By Paul Larson (TMF Parlay)

It's fairly amazing to think that it was roughly 50 years ago that we first figured out what DNA is and what it does. Today, Celera Genomics is in the process of fully decoding the human blueprint on the atomic level. This is the information age, and the information Celera is mining is among the most important chunks of knowledge to come our way in some time.

An Awesome Opportunity

Biotechnology as a whole faces a bright future, and much of this is thanks to the information and expertise Celera is compiling. Genomics is to biotechnology what semiconductors were to the computer. It is that basic and important to creating new drugs and enabling better understanding of how our bodies and the world works.

One might say that Celera is the Rand McNally of genomics. Up until now, those researching new therapies were basically driving blind and with no directions. Occasionally they would accidentally stumble onto something that was useful, but they weren't exactly sure how they got there. With detailed genomics information, they will know exactly where genes are located and how they work.

Celera will provide the road maps to the genetic makeup of humans, as well as plants and animals, to other biotechnology and pharmaceutical companies. This is incredibly useful information that no reputable pharmaceutical firm or research lab will want to go without.

Biotechnology has the capability to extend and improve the quality of life, and Celera holds the key to unlocking some exciting and mind-boggling advances.

Capital

Not only is the opportunity enormous for biotechnology in general and genomics in particular, but Celera also has the funding to take advantage of its situation. The company has over $1.1 billion in cash and equivalents with less than $100 million in total liabilities. This makes Celera the best-funded pure genomics company in existence. The company will be able to use this capital to hire more researchers and purchase more gene sequencers to further extend its technological lead.

It's also worth noting that this cash translates to roughly $17 per share, or about one-third of Celera's current (as of this writing) stock price.

Brainpower

Celera isn't the only genomics player in town, but it sure does appear to be the Michael Jordan of its niche. Celera just focused its sequencing efforts on the human genome some nine months ago, yet it was able to completely finish sequencing one human genome last month. Compare this to Celera's most direct competitor -- the publicly funded Human Genome Project. This loosely knit group of researchers started sequencing back in the early '90s and is now behind Celera in the amount of mapping data it has mined. Celera's unique shotgun approach to sequencing and gene mapping allows it to run laps around others using much slower techniques.

Celera is also attracting some of the brightest minds in genomics. Not only does Celera have Dr. Craig Venter (the inventor of the shotgun approach) as a leader, but it is able to adequately compensate scientists that join its team.

Sustainable Advantages

Celera is well-positioned for today, and it looks like it will be able to maintain its lead for many years to come.

Genomics really is the gold rush of the next century, and the company selling the best picks and shovels is Celera's parent, PE Biosystems (NYSE: PEB). Celera is one of PE's best customers. Those that don't have such a cozy relationship with an important supplier are at a disadvantage.

It's also worth noting that the barriers to entry into this business are extremely high. It not only requires a lot of capital, but it also requires great expertise that is in limited supply. Celera, like other biotechnology companies, also has the patent system to protect the information and methods it discovers.

In addition, it's worth noting that the demand for DNA sequencing is only going to increase as time goes on. It's not as if they are going to sequence one human genome and say "Done!" This is but the first drop of rain in an approaching hurricane of useful information. Genes vary from person to person, and there will be a great deal of study concerning the relationship of these variations to diseases. The utility of genomics information isn't limited to humans; there are entire fields of animal and plant studies that Celera can address. (Celera has already completely sequenced the fruit fly and is in the process of sequencing mouse DNA.)

Down the road, it's entirely conceivable that every single person could know his or her exact genetic sequence. This would not just mean knowing what diseases one may be predisposed to, but this knowledge may also allow researchers to create drugs customized to one's specific genetic makeup. DNA really is the foundation of life, and the advances that allow genetic information to be readily available will lead to mind-boggling advances in medicine.

There is plenty of ammunition for Bill's bearish argument since Celera is still a very young company. Nevertheless, I think Celera is exceptionally well-positioned to profit from one of the most exciting avenues of scientific discovery in our lifetimes. Celera has the capital, the brainpower, and the entrepreneurial spirit to pursue this enormous opportunity and create value both for its shareholders and for humankind.

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