November 11, 2002.
Today, Hyseq (NASDAQ: HYSQ) and Variagenics (NASDAQ:
VGNX) announced plans to merge. The new company will combine Hyseq’s expertise in DNA sequencing and its nascent drug discovery program with Variagenics’ expertise in pharmacogenomics (correlating patient genetic variation with response to medicine). The combined company will also benefit from Hyseq’s strong management team (including Amgen founder George Rathmann) and Variagenics’ relatively strong cash position.
Hyseq was one of the first genomics companies, founded on its expertise in high-speed DNA sequencing. Like other genomics companies, Hyseq has seen its business plan fall out of favor this year. Hyseq, Incyte (NASDAQ:
INCY), Celera (NYSE:
CRA), and similar companies are all attempting to re-focus their business plans on drug discovery. While Celera probably has the financial resources for such a change, many smaller companies are struggling to get their drug discovery programs underway.
Variagenics has not been as aggressive as other pharmacogenomics companies at initiating high-profile clinical trials to discover optimal drug use based on patients’ genetic variation. Although Variagenics is pursuing genetic correlates of colorectal and other cancer chemotherapy response, other pharmacogenomic pursuits have overshadowed this effort. Genaissance’s (NASDAQ:
GNSC) large STRENGTH trial is identifying genetic variation that correlates with response to the cholesterol-lowering statins. Interleukin Genetics (NASDAQ:
ILGN) is analyzing response to rheumatoid arthritis drugs.
Although the combined company will have enough cash to fund current operations for two years, it will still lack the critical mass necessary to transition into a successful drug discovery company. Its best hopes may lie in developing a pharmacogenomics platform that facilitates both internal and external drug discovery efforts. The long-term feasibility of such a business plan is still unclear not only for Hyseq / Variagenics but also for other pharmacogenomics companies.
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