First off, Happy Monday! We Rule Breakers defy the anti-Monday mentality. We scoff at Mondays and smile -- you can't hurt me! Bring on the week. We're made of sterner stuff, and each week is another opportunity to explore potential Rule-Breaking businesses -- like biochips.

Only two more days -- until Wednesday night -- to register for the Fool's Biotechnology Investing Online Seminar: Five weeks packed with useful tools to help you pick the winners and losers among companies using biotechnology to revolutionize life science. Fools and some special guest faculty will e-mail lessons right to your mailbox.

Biochips
Thanks to Celera Genomics (NYSE: CRA), the Human Genome Project, and others, we now have information on 100,000-120,000 genes with 3.2 billion letters (A, C, T, and G over and over). We have the raw data. What does it mean?

Biochips help you find out. They determine what gene you have in a given tissue and, eventually, what it does. Is this gene turned on or off in a diseased liver cell? Breast cancer cell? When? Researchers call this gene expression. If you can find how a gene expresses itself in different kinds of cells, maybe you can determine its function. The hope, then, is to be able to design more effective treatments based on that detailed genetic information.

With such large amounts of raw genetic data, you can imagine that gene expression and gene function are complicated and require complex hardware and software. In the past, researchers often proceeded painstakingly with one gene at a time, for years. Today, advances in computing and in biochips -- DNA arrays, microarrays, gene chips, or probe arrays -- allow testing for larger numbers of genes at a time.

The chips -- most often glass slides -- do this through a process called hybridization, which Wired Magazine's Brian Alexander likes to explain as a zipper. The chips contain probes with one unzipped half of genetic sequences. When exposed to more DNA, they zip up with their complementary half if it's present. With software, you can analyze how much zipping there is.

Top of the biotech class
You can get more technical than that ("we're really testing for mRNA, and maybe we really want to test for proteins, and which companies do it?"), and fellow Fools will help you out.

The top of the Fool biotech class hangs out on the Biotechnology, ElricSeven's Research Corner, Gene Phool Portfolio, and Proteomics discussion boards, as well as the boards for any number of companies that use biotech. Bart Janssen (who contributed today's headline) and Greg Carlin are two knowledgeable Fool community members you'll find there. To prepare for today and tomorrow, I read Bart Janssen's What the Heck is Genomics? and Bart and Greg Carlin's Genomics Picks and Shovels several times (both are available from Soapbox.com). These reports give more in-depth treatment to biochips and other biotechnology advances that are powering drug development advances.

The biochip players
Affymetrix (Nasdaq: AFFX) is the leader in high-throughput chips, which it makes with photolithography and masks -- the same technology used to make semiconductors. But, it has competition, and there are lawsuits.

Affymetrix claims that its key biochip intellectual property (IP) -- patents -- trumps or doesn't infringe on patents of Hyseq (Nasdaq: HYSQ), Incyte Genomics (Nasdaq: INCY), Applied Biosystems (NYSE: PEB), Gene Logic (Nasdaq: GLGC), and Oxford Gene Technology in the U.K. Bart and Greg cover the lawsuits in their Soapbox report. Affymetrix asserts very broad patent coverage over biochips, and this is a major cause of uncertainty for investors. More on that tomorrow.

Hungry for these potential growth markets, powerhouses Corning (NYSE: GLW), Motorola (NYSE: MOT), and Agilent Technologies (NYSE: A) want pieces of the action. Motorola partners with Incyte Genomics, and Agilent Technologies with Rosetta Inpharmatics (Nasdaq: RSTA). Corning wants to be number one or two in what it estimates will be a $1 billion market in five years.

Are biochips important and emerging?
Right now, at $2,000 a pop, Affymetrix's GeneChips are too pricey (or spendy, as we said in Minnesota) for anyone but biotechs such as Affy's biggest customer, Gene Logic, or big drug makers like Merck (NYSE: MRK) or Pfizer (NYSE: PFE). While companies using biotechnology could account for a $1 billion market, is potential there for a really important -- humongous -- market?

The competition could eat up $1 billion easily, and there are going to be more-affordable alternatives than, say, the Affy chip. I'm told smaller companies can make their own slides if they don't need industrial strength, high-throughput, volume. And, they can outsource to Rosetta Inpharmatics, which partners with Agilent Technologies for custom-designed chips and analysis.

Nah. I'm not turned on by the market for chips for gene expression and gene function research alone.

But, Bart, Greg, and others point the way to more potential -- diagnostics. What if doctors' offices could use more-specific, affordable, targeted chips to test patients? The result could be earlier detection and prevention. And, it's not far from there to see consumer use.

Now we're talking Rule Breaking industry.

Break out the biochips and soda, because tomorrow we'll answer whether there is a top dog and first mover.

Fool Forward!

--Tom Jacobs, TMF Tom9 on the discussion boards

Your turn:
Do you agree that biochip making is an important and emerging industry? Let us know on the Rule Breaker Strategies board.