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Supreme Court ruling on genes could boost biotech

A Supreme Court decision Thursday barring patents on human genes will likely do little – if any – harm to biotech companies that research and market tests for genetic abnormalities. That's because the long-anticipated Supreme Court decision upholds patents on so-called cDNA, or complementary DNA: a synthetically produced form of genetic material that can also be tested for abnormalities. The d

A Supreme Court decision Thursday barring patents on human genes will likely do little – if any – harm to biotech companies that research and market tests for genetic abnormalities.

That's because the long-anticipated Supreme Court decision upholds patents on so-called cDNA, or complementary DNA: a synthetically produced form of genetic material that can also be tested for abnormalities.

The defendant, Salt Lake City-based Myriad Genetics, noted that 75 percent of its business, from BRCA analysis tests that screen for hereditary breast and ovarian cancer, remains protected by patents that were not struck down by the Supreme Court decision written by Justice Clarence Thomas.

(Read More:Jolie's Decision Boosts BRCA Test-Maker Myriad)

"This could have had a lot of broad and really unintended consequences if all the patents had gone away," said Doug Schenkel, who analyzes biotech companies for Cowen. "Potentially Monsanto and some of their peers could have been affected if all of their [DNA-based] patents had gone."

"Given you have this mixed outcome, there may be no impact" on the entire biotech sector from the Supreme Court decision, Schenkel said. "And if there is an impact, it's not going to be as clear an impact as if you had thrown out all these patents."

Penn State law professor Eileen Kane, who has a Ph.D. in molecular biology, said that companies who rely on cDNA should view this as a good decision.

But of companies whose business is based on tests derived from isolating naturally-occurring DNA, Kane said: "Their business models are in question."

(Read More: Australian Court Backs Human Gene Patents)

Kane said the high court decision would encourage research, which could lead to more options for tests.

Les Funtleyder, healthcare strategist for Poliwogg, an entrepreneurial finance firm, agreed.

"We actually like the ruling because it's going to allow smaller companies and scientists to develop new tests without fear of reprisal from monopoly,” Funtleyder said. “Ultimately those will find their way into commercial use and be better for most companies."

"To the extent that that limitation is off, that should allow for greater innovation," Funtleyder said. "It becomes an innovation risk and a business risk, instead of a legal risk."

But Matthew Gibson, a patent lawyer in the biotech industry group of the Oklahoma firm McAfee & Taft, was less enthusiastic.

"If it's 'free game' and there's no exclusivity from a patent standpoint, I think at the end that's going to benefit the bigger company," Gibson said.

"It's really going to hurt the small companies," Gibson said, noting the entry costs are tougher for smaller firms.