Advanced materials powerhouse Corning believes that making DNA chips will marry its expertise with big profits. But the company joins an emerging growth market filled with competition and patent lawsuits. The players are betting that a $1 billion pie in five years is only the start, and picking a winner now is anybody's guess.
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Why Corning, why now?
Corning parachutes into a biochip playing field of big muscle competitors and flying lawsuits. But with $4.7 billion in 1999 revenues followed strongly this year, it's not about Corningware anymore. The company has morphed from a sleepy glass blower into an advanced materials stronghold. This includes fiber optics, where Corning is the number one fiber optic cable maker ahead of Lucent Technologies (NYSE: LU).
Investors have rewarded Corning by quadrupling Corning's stock price in one year. (Drip Port readers recently named it as one of the high-growth companies they were most interested in studying.) At this point, it may not fear competitors Agilent (NYSE: A), which started shipping biochips this week, and Motorola (NYSE: MOT).
And it must also see around litigious market leader Affymetrix (Nasdaq: AFFX). Affymetrix protects its turf: It has sued or is being sued by Hyseq (Nasdaq: HYSQ), Incyte Genomics (Nasdaq: INCY), and biotech infrastructure powerhouse Applied Biosystems (NYSE: PEB), formerly PE Biosystems.
If Corning is looking for compatible new growth markets, its biochip move makes sense.
Why do Corning, Agilent, and Motorola want in?
Biochips (or DNA chips, DNA arrays or microarrays) are essential for genomics-era research and medicine. They test what genes are present and in what quantity. This lets you ask, "Are they relevant to diseases? How do they work, and what drugs might work on them?"
Decoding the human genome has made the whole gene-testing business much more complicated and potentially time consuming. Some say there are about 100 important diseases, and 10 genes are factors in each disease. And 5 to 10 proteins relate to the function of each "disease" gene (shorthand, I know, and clumsy; remember "AIDS doctor"?). Research could be focusing on as many as 10,000 new targets for drugs. Hey, there are only 400 to 500 now!
So gene work just got 20 to 25 times harder, and scientists used to do this one gene and one experiment at a time. No wonder ears prick up when Corning says that its chips will test faster for more DNA and cheaper than any current products.
How do biochips work?
To understand biochips, all you need to know is high school biology. DNA is two winding strings -- the famous double helix. Each string is a sequence of the same four nucleotides (A, T, G and C), called bases. These four appear in different patterns over and over. Just like Velcro, two strings bind by matching parts: A always bonds with T, and G with C, and reverse. This binding is called base pairing, and here's an example:
string one pairs with
base sequence these bases
A --------- T
A --------- T
G --------- C
C --------- G
T --------- A
Probes are placed on the biochips, which are usually glass or nylon. The probes contain known DNA base sequences, such as the one on the left in this diagram above. You can then run unknown DNA samples over, through or on those DNA sequences. The known sequence on the chip may, as above, bind to its complementary base pair sequence. If the complementary sequence isn't present, of course it won't.
You must use really good gene libraries to put your DNA on the chip (witness alliances between Motorola and Incyte Genomics for the latter's library). And then you need the right equipment for analysis, such as Rosetta Inpharmatics' (Nasdaq: RSTA) or other companies' gene expression software. Then your chip tells you what DNA you have, and how much. This helps you know where the gene is found and what it does.
Multiply this by hundreds and thousands on one chip, and you get the idea. Good-bye, one gene and one experiment. Hello, thousands more accurate testing for genes for eventual treatments and drugs -- and more quickly.
The implications are huge
"Sure," you say, "I can see the money in lab testing for genes and proteins for drugs. But $1 billion in five years, divided among all these players?"
The biochip makers are thinking bigger, like diagnostics. Imagine cheaper, faster, more accurate testing in your doctor's office. Or, how about the privacy of your home? And what about using DNA and semiconductor technology in the computer chip industry? That research is happening at old and new era technology companies alike right now. (Uh-oh, the biologists and physicists are actually talking to each other!) This is how today's $250 million a year becomes Corning's estimate of $1 billion and beyond. That's why the big folks want in.
Who will win?
BioFools will be watching this market, trying to understand the differing technologies and who is positioned best to win the prize of $1 billion or more. But there are too many uncertainties now to pick a winner, except to say that small devices to test for DNA and proteins will be more and more a part of our lives. As much as Corningware!
Your Turn:
Good news for Corning? Sound off on the Corning discussion board. What does it mean for the biochip picture? Talk it over on the biotechnology discussion board or the Affymetrix board -- with lots of folks who can help us understand this stuff.
Related Links:
Corning to Enter Fast-Growing Market, 9/12/00
Corning Turns in Strong Q2, Breakfast News, 7/17/00
Agilent Technologies Begins Volume Shipments, 9/12/00
More Biotech Rule Breakers? Rule Breaker Portfolio, 9/13/00
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