Research -

Celera Genomics

Updated Oct 25, 2002


Years	Jun 2002	Jun 2001	Jun 00	Jun 99	Jun 98
Sales (Mln US$)	121	89	43	13	4
Sales Growth %	36	107
Net Loss (Mln US$, excl spec. items)	-186	-119	-93	-45	-8
Special Items	-26	-69
R&D (Mln US$)	232	165	168	48	10
Net Loss per Share	-3.21	-1.96	-1.73
Operating Loss	-246	-290	-168
Stockholders Equity (Mln US$)	1,100	1,111

Note:   Special charge in 2001: $69 million, amortization of goodwill and other intangible assets for acquiring Paracel.
Market Cap.:                                    $
Cash & Short Term Investment: $   889 Million
Total Assets:                                    $1,250
Long Term Debt:                             $     52
Total Liabilities:                               $   149
Shareholders Equity:                    $ 1,100

How does it make money?

    Celera is an information company. It sells subscription to its genomics database to the researchers in major drug companies.
Its business model is similar to Bloomberg but serving biotech industry. The number of subscription and service customers exceed 100, 16 commercial and 150 academic..
    Currently its clients are:
1) Drug companies :    Amgen, Pfizer, Takeda, AHP, Immunex, Novartis, Pharmacia, Genset, Arena, Vita Genomics, Yamanouchi, DNA Sciences, Genentech, Immusol.
2) Academic:           Vanderbilt Univ., Harvard Univ., UT Southwestern Medical Center, Univ. of Cincinnati, Ohio State Univ., Australia Govt., Caltech, Weizmann Institute of Science (Israel), Institue for Genomics, Max Planck Society (Germany), Karolinska Institutet (Sweden), Univ. of Tokyo, Univ. of California, Ludwig Institute for Cancer Research, BIOCONDA (Spain), National Cancer Institue.
    These major drug companies are willing to pay a huge amount of money for Celera's database. It is a favorable vote on what Celera is doing.
    As estimated by Scientific American, corporate subscribers pay about $5 million - $15 million a year, while academic labs pay about $2,000 - $15,000 a year.
    For the big pharmas, Celera could be treated as their labs' subcontractor who provides specialized research results which could not be done better or too expensive to be carried out by the drug companies themselves.

Is it in a growing industry?

Molecular biology is said to have major scientific breakthrough in the new century. Medicines developed by biotechnology have already created very huge profits. A great deal of money is being attracted into this industry for the gold rush. In the reinforcing process, the money inflow is pushing the technology to move further.
In order to compete and to be the first in discovering a new drug, the drug companies are spending a great amount of money on product research, about 20-40% of their revenues. In scientific research, only a small portion of the data are eventually proved to be helpful, but these data are essential for the scientists during the process.

Does it have a strong demand? How big is the market?

What does the market need?

Is it the market leader?

1. Celera is the first company which completed the sequencing of human genome. It was also the leader in sequencing fruitfly.
2. It has 3 times more computational power than its nearest competitor and has 15 times the data management capacity. (Fool.com) With the help of its associated company, Applied Biosystem, it runs the genome sequencing by 300 automated gene sequencers.

Who are its competitors?

At various specific area, its competitors include Curagen, Gene Logic, Genset, Incyte, Affymetrix, Millennium, Genaissance, Orchid Biosciences, Oxford GlycoSciences & SNP Consortium.

How could its competitive advantages be sustained?

Is the market price too high?

    Market cap in Nov 2000                                           3.8 b
    Market cap in 2006                                                   9.5 b    (expecting an annual 20% return on stock price)
    Supposing PE 40 in 2006, earning has to be               240 m
    Based on profit margin of 30%, sales need to be         800 m (it means a 80% annual growth in sales for next 5 years)

    Its revenues in 2000 was 43 million and that of Incyte, its competitor, was 157 million. The above expectation may be acheivable but the risk should be very high.
    If based on a subcription of $10 m / year, it needs to have 56 corporate clients:
                Corporate clients (70% of the total subscribers): 56 X $10 m = $560 m
    How many drug companies are large enough to pay $10 m for the subcription? Or Celera has to prove that their research data are worth to pay for.