To exit what is now an overcrowded and competitive market, on October 25 genomics pioneer Incyte Genomics (Palo Alto, CA) announced that it would disband its custom genomics and microarray businesses, laying off around 36% of its staff. However, the new slimmer Incyte appears to be loath to enter the drug discovery arena—a path taken by most of its direct competitors—preferring to focus on gene-database subscription and to leverage its intellectual property. Although this is a smart move for the short term, analysts question whether Incyte can convince shareholders of the long-term value of its “virtual” drug discovery business, which is dependent on royalties from the gene-derived medicines brought to market by others.
Incyte will close genomics operations in Fremont (CA) and St. Louis (MO) and discontinue a SNP sequencing project in Cambridge (UK) by the end of the year. The restructuring is a personal blow to 400 of Incyte's 1,000 employees who stand to lose their jobs, but analysts say aggressive pruning was needed. To date, Incyte has juggled selling several products to customers (including access to its gene databases) and customized genomics services including microarrays, publicly available clones, transgenics and contract sequencing. However, revenue from its custom genomics business (around $12.2 million in the third quarter this year) was essentially flat, and, in a statement, Roy Whitfield, Incyte's CEO, says that “increasing competition and margin erosion” within this area was draining company resources.
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