Biotech at the Beach -- Genomics, Part I

OK, OK, I am dawdling -- I am also on vacation at the beach, a real beach, uncluttered by too many humans, at the end of the island, four miles of beach to my right (west) without any sign of human habitation, lots of turtle nests, and this is the domestic US of A.

Genomics: First, in this part, a macro view -- a more detailed look at issues, opportunities and companies will be in the second part of this beach blog.

Genomics is a wonderfully broad area for pundits and an overly broad area for investors. To simpify matters, I want to break it down into pieces:

Genetic Testing

Tests that you and I take to see if we are genetically programmed or predisposed towards a specific disease.

For example, being half-Jewish (and my wife 100% Jewish), we were both tested for Tay Sachs disease before we were married, as it is much more likely to occur in a Jewish couple than a non-Jewish couple. My wife and I were also tested for a gene-predicting cystic fibrosis as there was an occurrence of this terrible disease in my family.

There are more tests now for more diseases than 20 years ago, and testing is moving into areas that are controversial, such as genetic screening of workers who may be more prone to respiratory diseases and therefore disqualified from working at certain jobs. I am, in my heart, a true, bleeding-heart liberal, but people who object to this kind of testing are nuts. There are few investment opportunities in this arena at present.

Genetic-Based Tests

A different subject altogether -- these are tests that look at the genetic composition of a virus or bacteria to determine if you really have a disease. An example of this is the killer staph called MRSA (the hospital staph infection). A company called Cepheid (CPHD) has a quick test for this super bug based on a genetic analysis of a nasal swab taken from a patient. This is the most promising area for genetic testing and investors -- as the quicker we know about a specific disease, the better. Plus hospitals and insurance companies like these tests.

Genetic Screening/Genetic Matching to Treatments

This is a relatively new field and the best example is the test for the HER2 gene in women with (or without) breast cancer. If a woman has this gene and has breast cancer, the drug Herceptin, made by Genentech (DNA), will be much more effective in preventing a recurrence. This is a booming area of research, although the logical step of treatment companies developing these tests has yet to happen.

Gene Therapy This is an area that was very hot and has cooled off since a mid-stage gene therapy killed someone (a relatively healthy someone) in clinical trials. In this category, a treatment replaces or repairs a defective gene to help the patient. This is still a very hot area, lots of little startups with a high level of risk -- and more on this to come in the future.

Genomic Databases This was once "the rage" -- the race to "map" the human genome. The problem is the erstwhile cartographers forgot to tell the world they were skipping the hard part -- the 98% of the genome they call "junk DNA."

This is still a very interesting area as several equipment manufacturers have databases up for rent as companies screen various components of the genome and the proteins associated with human gene interaction with the rest of the body. A good area to invest with maybe no real pure plays in this area -- but you need to look at companies whose primary business is something else.

Genomic Research Infrastructure and Equipment

So far, this is the segment generating serious revenues and making money -- well, some of the companies are doing so.

Firms to look at include Illumina (ILMN), Affymetrix (AFFX) and Sequenom (SQNM). Much more on this after a minor league baseball game, maybe some golf -- but no later than a day or two from now.

See ya.