Business Segment of Applera Corporation
Sales: $60.1 million (2004)
NAIC: 325410 Pharmaceutical and Medicine Manufacturing; 325412 Pharmaceutical Preparation Manufacturing; 325413 In-Vitro Diagnostic Substance Manufacturing
Under the auspices of Applera Corporation, Celera Genomics is engaged primarily in the discovery and development of targeted therapeutics for cancer as well as for autoimmune and inflammatory diseases. The company also seeks to advance therapeutic antibody and selected small molecule drug programs together with other global technology leaders in the field. Celera's sister firm, Applied Biosystems, serves to market Celera's various databases, which provide data about the genomes of mice, fruit flies, bacteria, and other life forms to life sciences companies. Celera also derives revenue from subsidiary Paracel, a maker of computer hardware and software for genomic data analysis. Celera Diagnostics, its 50/50 joint venture with Applied Biosystems, focuses on the discovery, development, and commercialization of diagnostic equipment and technology.
Background of a Maverick Geneticist
One of the founders of Celera was J. Craig Venter, the maverick geneticist who sparked the famed race with the publicly-funded Human Genome Project (HGP), an international consortium of government and academic scientists in the United States and Europe, to produce the first map of the human genome. Venter grew up in Millbrae, California, a middle-class town outside of San Francisco. During the Vietnam War he was drafted into the Navy and served in the medical corps in Vietnam. After his tour of duty, Venter enrolled at San Mateo Community College and then at the University of California-San Diego with the aim of becoming a doctor. In just six years he had received a Ph.D. in physiology and pharmacology, and he then accepted a position as a junior faculty member at the State University of New York at Buffalo. Venter's academic research focused on analyzing the nature of proteins on the surface of brain cells that pick up chemical signals—neurotransmitters. He sought to understand how messages in the brain were sent and received. Opinionated and not always tactful, Venter was denied tenure in the pharmacology department but was picked up by the department of biochemistry.
Venter next relocated to Bethesda, Maryland, having accepted an appointment at the National Institutes of Health (NIH), which in the late 1980s and early 1990s was making slow progress in mapping the human genome under the leadership of James Watson, the co-founder of the double helix. As a member of the NIH's Human Genome Project, Venter's interest was piqued by the introduction of the first gene sequencing machine, which he saw as a way to speed up the identification of gene fragments dubbed "expressed sequence tags (EST)." Venter grew increasingly embittered, however, when Watson and others in NIH expressed little interest in his automated gene sequencing work.
After publishing his findings on EST in Science in June 1991, Venter caught the attention and funding of venture capitalist Wallace Steinberg, head of the New Jersey firm Health Care Investment Corporation. In 1992, Steinberg offered Venter an extraordinary deal; HealthCare would provide $70 million over seven years to a nonprofit institute run by Venter. In return, the new institute would turn over all proprietary commercial rights for any marketable discoveries it made to a profit-making firm formed by Steinberg. Venter also would receive 10 percent of the profitable company's stock. Venter called his new venture The Institute for Genomic Research (TIGR), recruited many of his NIH lab staff, and set up headquarters in Rockville, Maryland, a few miles north of Bethesda. Steinberg recruited William Haseltine, a leading AIDS researcher at Harvard, to lead the for-profit enterprise, which was named Human Genome Sciences (HGS). Under the terms of the arrangement, TIGR would search human tissue for expressed genes, sequence nucleotide fragments on automated machines, and compile the data onto massive databases. HGS would be given six months between the discovery of the gene fragments and their publication to analyze their functions. Venter could then publish the information, and the academic community and nonprofits could use the data for any purpose on the condition that HGS had first rights to commercialize any discoveries resulting from the data. HGS also could exercise a clause giving it another year to explore a gene's commercial promise and patent it if the gene proved medically promising before Venter could make the data public. The profits stemming from commercializing TIGR's discoveries would be funneled back to Venter's Institute. In 1995, TIGR achieved its first major success when Venter and Nobel Prize-winner Dr. Hamilton Smith mapped the genome of Haemophilus Influenzae, the bacterium that causes ear infections. The institute also mapped the H. Pylori bacterium and was working on mapping the genomes for the syphilis, cholera, and malaria bugs.
The 1998 Creation of Celera Genomics
In 1997, Steinberg died, and an increasing clash between Venter and Haseltine over research findings and competing agendas led to a split. Notorious for his aggressive approach to science and business, Haseltine aimed to form a multibillion global pharmaceutical company. He had also had been exercising the extension clause on numerous sequences, permitting little data out of TIGR to enter the public realm. Venter felt caught between being vilified by academics for withholding data and Haseltine's demands to withhold even more. Believing he was betrayed into serving HGS's sole commercial interests, Venter looked for a way out. In July 1997, HGS and TIGR issued simultaneous press releases that the two agreed to dissolve their partnership. To buy its freedom, TIGR gave up $38 million in funding from HGS but Venter retained the right to publish his genomics research whenever and however he wished.
In 1998, Michael Hunkapiller, developer of a new sequencing machine at Applied Biosystems (ABI), and Tony White, head of ABI's parent company, the Perkin-Elmer Corporation of Norwalk, Connecticut (later Applera Corporation), approached Venter to lead a new company. The idea was to use ABI's innovative sequencing technology that was ten times faster than existing equipment to map the complete human genome in three years, ahead of the government's 15-year $3 billion effort, at a fraction of the cost. Not wanting to repeat his experience with Haseltine, Venter demanded that the genome produced by the company be made publicly available. Hunkapiller and White agreed on condition that the company would seek patents only on a few medically important genes. The agreement gave Venter a 5 percent stake in the new company, with TIGR receiving another 5 percent. Venter also was named president and chief scientific officer of the new company called Celera Genomics. The name of the firm was derived from the word "celerity," meaning swiftness of motion or rapidity—a definition intended to convey the speed with which Celera intended to accomplish its mission. Venter recruited most of his scientific talent from TIGR. Celera would utilize his rapid fire method known as the "random shotgun" approach, which served to sequence bits of genes that were pieced together in the end to create a map. Venter now planned to apply this method to decode the estimated 3.5 billion chemical letters of DNA that comprise human heredity by 2001. To accomplish this mission, Venter set up the world's greatest DNA sequencing factory with 300 machines developed in secret over the previous two years by Perkin-Elmer's West Coast subsidiary, Applied Biosystems.
With the cost of developing the human genome estimated at $300 million, Perkin Elmer expected a return on its investment. The question was how Celera would make a profit if it gave the genome away. Venter conceived of Celera not as a biotechnology firm but as an information company whose principal product would be a massive database of DNA centered on the human genome. Scientists, pharmaceutical companies, and others could access the fundamental sequence for free, but to probe the complete database, including data on genetic variability in humans and the genomes of other animals critical to biomedical research, would require a sliding fee. By developing and licensing genomic databases, Celera would become the definitive source of genomic information in the world, allowing for the development of new therapies, targeted diagnostics, and individualized medicine.
Challenging the Publicly-Funded Human Genome Project
From the start, Celera's ambitious plans raised suspicions among officials and scientists of the Human Genome Project (HGP) that Venter and Perkin-Elmer would try to monopolize the human code for profit, if not seize the scientific glory. Directors of the government sponsored project also worried about a cutoff of public funding if Congress believed the private sector was mapping the human genome more efficiently and at far less cost. Responding to the unexpected competition, lead scientists of the publicly-funded HGP announced they would complete the mapping of the human genome by 2003, two years ahead of schedule, and would produce a working draft by 2001 to match Celera's data.
Our mission is to discover and develop meaningful new therapies that improve human health. We are applying our diverse genomics, bioinformatics, proteomics, medicinal chemistry and biology technology platforms to identify and validate drug targets, and to discover novel therapeutics.
In September 1998, Celera entered into its first significant collaboration since forming in May, agreeing to work with Paracel Inc., of Pasadena, California, to develop high resolution bioinformatics tools to analyze genomic information. Paracel's primary contribution was its GeneMatcher data analysis technology, which would assist Celera in its large-scale shotgun sequence assembly of the human genome. In the same month, Perkin-Elmer announced plans to distribute a new class of common stock to track the separate performance of its newly created Celera Genomics business unit. Perkin-Elmer believed the new stock structure would give Celera more autonomy and synergy with its Applied Biosystems venture to reach its commercial goals of developing and licensing genomic databases.
In May 1999, Perkin-Elmer shareholders approved a corporate reorganization, resulting in a name change to PE Corporation and the creation of separate securities for PE Biosystems Group and Celera Genomics Group that tracked the performance of the two business units. Celera also passed several milestones, including employing more than 300 employees, nearing the completion of laboratories and related facilities, working with Compaq Computer to establish one of the largest supercomputer centers in the world, and entering into database subscription deals with Amgen, Inc., Pharmacia & Upjohn, Inc., and Novartis Pharma, in addition to gene discovery agreements with Rhone-Poulec Rorer and Gemini Research Ltd. In September 1999, Celera also completed the sequencing phase in deciphering the genome of dropsophila melanogaster, the fruit fly—a model organism in biological research for more than 80 years. Because its DNA sequence and other characteristics made it the closest invertebrate research organism to humans, the sequencing of the dropsophila genome was anticipated to provide a valuable key to understanding the sequence of the human genome and human biology.
By November 1999, Celera was about one-third of the way toward mapping the human genome—well ahead in the race with the HGP consortium. While the publicly funded scientists questioned the accuracy of Celera's data, Venter insisted his map would be more precise than that of the consortium. Amid the acrimony, the two groups nevertheless felt pressure to collaborate to speed up the completion of the genome. Discussions between Celera and the HGP began as early as December 1998, but the international consortium—which insisted that gene discoveries should remain in the public realm—clashed with Celera's plans to acquire patents on its gene discoveries. The imbroglio between the public and private ventures first erupted publicly in March 2000 when discussions were still underway to jointly pool their data and publish results. An agreement and memorandum of understanding had been reached but eventually fell through due to pressure from American scientists and those in the United Kingdom's Wellstone Trust and Sanger Center, who charged Celera with trying to control the jointly produced genomic data. With the termination of discussions, the two sides only agreed to collaborate on a single publication date for their respective reports on the human genome.
In a surprise announcement before a U.S. House of Representatives hearing on the future of the HGP in April 2000, Venter said Celera had nearly completed the sequencing of the human code, laying claim to one of history's greatest milestones. With these words, Venter tried to declare Celera the winner in the long, closely watched race with the publicly funded consortium. The announcement caused Celera's stock to jump 19 percent in one day to $137 per share. Venter said Celera would complete an annotated map of the human genome by the end of the year, and that the company would make the genome available to researchers who wanted to use it, despite ongoing charges that the company intended to restrict access to the data. Venter, however, also defended Celera's plan to patent up to 500 genes. Soon after Venter's pronouncement, however, the HGP also claimed to be close to finishing its decoding rough draft. The private and public enterprises said they would now focus on finding where certain genes resided in the DNA sequence and what functions those genes controlled in order to produce medical treatments.
In June 2000, with the two sides putting aside their differences and racing to a draw, Celera and the public consortium held a much publicized ceremony at the White House in which they announced the simultaneous completion of a rough draft of the human genetic code. While scientists worldwide were jubilant by the news, Wall Street was less enthusiastic as the historic achievement seemed more scientific than commercial. Investors sold off shares in Celera, pushing its stock down to $109 per share. Celera's shares had been enormously volatile, ranging from a 52-week high of $256 to an abysmal low of around $7. For fiscal year 2000, Celera reported revenues of $42.7 million compared to $12.5 million for 1999. Revenue growth was attributed mainly to subscription agreements reached with major pharmaceutical companies. PE Corporation's chief executive officer Tony White—well aware of Wall Street's growing skepticism of Celera's business model as a seller of genetics data—said that Celera's primary focus would now turn to developing drugs and products around the raw information from the genome project. Once placed in sequence, scientists predicted the code would provide the key to new profitable blockbuster drugs that may cure cancer, heart disease, and other deadly diseases.
In November 2000, PE Corporation changed its name to Applera Corporation and announced the appointment of Kathy Ordonez, formerly with healthcare giant F. Hoffmann La Roche & Co., to create the molecular diagnostics business that would later become known as Celera Diagnostics. The initiative, started as part of Applied Biosystems with Celera actively participating, would seek to pursue opportunities in the rapidly evolving field of personalized medicine products and services based on the revolution in genomics research. At the same time, Celera expanded its operations by adding a protein research lab and hiring high-profile biologists to discover new proteins that could help researchers develop new drugs.
- Celera Genomics is founded by Dr. J. Craig Venter and the Perkin-Elmer Corporation.
- The dropsophila (fruit fly) sequence is published by Celera and Berkeley Dropsophila Genome Project; Celera announces the completion of its first draft of the human genome.
- Celera completes the first assembly of the mouse genome and acquires Axys Pharmaceuticals, a small molecule drug discovery company.
- Celera Genomics initiates new strategy for building its drug discovery and development business.
- Celera forges partnerships with leading drug discovery firms.
In 2001, Celera achieved more milestones in publishing its human genome paper in the premiere journal Science, receiving a $21 million NIH grant to sequence the rat genome, and completing the mapping of the genetic code of the mouse, the single important test organism in medical research. The company planned to make the data available only to companies and universities that subscribed to its database, rather than to all researchers. But one year later in 2002, the publicly funded international consortium led by the National Human Genome Research Institute publicized their own mouse genome map, which was made available worldwide without any restrictions. Celera also acquired Axys Pharmaceuticals of San Francisco, a biopharmaceutical company with expertise in the development of small molecule therapeutics, for $175 million as part of its strategy to transform itself into a profitable drug discovery and development business. By the end of fiscal 2001, Celera had increased revenues to $89.4 million stemming from subscription agreements with commercial and academic customers and from collaborations and service, but reported a net loss of $186.2 million due primarily to higher research and development costs.
Major Changes in the Early 2000s
In January 2002, Venter left the company, reportedly forced out by Applera Chief Executive Officer Tony White over differences about Celera's direction. Venter also had grown restless after the excitement of the genomics race faded and Celera and its corporate parent had turned their attention to drug discovery and development. In April, the company appointed Ordonez as Celera's new president. She faced the formidable task of transforming Celera from a genetic data provider into a drug company at a time when many investors had lost confidence in the firm. Its stock that once soared as high as $256 two years earlier had tumbled to little more than $14. Following her appointment, the company's stock had slipped 24 percent in one month, a vote of no confidence in Ordonez's qualifications to lead Celera's transformation after Venter's hasty departure.
Ordonez wasted little time in seeking to accelerate Celera's shift from marketing genetic data to developing drugs. In June 2002, she shed 132 employees or 16 percent of Celera's work-force from its DNA sequencing and information technology operations to realign the company. Celera also shifted its genetic information business, the Celera Discovery System, to its sister company, Applied Biosystems. The foray into drugmaking proved considerably more difficult than selling information as the company had no drugs in clinical trials and faced intense competition from existing drug companies. By January 2003, Celera's stock had plunged 58 percent in the previous 12 months. Nevertheless, the company had its advantages, including its database of the human genetic variations that scientists believed underlie disease. The company had been decoding these differences or chemical letters of the human genetic code called single-nucleotide polymorphisms (SNPs). Celera, moreover, had intellectual capital and $864 million in cash, one of the largest reserves in the biotechnology sector. This seemed to assure its survival over the long haul as it sought to develop new drugs. Analysts waged the company's immediate future on its diagnostics unit, which could earn a faster revenue stream by developing diagnostic tools for doctors and researchers. Celera also began to emphasize developing oral drugs for asthma, blood clotting, and osteoporosis, which it hoped to push through the early stages of human testing and into advance trials without relying on a major pharmaceutical company. Nevertheless, it would be years before Celera's drug candidates became eligible for Food and Drug Administration approval, a situation that explained why a company with so much cash and a trove of genetic data was finding it difficult to attract investors.
By the end of 2004, Celera's transformation into a drug development firm seemed to be maturing as it signed new deals with a number of pharmaceutical and biotechnology companies—including Abbott Laboratories, Seattle Genetics, Genentech, and General Electric—to provide potential targets for cancer drugs and new products for targeted medicine. The collaborative agreements were anticipated to help Celera's development while conserving its cash reserves of $700 million. Celera seemed to have withstood the worst of times in reinventing itself and could now look forward to making continued advancements in the drug discovery and diagnostic business.
Principal Operating Units
Celera Diagnostics (50%).
Human Genome Sciences; Incyte; ZymoGenetics.
Barbarao, Michael, and Terence Chea, "Celera to Cut 132 Jobs, Refocus," Washington Post, June 12, 2002.
Bruno, Michael P., "Human Genome Finally Translated," Newsbytes, June 26, 2000.
"Celera Genomics, Human Genome Project One Happy Family?," Newsbytes, June 20, 2000.
Chea, Terence, "Guiding Celera's Change," Washington Post, May 9, 2002.
"Drug Target Alliance Formed," Industries in Transition, August 1999.
Gillis, Justin, "Scientists Compile Map of Mouse Genome," Washington Post, May 7, 2002.
Jegalian, Karin, "The Gene Factory," Technology Review, March-April 1999.
"Nice Job on the Genome. Now, Let's See Some Profits," Business Week, February 26, 2000.
"Perkin-Elmer Announces Proposed Distribution of Celera Genomics Targeted Stock," Business Wire, September 23, 1998.
Philipkoski, Kristen, "Foes May Swim in Genome Pool," Wired News, November 16, 1999.
"Revenues, Loses Rise at Celera Genomics," Newbytes, July 29, 2000.
Roberts, Leslie, "The Lord of the Flies," U.S. News & World Report, September 20, 1999.
"Rockville, Md.—Based Biotechnology Company Expands Operation," Washington Times, November 15, 2000.
Rosenwald, Michael S., "Celera, Genetech Sign Cancer Drug Research Deal," Washington Post, September 29, 2004.
Seachrist, Lisa, "Celera Completes Dropsophila Sequence; Starts Human Effort," Bioworld Today, September 10, 1999.
Shreeve, James, The Genome War: How Craig Venter Tried to Capture the Code of Life and Save the World, New York: Alfred A. Knopf, 2004.
Shrine, Jim, "Race to Sequence Human Genome Continues: Celera, Paracel Team Up to Develop Bioinformatics," Bioworld Today, September 21, 1998.
Terry, Rob, "Life after Venter," Washington Post, May 9, 2002.
Welsh, James, "Investments—The Promise of Healthy Returns: Investors Can Score Big Profits in Biotechnology," Financial Planning, August 1, 2000.