Genetic Future

Struggling Icelandic biotech deCODE Genetics has finally reached the point of formal insolvency. A press release today announces that the company has filed for chapter 11 bankruptcy in a US court:

In a filing with the U.S. Bankruptcy Court for the District of Delaware late on Monday, deCODE listed total assets of $69.9 million and total debt of $313.9 million, as of June 30.

deCODE launched in 1996, basing its business plan on its unique access to biological samples and genealogical and medical records from the small, homogeneous Icelandic population. Since its launch it has proved wildly successful as a research institute, generating an astonishing number of high-profile publications on the genetics of common traits and diseases. Unfortunately it has also been a complete disaster as a commercial venture, haemorrhaging away over $700 million while failing to generate a single quarterly profit.

As I understand it, following the filing deCODE will continue to operate its business, just in a different form: the company has entered into an agreement with a US investment firm to sell off its subsidiary Islensk Erfdagreining (IE), which “conducts deCODE’s human genetics research, manages its population genetics resources and provides its personal genome scans, DNA-based risk assessment tests, and genomics services for contract customers”. In other words, pretty much all of the core business that deCODE does will continue, simply under a different name.
While deCODE will limp on for a couple more years under this agreement, this is very much a temporary fix. The core problem for the company – figuring out how it can use its expertise and unique resources to generate an actual profit, rather than simply more Nature Genetics paper – remains. Until that problem is solved the company’s future, and that of its superb genetic resources and databasem remains in doubt. 
What would happen to the genetic data from customers being held by deCODEme if the company goes under for the final time? Three very timely recent guest posts from Dan Vorhaus and Lawrence Moore here on Genetic Future provide a solid basis for speculation, herehere and here.
We’ll have to wait and see what the future holds for deCODE’s database, and cross our fingers that it doesn’t simply slip under the Icelandic permafrost. 

For the financially cognisant, I’ve added more details from Stockhouse:

deCODE genetics, Inc. (Nasdaq: DCGN) today announced that it has filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware to facilitate the sale of substantially all of its assets. deCODE is continuing to operate its business and manage its properties as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.

In recent months, deCODE and its advisors have explored multiple restructuring alternatives, including the sale of specific portions of deCODE’s operations, the sale or license of its drug discovery programs, the restructuring of its outstanding convertible notes and the obtaining of new equity financing. As a result of these efforts, deCODE has entered into and filed concurrently with its Chapter 11 petition an asset purchase agreement with Saga Investments LLC (Saga) to sell its Iceland-based subsidiary Islensk Erfdagreining (IE), and its drug discovery and development programs. This agreement, pursuant to Section 363 of the Bankruptcy Code, is subject to a number of contingencies, including a competitive bidding procedure and court approval in accordance with bankruptcy law. IE conducts deCODE’s human genetics research, manages its population genetics resources and provides its personal genome scans, DNA-based risk assessment tests, and genomics services for contract customers.

deCODE expects that if the asset sale is consummated it would be liquidated pursuant to a plan of liquidation which would be subject to the approval of the bankruptcy court. In the event of a liquidation, any recovery for stockholders of deCODE would be highly unlikely.
deCODE has also entered into a secured loan agreement with Saga which, subject to bankruptcy court approval, will provide the Company with interim financing to fund post-petition operating expenses. deCODE expects this debtor-in-possession financing, if consummated, to allow the delivery of services to deCODE’s customers and clients to continue without interruption during the bankruptcy process. Saga’s investors include Polaris Venture Partners and Arch Venture Partners.

deCODE has filed various “first day” motions with the bankruptcy court to ensure its ability to conduct normal business operations. This Chapter 11 filing is for deCODE genetics, Inc. only and does not include IE or deCODE’s former U.S.-based subsidiaries deCODE Biostructures Inc. and Emerald BioSystems Inc., recently sold to an unrelated third party.

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Comments

  1. #1 Thomas Mailund
    November 17, 2009

    I have a grant proposal under review with DeCODE at the moment, so I sure hope they last long enough for us to get it :)

    Self interest aside, it would really be a pity to break up the group there. They have done some truly great work on human genetics and association mapping!

  2. #2 Frustrated Investor
    November 17, 2009

    Good for you and your grant proposal. Now that this company screwed up, investors like myself lost all of their money. Hope you get your money out of this since I lost all of mine- that sounds fair

  3. #3 Thomas Mailund
    November 17, 2009

    Hi “Frustrated Investor” — I just talked to my contacts at DeCODE and according to them you have nothing to worry about (well, they would say that, but still…)

    They have a meeting tomorrow about the future of the company, but DeCODEme is going to stay alive, so that is good at least.

    If that is not what you invested in, I feel with you, but this is a risky business after all…

    I am mostly concerned about the science, and the profit comes later by a long shot. I was in a start up where we tried to make money out of association mapping, and I burned my hands on that so I am not too optimistic there.

    Doesn’t mean that you loose your money, though. You can still earn from the sales to the States, but I would probably get out on the deal now if I were you. I think DeCODE turns into a science group in the long run…

  4. #4 Andrew Yates
    November 17, 2009

    Iceland isn’t going anywhere, and neither are the people of deCODE. Ok, sure, maybe all that Anglo debt known to YOU as “DCGN” is going somewhere, but Iceland? Iceland stays where Iceland is.

  5. #5 Andrew Yates
    November 17, 2009

    lol:

    “So long, and thanks for buying all our fish!”

  6. #6 CURT PETERSON
    November 18, 2009

    Dr. Steffansson came to Boston to speak to the Swedish-American Chamber of Commerce in 2000. A brilliant and intense man, he obviously “knew his stuff” regarding Iceland’s isolated population, its value as a medical research resource and the long-term benefits offered to mankind by deCode’s potential research and, yes, investors. Money is only money, as they say, and it can be replaced. Genetic research, on the other hand, has real, irreplaceable value.
    I can only hope that the future deCode Genetics remains focused on the real values instead of on short-term financial gain. Perhaps the U. S. is not the best place to find that kind of thinking …

  7. #7 sparky
    November 18, 2009

    deCODE was originally a drug discovery company. Their business model was to do GWAS on Icelanders to identify genes in novel pathways implicated in disease. Much of their investment went into patenting associations and developing therapeutic leads that ultimately have not panned out.

  8. #8 CURT PETERSON
    November 18, 2009

    Sparky is a little off. An average Icelander can accurately trace his ancestry for thirty-five generations; their population, mostly rooted in Western Norway and Wales and Ireland over a thousand years ago, is one of the two most genetically isolated on the globe. The Iceland government financed and mandated DNA identification of every resident, as well as individual contemporary medical histories. I believe DeCode’s first transaction was, for its client, to trace epilepsy backwards, mining genetic and anecdotal information to trace the disease over many generations. This data were requested by a company studying the disease, perhaps in hopes of producing antidotes or treatment drugs.
    The research concept was originally conceived by Andre LaMotte of Switzerland, a close friend and MIT roommate of Dr. Steffansson’s, during a visit to Iceland.

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    December 16, 2009

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  10. #10 David in England
    December 17, 2009

    DeCode was a great concept and they really did a good job generating associations. But if that information is truly valuable then someone will be prepared to pay for it. It looks like DeCode were unable to identify that person who was prepared to hand over money in exchange for their information.

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    January 12, 2010

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