Possible setback for genetic medicine as deCODE Genetics faces bankruptcy

The impending financial demise of leading human genetics biotechnology company deCODE Genetics is seen as a direct blow to genetic medicine and ultimately signalling wider ramifications for the impact of the global financial crisis on the genomics industry as a whole. Chief executive Kari Stefansson announced, on Wednesday, that the Iceland-based company does not have the liquidity to continue trading beyond the second quarter of this year and made an earnings call. He described the company's position as 'in a tough spot' but remained optimistic that investors are lined up and following a restructuring of debt there will be 'a business...with spectacular potential'.

Professor Peter Donnelly, the director of the Wellcome Trust Centre for Human Genetics at the University of Oxford, attributed 'a huge number of discoveries in human genetics...probably more than any other academic group' to the company and lamented that 'it would be a big loss to the field' if it ceased. Stefansson agreed describing deCODE as the leading pioneer for the development and implementation of genetic diagnostic technologies: 'The ability to assess individual disease risk and response to treatment is at the heart of personalised medicine.' Daniel MacArthur, of the Genetic Future blog described deCODE's publication record as one that 'would be the envy of many large research institutes'.

The company has historically invested significantly in basic research discovering a number of genetic variations responsible for diseases including heart disease, diabetes and certain cancers, but announced it would now streamline its funding towards more profitable diagnostic research and developments, including its tests for prostate and breast cancer and the deCODEme personal genomics service. Stefansson predicted 2009 as the year in which financial markets will see DNA-based diagnostics companies profit.

Stefansson's optimism belies the 2008 company report reflecting a loss of more than $80 million USD - with only an estimated $4 million liquid assets and roughly $12 million deferred compensation owed. Stefansson did not blame the recent collapse of Iceland's banking system but noted the lack of Lehman's funding hit hard.

Some suggest that the company's financial difficulties are the result of growing investor fears that genetic research and development will not translate into lucrative business, no matter how much it advances medical understanding of the causes of common diseases. There are concerns that these companies will not be able to gain or realistically protect exclusive proprietary rights to the intellectual property in their discoveries allowing competitors to equally profit from the research a company funds.

DeCODEme was one of the first to offer direct-to-consumer personal genomics services in November 2007 which gained international attention when New York and California state departments of health cracked down on the regulation of this testing and rivals steep high-profile competition from Google-backed company '23andMe'.

Mark Henderson in The Times linked deCODE's struggle with a 'looming crisis in the European biotechnology industry', citing the European Biopharmaceutical Enterprises findings that one in five biotechnology companies face bankruptcy this year.