- The Washington Times - Monday, July 17, 2000

Public interest in genomics companies has increased so much that a group of investors this spring started a mutual fund strictly for such stocks.

GenomicsFund of Gaithersburg is made up of shares from 21 companies that research human genes, their functions and uses.

The fund "fills an unmet need of investors," said Steven T. Newby, chief investment officer with GenomicsFund. "They want to invest in genomics, they've heard about it and believe it will change the world we live in. But they don't know how to invest in it."

Typically, investment funds include a gamut of industry players from biotechnology and pharmaceutical companies to HMOs and hospitals. GenomicsFund, with $17 million in assets, is the first mutual fund in the world that strictly focuses on genomics companies.

The hype over genetic research reached a turning point June 26, when Celera Genomics of Rockville and the Human Genome Project, a federally funded international consortium of scientists, jointly announced the completion of a map of a single person's genetic makeup.

The genetic map lays out in sequence the 3.12 billion pairs of chemicals that make up the DNA in each human cell. These pairs make up the human genes, which carry the instructions for all the body's processes.

The completion of the biological map has been called one of the most significant events in medical history. For genomics companies, it is a potential gold mine because knowing how genes are sequenced will help scientists discover new drugs and treatments for diseases.

While history unfolds and new drugs are in progress, investors have equal chances of making or losing money from backing genomics companies.

"This is a higher risk fund than most that are available right now," said Mr. Newby. "It's going to be a very volatile fund for years to come."

To survive the ride, people considering investing in GenomicsFund should have at least $5,000, and really "believe there is a tremendous future in genomics," Mr. Newby said.

That means the fund is definitely not for just anybody, said Emily Hall, an analyst who tracks biotechnology and genomics stocks at Chicago-based Morningstar Inc.

To illustrate GenomicsFund's volatile nature, Ms. Hall described its ups and downs over the past four months: In March the fund lost 33.6 percent. In May it gained just under 1 percent. In April it lost again another 7 percent. But then in June it gained a dramatic 48.6 percent.

"But by then you had already lost a third of your investment and might have been tempted to leave the fund. The hit was pretty brutal, but then the fund went up again," Ms. Hall said. "People just need to be aware that it's going to be intensely volatile. It's already proved that."

The fund's roller coaster nature reflects the insecurity in genomics stocks. In the end of February and early March, biotechnology and genomics stocks were well favored by investors and were skyrocketing. Celera, for example, reached its all-time high of $275 on Feb. 25. But by March 31, it was down to $92.13.

April began well for the stocks, but by the end of the month they were considerably lower. Gene Logic Inc. of Gaithersburg closed the first week at $41.31 and by the end of the month in the mid-$20s.

May dragged shares of genomics companies even lower: Celera slipped as low as $55, and Gene Logic fell to just under $19 by the end of the month. Celera closed Friday on the New York Stock Exchnage at $92.31, and Gene Logic closed on Nasdaq at $29.63.

The summer greeted the industry with the expectation of Celera's promise that it would announce the completion of the sequenced human genome. When the announcement came, the sector stocks surged again.

Human Genome Sciences Inc., of Rockville opened June in the low $100s, and closed the last week of the month at $133.38. It closed Friday on Nasdaq at $153.25.

The bottom line, Ms. Hall said, is that with a fund such as GenomicsFund, it's all about extremes.

"When the stocks go up a lot, the fund will do exceptionally well. But when it does down, it could be really, really uncomfortable."

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