Competition
Compared to fields such as telecom or wireless, there is little significant competition within the pharmacogenomics field. Only a handful of companies in the world have high-throughput genotyping capabilities (25,000 genotypes per day
or greater). In addition, data analysis represents a significant barrier to entering the field for many of these companies. In part, this is because doctoral level mathematicians and geneticists are necessary to build the
information tools necessary to conduct this type of research. Because of the esoteric nature of the field, high cost of equipment and intellectual property, and limited personnel, there are only a handful of companies in the world that
perform pharmacogenomics research and development. Most of these companies practice SNP profiling to accelerate gene discovery and product evaluation for pharmaceutical partners (i.e. studying experimental drugs). In contrast, we focus on drugs with existing markets, and existing consumer genomics markets.
We are aware of only a few other companies whose goals resemble ours. About ten pharmaceutical companies are engaged in the pharmacogenomic field. Few are devoted to complex trait determination through SNP profiling; most are focused on single gene disorders and phenotypes.
Some of the more sophisticated players in the pharmaceutical industry include Curagen (which has had success with Type II diabetes), Millennium (which has had success with arteriosclerosis and heart disease), and Warner-Lambert,
GenSet, Parke Davis and Glaxo Wellcome, which have had success with various drug interactivity traits. There are over 1,000 drugs with adverse events or variable efficacy in the Physicians Desk Reference. Since a pharmacogenomics drug study
costs millions of dollars, and since most of the handful of companies with expertise in this field are focused on experimental drugs (not drugs already on the market and present in the Physicians Desk Reference), the Company believes
that the competition landscape is favorable.
20
Most DNA testing facilities in the forensics sector focus on STR matching or paternity determination using the STR technique. These are LabCorp, the market leader, IdentiGene Corp., ReliaGene Corp., LifeCodes Corp., GeneLex Corp., GeneScreen Corp. the Bode Technology Group and DNA Identification Services. None of these companies targets their services for other than the STR matching or paternity market, and none could be considered a research and development or pharmacogenomics company. Non-commercial leaders in the field of
DNA testing include the Armed Forces DNA Identification Laboratory (AFDIL), the FBI Laboratory and the Lawrence Livermore National Laboratory.
There is little current competition in the initial niches that DNAPrint has selected to compete. At present DNAPrint is the only company in the world with IP for operating Admixture Mapping screens, and DNAPrint believes that the use
of AIMs is crucial for the development of tests for complex, common traits (such as drug response) that meet expected clinical performance criteria.
All but one of the products in the Company's pipeline has negligible competition that the Company knows of at this time. No other company has presented or discussed physical profiling forensics products. Indeed, no other company that we are aware of has demonstrated it has mastered the mathematical
methods necessary to develop such products. The same applies, though to a lesser extent, with the Company's Taxol chemopredictive product. The remaining candidate product, STATNOME, has only one known genomics company competitor,
Gennaissance. It is unknown if the competition's product will compete directly with STATNOME or if the products will participate in separate niches. Based on recent reports, Gennaissance Pharmaceuticals has identified markers of drug
response and is conducting clinical trials related to Statin drugs, which would place it in the lead position in this niche market. The impact of this competitive product to STATNOME is unclear based on the early reports from Gennaissance. The classifier or drug response market for Statins is potentially
very large and may have several sub-niches that allow multiple companies to flourish. In this case, given the different approaches used (Admixture mapping plus candidate gene for the Company, versus candidate gene for Gennaissance) it
is unlikely that the genome positions between Gennaissance's and DNAPrint's patents overlap perfectly. For example, Gennaissance has never discussed adverse events in any of its press releases or meeting presentations, but DNAPrint's
test is able to predict adverse hepatocellular response. The most significant market opportunity related to Statins is from market expansion to prophylaxis, and as previously mentioned, to do this a test must be able to predict adverse events accurately. Thus for the prophylaxis market, management believes
DNAPrint's Statin product is in the lead.
Each of the competitor's products may provide new, unique and independent information. If the Gennaissance product is successful, it may become the market leader and diminish the projected market penetration of STATNOME. As STATNOME is one of the more distant products under development by DNAPrint, the impact of
21
this known competition on the Company is limited. The Company intends to adjust forecasts as new information is available that suggests a material change is apparent.
The completed development of DNAPrint's classifier products, RETINOME, RETINOME-HA, AncestrybyDNA 2.0, OVANOME, STATNOME and others will also allow launches of Company products into new molecular diagnostics market niches.
Management believes DNAPrint is unrivaled in offering to collaborating pharmaceutical companies the opportunity to use the power of population genetic structure to identify what it is that makes their customers respond differently to their drugs.
No competition to OVANOME has been identified to date. Bristol Myers Squibb makes Taxol and has teamed up with Millennium Pharmaceuticals to use DNA chips to predict individual tumor responses to Taxol based on an analysis of gene
expression. This particular project is more appropriate for patient response during later courses of chemotherapy, after a tumor has had a chance to evolve resistance; in other words, when response is likely a function of tumor genetics not pharmacokinetics. In contrast, the Company's work is on first-line response to Taxol only - that is, DNAPrint is looking at the somatic genetics of patients with chemo-naive tumors in which response is mostly a function of pharmocokinetics rather than tumor genetics. Thus, the two companies are developing two separate kits, but the kits will offer non-redundant and only
partially overlapping information., In addition, ours would be the first to be used since it is for prediction of first-line chemotherapy (first treatment). Thus, DNAP would expect that if the Millennium test is ultimately sold to patients, it would be to patients that have already purchased an OVANOME test.
Other companies, such as Orchid and Gennaissance, are beginning to introduce SNP based tests for human identity testing. These tests are engineered to replace STR tests, and their advantage includes a lower cost without a significant reduction in accuracy. None of these tests, however, are useful for physical profiling or imparting any phenotype information, like those of DNAPrint. DNAPrint believes its forensics tests for physical profiling are the worlds' first - and the Company's patents help to ensure the Company's potential
market position.
