure out how to create productive businesses from their mega-mergers, most of the year's high-value M&A saw biotechs buying late-stage or marketed products. But these biotechs are also, with the risk of development failure ever clearer, actively in-licensing and acquiring products and product-creating technologies in order to diversify what are often single-product portfolios. Unlike many Big Pharmas, these companies have been willing to improve existing chemical entities, often exploiting drug delivery and other pharmaceutical sciences. Meanwhile, large companies focused on late-stage in-licensing, in part because they couldn't afford acquisitions--given the valuation disparities between large companies and small ones with valuable late-stage products. Nonetheless, while more affordable than acquisitions, the high price of these deals has transferred the majority of the regulatory and commercial risk to the licensee. As for the early-stage side of the biotech industry: platform companies have not been able to sell their discovery technologies at anything like the prices they expected; as a result, many of them have merged in an effort to create product-focused discovery operations.

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