Celera Diagnostics Teleconference; Celera Diagnostics-Abbott Laboratories Strategic Alliance
- June 24, 2002
Thank you for joining Applera and Celera Diagnostics' management to discuss the strategic alliance announced yesterday afternoon between Celera Diagnostics and Abbott Laboratories.
Present today are Tony White, CEO of Applera; Dennis Winger, Applera's Chief Financial Officer; Kathy Ordoņez, president of Celera Diagnostics; Thomas White, chief scientific officer for Celera Diagnostics; and Mike Hunkapiller, president of Applied Biosystems.
During this call we will be making forward-looking statements about Celera Diagnostics, which is a 50/50 joint venture between Applera's Applied Biosystems Group and Celera Genomics Group. These forward-looking statements are subject to the risks and uncertainties that are referred to in yesterday's release and in Applera's filings with the Securities and Exchange Commission.
Tony White will be the first speaker this morning, followed by Kathy Ordoņez. The team will then take your questions. Please note that during this call the remarks prepared for this morning will be posted on the Investor Relations sections of the Applera, Applied Biosystems, and Celera Genomics web sites.
Tony, please begin.
Good morning. Late yesterday, we announced the execution of an agreement that forms the basis of a long-term strategic alliance between Abbott Laboratories and Celera Diagnostics to jointly develop and market new molecular diagnostic products. This agreement is an important step forward for Celera Diagnostics.
Over the past year, we carefully assessed options for developing a commercial infrastructure for our new diagnostic business, including building the necessary capabilities in-house or partnering. We held discussions with several major parties, and on balance, chose to work with Abbott. We believe this approach is sensible for our customers as well as for us.
Strategically, we expect the alliance to accelerate Celera Diagnostics' development and commercializion of new tests, to reduce risk, and to more quickly get Celera Diagnostics to critical mass as a major new diagnostics company.
This business partnership builds a very tangible bridge between gene-based research and new products beneficial to human health. With the combination of talent, resources, and intellectual property that are being joined, Celera Diagnostics can make contributions to diagnostic medicine and to shareholder value for the owners of Applied Biosystems and Celera Genomics.
Kathy will now provide more details about the alliance and the benefits it should bring to the molecular diagnostics market, Celera Diagnostics and our shareholders.
Thanks, Tony. Good morning.
We believe our new molecular diagnostic alliance with Abbott has the potential to contribute to the advancement of medicine by fueling discovery of new tests to detect, monitor, and characterize diseases and to utilize genetic information to select and optimize patient therapy. This collaboration also holds the promise of contributing significantly to the commercial success of both companies.
Through the alliance, Abbott and Celera Diagnostics will work together to discover novel genetic markers for disease, and to configure these and other known diagnostic markers into robust clinical tests to be provided to physicians and their patients through hospitals and clinical laboratories throughout the world. Initially, approximately 250 scientists and engineers from both companies will be dedicated to the effort. Celera Diagnostics will focus on discovery of new markers for disease and the development of test formats and genetic test reagent systems, while Abbott is expected to provide additional product development and systems integration expertise. Both companies will manufacture and register products developed by the alliance with the FDA and other regulatory bodies around the world.
Abbott will also contribute marketing, sales and distribution resources to ensure that the new products developed by the alliance reach their intended customers. Alliance products will typically be sold by Abbott's global diagnostic sales force of 2,500 people, and their extensive service and technical support network, in conjunction with those from Celera Diagnostics and Applied Biosystems, will service and support alliance products.
Abbott and Celera Diagnostics are logical partners in this endeavor, which is expected to provide many benefits to both parties and our customers. As one of the leading providers of nucleic acid tests for sexually transmitted diseases, Abbott has already established a strong position in molecular diagnostics. Our alliance with Abbott should better position Celera Diagnostics to participate in the $700 million molecular infectious disease testing market, where Abbott has access to important intellectual property, including rights for hepatitis C, the most rapidly growing sub-segment of this market.
The alliance will also benefit from other key intellectual property owned or licensed by Abbott, including patents for PCR, diagnostic assay markers, molecular beacons assay formats, and multiplexing techniques. Applera's PCR, DNA sequencing, and assay detection technologies, as well as Applied Biosystems' instruments, which have been a standard in molecular diagnostic laboratories since the inception of PCR and DNA sequencing, will further contribute to the alliance. It will also benefit from Celera Diagnostics' genetics discovery program, as well as our relationships and collaborations with key customers in this rapidly developing market.
Celera Diagnostics' ongoing discovery efforts involve disease association studies with hundreds, and in some studies, thousands of clinical case and control samples. We are working to incorporate discoveries of novel single nucleotide polymorphisms, or SNPs, obtained through the Applera Genome Initiative into our diagnostic discovery work. The Initiative, which involves the resequencing of nearly all genes from about 40 individuals, is progressing rapidly and we are discovering many novel functional SNPs. If we extrapolate from the data analyzed to date, we would predict the Initiative would identify tens of thousands of novel SNPs that impact the amount, stability or function of proteins associated with the relevant genes - thereby potentially doubling the number of diagnostically important SNPs contained in the current Celera and public SNP databases. These novel SNPs will be used in our disease association studies to identify "constellations of markers" which Celera Diagnostics - in concert with Abbott - will incorporate into new diagnostic tests.
A Joint Review Board, composed of three executives from each company, will manage the alliance. The alliance Joint Review Board has already identified over 20 joint development programs, including next-generation homogeneous molecular tests for infectious diseases and new discovery projects and product development efforts in cancer, cardiovascular disease, inflammation, and central nervous system disorders. These tests will focus on diagnosis, prevention and treatment selection for age-related diseases and in addressing women's health issues. In the future, our alliance is expected to be able to offer customers a unique combination of viral load and genotyping tests for HIV and hepatitis, allowing labs and physicians, along with the patients they support, access to critical information to both optimize therapy selections and to monitor a patient's progress resulting form those therapeutic decisions. The alliance combines work that is already ongoin g at Celera Diagnostics in Alameda, California and at Abbott Park in Illinois.
The alliance will not include the development or commercialization of products intended for the research or pharmaceutical markets, or Abbott's products acquired through its recent acquisition of Vysis. Protein discoveries made through the proteomics program at Celera Genomics that might have diagnostic immunochemistry applications are also not included in the alliance. Applied Biosystems' sequencing instruments, which are often used by clinical diagnostic laboratories, will continue to be sold and serviced exclusively by Applied Biosystems, with co-promotion support from Abbott. Other molecular diagnostics instruments developed by the alliance are expected to be sold through the Abbott sales force.
Current Celera Diagnostics products - the ViroSeq system for genotyping the HIV virus, cystic fibrosis analyte specific reagents, and reagents for HLA testing for tissue and organ transplantation, will become part of the alliance and begin to be sold by Abbott's sales force on October 1. End-user sales for these products in fiscal 2002, which ends June 30, will be about $10.5 million and are growing rapidly. Revenues generated through sales of Abbott's virology products - LCx viral load tests for HIV and hepatitis - will become part of the alliance on July 1 of this year. Other Abbott tests, including their market-leading LCx assays for STDs, will become part of the alliance on July 1, 2003.
Typically, Celera Diagnostics will transfer products it manufactures to Abbott at cost and Abbott will distribute these products along with those they manufacture for the alliance. In selected situations, Celera Diagnostics will sell to customers directly, aggregating additional revenues for the alliance. All expenses incurred by the alliance will be shared, as will profits or losses attributed to the collaboration.
Several months ago, Celera Diagnostics announced that it expects to reach profitability late in fiscal 2005 or sometime during fiscal 2006. We believe the alliance better positions Celera Diagnostics to meet this outlook, and that it adds substantial long-term value to our diagnostics enterprise for the benefit of our customers as well as Applied Biosystems and Celera Genomics shareholders.
Personally, I am very enthusiastic about our new alliance. The team at Celera Diagnostics has developed a strong relationship with colleagues at Abbott. By working together through our new alliance, we believe we have the opportunity to accomplish the objectives we defined when we created Celera Diagnostics - to transform medicine through the introduction of new actionable diagnostic products and to build a successful new business for Applera.
Now we would be happy to take your questions.
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