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Obituaries IV: DeCode Genetics Destructs in Debt Death-Spiral

Another casualty of the biotech industry's recent Darwinian attrition -- one whose passing may have come as a surprise given the firm's fame -- is deCode Genetics (DCGN).

decode obituaryReykjavik, Iceland-based deCode once shone as a beacon of the genomics revolution. Founded in 1996, the biotech hoped to use the Icelandic genome, which has remained relatively isolated for about nine decades, to figure out which genes cause which diseases.

With that lofty goal, deCode raised $12 million in venture capital, inked a $200 million deal with Roche and raised $198.7 million in its 2000 initial public offering. More partnerships and financings followed, as did revenues, but deCode continued to post losses.

What went wrong? As Forbes explained back in 2000:

Just because this population is an ideal place to mine for bad genes doesn't mean those genes will be found, or that once they are found they will lead to valuable drugs or even genetic tests. Unless deCode finds genes and also turns them into products, it won't make enough money to put it in the black.
There was also concern among Icelanders regarding privacy. And a class action lawsuit for hyping (eventually dismissed). And the discontinuation of a Phase III trial due to formulation troubles. Eventually, deCode fell into the same trap that trips up so many biotechs: as its stock price slid lower and lower, its financing opportunities grew fewer and farther between, and its debt began to seem less and less manageable.

Last month, deCode filed for Chapter 11 bankruptcy and entered into a debtor-in-possession loan agreement with Saga Investments. In the interim, the firm continues to operate, and it may continue to do so for some time. But as blogger Daniel MacArthur states:

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 papers -- remains.
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