Jeff Fischer and Tom Jacobs recently interviewed Dr. William Haseltine, founder and CEO of the Rule Breaker Portfolio holding, Human Genome Sciences (Nasdaq: HGSI). Yesterday, in part one, we talked about the company's strong financial position and current business strategy. Today, we bat around the number of genes in the genome, and Dr. Haseltine names the biotech companies he admires most and shares how immortality could be possible.

The following is the edited transcript.   

Dr. Haseltine: I divide the knowledge of genes into two categories. Knowledge of what a gene or a protein is -- that includes most of everything that people call genomics and proteomics -- and knowledge of what they do. Knowledge of what it is includes knowledge of its sequence, knowledge of where it is made, knowledge of how it changes in health and disease, knowledge of what the protein may interact with. Those don't describe what it does, those describe what it is.

In order to understand its function relative to medicine, you've got to do an experiment.You've got to determine a living system. I think that investors can draw a clean, bright line between companies that do biology, and those that don't. Biology is by and large a messy business, as we all remember from high school biology. If you are going to understand the function of a gene, you've got to do the biology. If you don't, you won't fully understand the function and the potential medical utility. There will be some cases where you can just by its sequence, but those are much fewer...

Tom Jacobs: Dr. Haseltine, is that why you told The New York Times a few weeks ago that gene sequencing is probably the worst way you know to find genes?

Dr. Haseltine: No. I said genome sequencing is the worst way I know.

Tom: You're right [looking at the quote in the paper, laughing]. I misspoke.

Dr. Haseltine: Genome sequencing. And the reason for that is, the genome is, as we now suspect -- less than two or three percent of its total mass calls for parts of genes that make proteins. So, what can you do with a clean gene sequence? And let me say most of the gene sequences are not so clean, so it's even harder, but let's say it's clean. You can find a long open reading frame, an area that might make a protein. But you don't know if that's a gene, because computers predict with the same frequency long open reading frames where genes exist as they do where they don't exist, so that doesn't tell you whether the gene is there... Secondly, if you find the wrong open reading frame and it's not identical to the messenger RNA, then you don't know if it's a gene, and you don't know where its missing pieces are either.

It is so bad that the people who use it have to be very cautious in identifying what is a gene and what isn't, and the correct description of that work is to say that the genome sequencing has allowed us to locate on the chromosome 85% of known genes, which is about 7,000, according to them. It allows us to speculate on the existence of another 20,000, about, but we can't tell you they're really genes. We don't know if they're ever used to make messenger RNA, we don't know where they're made, etc., etc. So it doesn't tell you very much. On the contrary, if you have a messenger RNA, you know it's made, you know the proteins it's made, you can find out where it's made in the body, and you can, if you have full data, make a protein and find out what it does.

Tom:  Is one of the reasons there is a lot of confusion over the number of genes we have due to the media throwing around the term "gene" when they really mean gene transcript?

Dr. Haseltine: I don't think so. When I say gene, I mean what they mean -- just gene. The region of a human chromosome that can give rise to one or more functional RNA or protein entities.

Tom: So with all the ballyhoo of the human genome project the last few weeks, when they say they have found 35,000 or 40,000 genes, what they really mean is protein coding genes?

Dr. Haseltine: Functional RNA, or protein coding regions, and it is possible that each protein coding region can give rise to one or more versions of protein.

Tom: In which case we may have over 100,000...

Dr. Haseltine: But that isn't where I get my 100,000. They've miscounted. There are many thousands of genes that we know make proteins that are not accounted for by their analysis.

Tom: How do you know that?

Dr. Haseltine: Because we've made the proteins.

Tom: So you stand by the fact that your number [of genes] is much larger and different [than the 30,000 to 40,000 estimated by the International Human Genome Sequencing Consortium and Celera Genomics (NYSE: CRA)]?

Dr. Haseltine: It's much larger. We have found many thousands of proteins. We've actually made the proteins from genes which they don't even annotate.

Jeff Fischer: So what value would you place on Celera's database?

Dr. Haseltine: I don't comment on other companies in that fashion.

Jeff: Will you name the biotech companies that you admire most?

Dr. Haseltine: I think that Affymetrix (Nasdaq: AFFX) is a successful business, but not in our business at all. It's an interesting company because they've generated healthy revenue from a service model. I don't think they'll ever be wildly profitable, but it's a company that I admire for their imagination and execution. I think that in terms of other companies, of course, we aspire some day to be a company like Amgen (Nasdaq: AMGN). We hope if we reach their status, we will have more drugs in our pipeline than they do, but you certainly can't quarrel with their success. We believe the scientists at Genentech (NYSE: DNA) are as good as it gets in terms of understanding how to bring protein and antibody drugs from the laboratory to the patient, and they've demonstrated to us it can be done and it can be done routinely. Those are companies that I have enormous respect for.

Jeff: Can you compare your business to that of Millennium Pharmaceuticals (Nasdaq: MLNM)?

Dr. Haseltine: Well, Millennium is a more complex business model than ours. They have invested primarily in small molecule discovery, not protein and antibody, although they have some efforts in that area, but certainly they're a fine company. I think they're the only one with a comparable market cap to ours, and they're the one we're most often compared to, but I think that if people get to know us in detail they'll see that in broad outline we're similar, but in detail we're very, very different.

Jeff:  Let's move to a lightning round of questions. One Fool reader is interested in an update on VEGF-2, which is on hold in clinical trials. When will the drug's trial resume?

Dr. Haseltine:: The trial is still on clinical hold. The company, Vascular Genetics Inc.[currently partnering with Human Genome Sciences], is working mightily in many ways to get it off hold, and I wouldn't predict when that'll happen, but I wouldn't count it out.

Jeff: Can you give your latest estimate regarding your drug pipeline expansion?

Dr. Haseltine: We hope to have three to five new compounds in human clinical trials this year.

Tom: This year! That's about equal to the number you currently have.

Dr. Haseltine: That's true. We currently have four drugs in clinical trials, five if you count VEGF-2, which is on clinical hold. So, we're moving.

Tom: To say the least. Three to five this year...

Dr. Haseltine: Let me point out, in contrast to some other companies, so far we have made our projections.  We've made them. They only count if we live up to them.

Jeff: Is it too soon to give visibility as to your pipeline in 2002?

Dr. Haseltine: We'd rather wait a while before we do that.

Jeff: Okay. We have time for one more question. I've read many of your articles and speeches where you address immortality. So -- here's a difficult task for you -- in a few sentences, share your vision for how immortality is achievable through science.

Dr. Haseltine: Well, immortality has been a dream for humanity for as long as people have been conscious. We ascribe that dream to God and other figures in our history. But we did not believe until recently, except in myth, that it might be ours. I believe our generation is the first to be able to map a possible route to individual immortality. The first thing to say is that the real revelation that this may be possible comes through the work on animal cloning. The real significance of cloning is not that you can clone another entity that has your genetic makeup. Although that's interesting enough, cloning ultimately, I believe, will mainly be seen as an alternative reproductive choice.

Jeff: As long we don't clone Tom, that's okay.

Dr. Haseltine:  It won't be Tom. He'll be a baby. He'll be raised new. Now, I don't know if you want to raise a baby Tom. And he won't even be Tom, he may have a completely different personality. You know, twins, even though they have the same genes, have very different personalities. But what the [cloning] experiments have shown is that you can take an adult cell and move it backwards in time in two senses. It can become a younger version of itself. In fact, a baby. Any cell in your body has the potential to move back in time. And secondly, there is the potential to recreate almost any tissue that exists.

Tom: You're talking about stem cells.

Dr. Haseltine: Stem cells. We can take any adult cell we make and move it backwards in time so it becomes equivalent to a multi-potent stem cell, and is younger. If that's the case, we can now imagine that we can reseed the body with our own cells that are made more potent and younger, so we can repopulate the body. So, how do we view our ability to replace our cells on a routine basis?

We go through a remarkable process, that we don't really think about, called transubstantiation. If you take the chemicals that you are today, they are literally a different substance from the chemicals they were ten years ago, and yet your identity remains the same. If you take your cells, you do not have the same cells you had ten years ago. They are all different. They have been replaced, and their complements have been replaced. Yet you are the same. It is your stem cells that do that. When the clock winds down on your stem cells, they don't replace the body as efficiently, and therefore you age. If we can give you a resupply of those stem cells, we can keep you young as a mature adult, I think forever. We should remember that the fundamental aspect of life itself is immortality. DNA is a molecule that's been on this earth for about 3.9 billion years. It is immortal in that sense -- as immortal as our planet, at any rate. And therefore, our task is to couple individual immortality to the essential immortality of life itself, and I believe through stem cell replacement, we have a clear vision of how to achieve it. Whether we will do it in the next 100 years or beyond one cannot predict. But we now know the potential is there and we believe it can be achieved.

Jeff and Tom: Thank you, Dr. Haseltine.

Dr. Haseltine: Thank you for your interest. I hope I've been helpful.

Jeff Fischer (TMF Jeff) wonders what he'd do with endless time, but he'd surely succeed at long-term investing -- eventually. He owns shares of Genentech. Tom Jacobs (TMF Tom9) rejoices at the sights of old friends and spring bulbs. At press time, he owned shares in Celera Genomics and Human Genome Sciences. To see his other holdings, view his profile, and check out The Motley Fool's disclosure policy.