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Disco(very) Dancing to a Slower Beat?

Executive Summary

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.

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GE's Personalized Play for Amersham

GE Medical's pending $9.5 billion acquisition of Amersham PLC, while cast in terms of the company's commitment to accelerate progress in personalized medicine, is fundamentally a hard-headed numbers play aimed at maintaining momentum of GE's gargantuan $10 billion medical systems business unit. GE needs healthy businesses oriented towards growing markets to maintain its momentum. And Amersham, with its stable, predictable contrast agent and protein separations businesses fits well into the portfolio. Meanwhile, the personalized medicine play holds mid-to-long term promise.

GE's Personalized Play for Amersham

GE Medical's pending $9.5 billion acquisition of Amersham PLC, while cast in terms of the company's commitment to accelerate progress in personalized medicine, is fundamentally a hard-headed numbers play aimed at maintaining momentum of GE's gargantuan $10 billion medical systems business unit. GE needs healthy businesses oriented towards growing markets to maintain its momentum. And Amersham, with its stable, predictable contrast agent and protein separations businesses fits well into the portfolio. Meanwhile, the personalized medicine play holds mid-to-long term promise.

Affymetrix: Taking the Long View

Affymetrix can succeed long term if gene expression proves to be a viable method for assaying disease. For now, that core question-the extent to which genotype correlates with phenotype-is as much a matter of philosophy as it is demonstrable fact. But making that determination will take time-and much data. Meanwhile, with its first-mover advantage in technology development and a strong IP portfolio, the company's GeneChip will likely as not be the technology used to answer that question. And in that sense, the GeneChip technology is enabling. Thus, at least for the time being, Affymetrix is well positioned to grow its life sciences markets. And through a recent major deal with Roche, it could become a major player in the nascent but arguably huge market for array-based clinical diagnostics.

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