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DNA news to tickle Wall St.
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June 5, 2000: 4:13 p.m. ET
Biotech investors eagerly anticipate the decoding of the human genome
By Staff Writer Martha Slud
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NEW YORK (CNNfn) - Later this month, scientists are expected to announce one of the most anticipated milestones of our time -- the "rough draft" of the human genetic code, a sort of DNA guidebook that promises to illuminate the human body's intricate and mysterious design.
Rockville, Md.-based Celera Genomics Group (CRA: Research, Estimates) says it is on the verge of completing a key stage in charting the roughly 100,000 genes in the human body. Researchers say the raw data will ultimately help them decipher the function of each gene and what role these genes play in disease. The hope then is that scientists could develop highly potent new drugs for cancer, Alzheimer's disease and other illnesses based on a patient's individual genetic makeup.
 Publicly funded researchers also are racing to unlock the secrets of the human genome.
But Celera claims to be a step ahead, and is expected to announce later this month that it has assembled - or put in their proper order - virtually all of the genes in the human body through supercomputers that have processed reams of genetic data. A company spokeswoman, Heather Kowalski, confirmed Monday that the research is on track and an announcement should be made "in June."
The milestone is an enormously significant development, with major implications for the future of the pharmaceutical and biotechnology industries, said Faraz Naqvi, manager of the Dresdner RCM Biotechnology Fund.
"They [Celera] are basically making the blueprint and allowing all of the other biotech companies, and themselves, to build the house," he said. "Now the blueprint's done, and it's time for us to start building the foundation and going from there."
The practical value of these genetic discoveries may be a while away, however. Experts say it will likely take years for scientists to translate the billions of DNA sequences found in the human genome into an in-depth understanding of how genes work and the advent of new, gene-based medicines.
While Celera's imminent milestone represents only a first step in leading to a new era of drug discovery, it is nevertheless a development that cannot be overstated, said Eric Schmidt, a biotech analyst at S.G. Cowen & Co., who rates Celera shares a "strong buy."
 "It's clearly just the beginning from a scientific standpoint," he said. But, "I think this [genome sequencing] is perhaps -- and I don't think this is an exaggeration ... the most significant event in the history of health care."
Advances in genomics - the study of the structure and function of human genes - and an overall maturing of the biotech industry helped spur a bull run in the sector last fall. The Nasdaq biotech index, which tracks the performance of about 200 companies, more than doubled in 1999 and went on to climb another 60 percent earlier this year.
Biotech stocks, however, began to fall sharply in March, erasing much of their gains - although investors who got in at the ground level of many of these stocks are still sitting on big profits. Analysts say that many stocks were overvalued, and that investors began to get cold feet over patent worries and concern about the profitability outlook of many of these highflying, money-losing companies involved in compiling genomics' databases.
Another biotech rally?
Shares of Celera have been regaining ground in recent days as its expected announcement draws closer. Shares surged 11-13/16, or about 17 percent, to 80-5/16 in Monday afternoon trading. That's far from a 52-week high of 276, but still a big climb from its yearlong low of 7-3/32.
Naqvi, manager of the Dresdner RCM Biotechnology Fund, said that Celera's scientific advances as well as some other strong fundamentals in the biotech sector are likely to spur interest in other stocks in the industry.
 To deal with volatility in the genomics sector, he said, many investors already buy groups of biotech stocks, including Millennium Pharmaceuticals (MLNM: Research, Estimates) -- the Dresdner fund's top genomics pick, with a 3.5 percent weight -- Curagen Corp. (CRGN: Research, Estimates), Incyte Pharmaceuticals (INCY: Research, Estimates) and Human Genome Sciences Inc. (HGSI: Research, Estimates). If Celera shares go up, then that will likely boost buying in its competitors, he said.
"The strategy is not to just invest in one company, rather you buy a basket of them to somewhat diversify your risk," he said.
 Shares of Human Genome Sciences, a genomics' database and drug development firm, gained 8-13/16 to 114-3/4 Monday afternoon after an upgrade by a Wall Street analyst.
In a research report, Merrill Lynch's Todd Nelson raised his rating "long-term buy" from "long-term accumulate," saying that the company is expected to boost its pipeline significantly over the next year.
The Nasdaq biotech index gained about 2 percent Monday afternoon, while the overall Nasdaq composite traded flat.
Schmidt said that in addition to enthusiasm over the science of the genomics industry, many investors are stepping in to buy biotech stocks that have been knocked down sharply in recent months.
"This sector could be set for another run," he said. However, "we would argue that still in a volatile market, you would want to stick to the cream of the crop." 
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