Genetic Therapy Inc. has no products and no profits -- and the medical revolution that promised to turn genes into gold hasn't materialized quite yet.
Still, the company's stock has risen about 45 percent in less than two months -- to $20 a share Friday. And Genetic Therapy is touted as one of the handful of Maryland biotech companies with a real chance to strike it rich and to help transform the Interstate 270 corridor into the state's economic engine.
So what makes investors -- and state officials -- so confident in this little Gaithersburg company? As with many biotech companies, the answer lies partly in perception.
Recent, high-profile gene therapy experiments -- treating illnesses by inserting genes into a patient's cells -- have focused attention on this segment of the biotech industry. And that's spotlighting the Maryland company, which is believed to be closest to commercializing the technology, says Paul Boni, an analyst with Mehta and Isaly in New York.
But Genetic Therapy's recent success is based on more than the experimental treatment coming of age. Reports in medical journals and leaks from researchers have built anticipation that doctors at the National Institutes of Health, in collaboration with company scientists, will announce this summer some success in treating eight brain cancer patients.
And that could give the company its first commercial product -- as well as an entry into a niche market estimated at $330 million a year, according to analysts at First Boston.
In the future, doctors could cure a patient with a genetic disease by taking a bottle of genes off the shelf and administering a shot. The company is targeting many illnesses, from cystic fibrosis to cancer and AIDS.
Today, though, the technology is experimental and often requires a laborious process of extracting cells from a patient and growing them in the lab. Genetic Therapy makes the mechanism -- a sort of taxi service -- that transports the genes into the proper cells in the body.
Consider, for example, the first gene therapy trial, which started in September 1990 on two Ohio girls. The girls, born without functioning immune systems, were missing one gene, called the ADA gene.
To treat them, NIH researchers took white blood cells from the girls' bodies. Genetic Therapy then took a live virus, removed its genetic material and engineered it to carry a copy of the ADA gene. The revamped viruses, called vectors, were mixed with the girls' blood cells in the lab and transported the gene into their cells.
Doctors put the cells back into the girls' bodies with a transfusion. Until recently, that process had to be repeated every few months to replenish the white cells. But earlier this month, doctors tried for a permanent solution by returning genetically engineered stem cells from the girls' bone marrow to their bodies in hopes that those stem cells would continuously produce white blood cells with the ADA gene.
Treating cancer or cystic fibrosis with gene therapy is far less straightforward.
But if expectations are met, Genetic Therapy could have the first gene therapy product on the market -- and one of the first treatments for brain cancer, an almost always fatal disease that strikes about 30,000 people in the United States each year.
The company and researchers have generally kept the results quiet. But one doctor was quoted in the Journal of American Medicine as being encouraged by early results. If all goes well, analysts say, the company will be selling its product for brain cancer in 12 to 18 months.
But that would depend on the Food and Drug Administration giving extremely fast approval to the first gene therapy product, an event that Mr. Boni, the analyst, believes is unlikely.
Obtaining FDA approval to market the product in a year is a very optimistic scenario, says Genetic Therapy Chief Executive James Barrett Jr. But he doesn't expect the approval process to take as long as it might for some drugs, partly because the company is focusing on a vicious, incurable disease.
Meanwhile, the competition among biotech companies to develop gene therapy products has become fierce.
At least five other companies, many of them small and private, are developing gene therapies. California-based Somatix Therapy Corp. and Massachusetts-based Genzyme Corp., which are developing therapies for cystic fibrosis and cancer, are the leading contenders. Some major pharmaceutical companies might also be working on gene therapy, even though they have not publicly acknowledged the programs.
Some analysts fear that an underdog contender may sprint ahead of Genetic Therapy in the race to dominate the market for gene therapy products.
The dominant issue in the competition is the vectors' safety and efficiency. Over the past five years, scientists have had to prove the safety of the vectors that Genetic Therapy makes. Still, some researchers believe the future of gene therapy lies in the creation of a transport system that isn't dependent on live viruses and is more efficient at placing the gene in cells and in getting those cells to produce a protein needed for treatment.
That has led some of Genetic Therapy's competitors to spend years on research to create a vector that doesn't use live viruses. If they are successful, could they leave Genetic Therapy the dust in a few years?
"My concern is that [Genetic Therapy is] getting caught up in something that may not prove fruitful," Mr. Boni said.
Dr. Barrett says Genetic Therapy has devoted some research to developing non-viral vectors, but the company is unwilling to change its entire research program based on an unproven technology.
"Absent data, fantasy reigns," he said.
Another worry for the company: Its stock price has risen so quickly in the past several months that it might not reflect reality. "Based on publicly available information, there isn't a justification for $20 a share," Mr. Boni said.
For those who purchased the stock at $8 or $10 a share, he recommends cashing in. He acknowledges that "if things are as good for gene therapy as we hope it can be," then the stock is not overpriced. But, he cautions, "If things go badly, there is a long way to fall."
On the other hand, Brandon Fradd of San Francisco-based Montgomery Securities, which has helped underwrite some of the company's offerings, recommends holding the stock. "It looks fully valued for the near term. I think the [brain cancer] trials will go well."
Mr. Fradd is optimistic about the company's position and its managers, including Dr. Barrett, a former president of the clinical laboratory at SmithKline until 1982. He was the chief executive of Life Technologies Inc., another Maryland biotech company, before joining Genetic Therapy in 1987, a year after it was formed.
Genetic Therapy boasts some other strengths: Its major scientific collaborator is W. French Anderson, a gene therapy guru who recently left NIH for the University of Southern California. It has money to burn -- $50 million in cash -- after having just completed a secondary public offering early this year.
Currently, it is burning about $15 million a year on research. Revenues for the past quarter were $1.4 million, primarily from payments from New Jersey-based Sandoz Pharmaceutical Corp., a major company that has a collaborative research agreement with Genetic Therapy. Genetic Therapy lost $2 million, or 20 cents per share, in the quarter that ended March 31.
But the real test is likely to come in the next several years, as Genetic Therapy's technology is scrutinized in laboratories and in the FDA approval process.
The company, with research collaborators, will ask the NIH and FDA to approve a treatment for Gaucher's disease within a week. And it expects to start experimental studies on cystic fibrosis patients by the end of the year.
In all, Genetic Therapy will be participating in nearly half the gene therapy experiments approved in the United States.
If they work, commercial products -- and profits -- shouldn't be too far behind.