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Hi Fushi,

Interesting post, but I'm curious, in light of your comments regarding the value of unvalidated targets (with which I totally agree), what you think about the original theme of the thread: whether Celera should take cash for information now or introduce more royalties into the equation. Wot and other argue that since the real money is in the final drug product (quite true), Celera should be looking get more royalty bearing agreements. I argue that cash up-front is much better because of the huge amount of time before Celera will see a dime of royalties.

If I read your comments correctly, Celera has a boatload of essentially unvalidated targets. I think your HGSI/SKB example illustrates the point well: a boatload of unvalidated targets may end up yielding a mere dinghy of useful, validated leads. I totally agree. I believe (merely MHO) when all is said and done, this first wave of genomics/bioinformatics will essentially be a "low margin" discovery platform. Reams of data yielding much fewer drugs per target than previous platforms. That's not all bad, since the volume of data is entire orders of magnitude greater than before, so "low margins" are just fine and dandy. Because of this, I think Celera, by selling subscriptions and slowly ramping up its own drug discovery program, is taking the right approach. Here's why:

Subscribers are being overcharged

Currently, big pharma subscribers are paying several million dollars per year, for several years, on a non-exclusive basis. Now if we assume you are correct in that unvalidated targets are worth MUCH less than validated targets (and I'm correct in assuming that first generation genomics targets are evn more likely to be "low margin") then, considering the time it will take to bring an unvalidated target to market, Celera is ripping these guys off (well, that's a little extreme). There's absolutely no guarantee any of this data will yield blockbuster drugs and yet they can charge tens of millions of dollars for it on a non-exclusive basis. Why does pharma buy it? Because several million a year is pocket change for a lot of these companies. Why risk missing out? Suckers.;-)

I realize I'm taking an extreme stance, but it's only to make a point: Celera is making a lot of money from their subscribers. The big question is can they continue to sign companies up at a rate sufficient to fund expansion of an internal drug discovery platform. Here we may have a problem. The subscription rate has been, for most of us, disappointing. Either Celera is going to have to start validating targets (or annotating or value-adding) to attract more customers, or they are going to have to enter into significant collaborations. I think they're going to do both.

Either way, cash now is crucial. If all the money is in drugs (wasn't Haseltine saying this from day one?), then waiting for royalties, at the expense of licensing fees, could be a fatal mistake. Celera needs every dollar it can squeeze out of their database to ramp up their own discovery platform. Let's keep charging those guys millions to fund our development. Beautiful!

-S

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