Gene Logic Inc.(GLGC) AT 1.64

Fundamental: 6
Chart: 8

Oct 22, 2006

Gene Logic, Inc. provides drug discovery and development solutions to pharmaceutical and biotechnology companies worldwide. It operates in three segments: Genomics, Preclinical, and Drug Repositioning. The Genomics segment consists of proprietary reference gene expression and toxicogenomics databases, toxicogenomics services, software tools, microarray data generation and analysis, and other professional services. These services enable customers to discover and prioritize drug targets, identify biomarkers, predict toxicity and understand the mechanism of toxicity, and obtain insights into the efficacy of specific compounds.

GLGC is a cash rich company with about $1.87 cash/share and no debt at the moment. Back in late June, GLGC dropped from $ 2.0 to $ 1.34 after the company said that revenue at its genomics division during the second quarter and full year will be significantly lower than expected. What's more, the company said lower-than-expected revenue would hurt operating results at the division for the "foreseeable future."

In August, GLGC had entered into an agreement with the United States Food and Drug Administration ("FDA") to provide the FDA with access to certain of Gene Logic's genomics data and software, including:

• An extensive collection of toxicogenomics and rat classical toxicology data from the ToxExpress® System including hundreds of time and dose studies.
• Gene Expression data from thousands of normal human tissue samples from the BioExpress® System for comparative analyses.
• The powerful Genesis Enterprise System® 3.0 software for data management and analysis and the GX(TM) Connect 3.0 software for uploading third-party data into the Genesis Enterprise System.

The FDA agreement does not necessary bring in revenue for GLGC, but proving its leadership in the Genomics space.

Last week, GLGC entered into a drug repositioning and development agreement with Eli Lilly and Company to seek alternative development paths for multiple Lilly drug candidates. All of these drug candidates were discontinued or de-prioritized in clinical trials for reasons other than safety.

The agreement provides for milestones and royalties similar to those paid for development-stage in-licensing deals, discounted to account for Lilly's contribution as the originator of the compound. The agreement also provides Gene Logic the option to receive an exclusive license to any drug candidate that Lilly chooses not to pursue, in which case Lilly would receive success-based milestone and royalty payments.

The partnership with Eli Lilly will bring a long term goal for GLGC to generate revenue and a powerful catalyst to reverse its current downtrend. From the chart, GLGC is in the perfect position to fill the from here to $2.00 in the short term. As any additional information on the drugs acquiring from Eli Lilly, it will likely to trade back higher to $3.00 for the long term, that is about 1 year. Use a stop at about $1.46 on GLGC.

Fair Disclosure: Do not hold position.