DCGN...interesting article,looks like big time stuff..
July 10, 2000
Mining the Icelandic Genome
By Anna Snider
A useful gene pool
OK, IT MAY be true that Icelanders don't all look alike. But that doesn't mean you'd pick Reykjavik as the setting for a documentary called "People of Color," either.
Even in this age of increasing borderlessness, Iceland is remarkably homogenous. That's because its chilly isolation has meant a large percentage of the 270,000 people who live there are descended from the same ninth century Norsemen who settled the Arctic land. It didn't help that in the Middle Ages, the Black Death and smallpox swept the country, further shrinking an already narrow gene pool.
The lack of ethnic diversity may leave Iceland a little on the bland side. But the country's DNA is about as exciting as it gets for scientists at work deciphering the human genome. Not only has the country's isolation created an unusually pure gene pool, but Iceland is also known for its 1,000-year obsession with genealogy and medical record keeping. The combination has given scientists a head start on finding a number of medically significant genes amid the riot of chemical components contained in the average strand of DNA.
To put it more precisely, the head start has gone to scientists at a small Reykjavik company called deCode Genetics, which plans to raise $120 million with an initial public offering later this month. Launched in 1996 by scientist-turned-Chief-Executive Kari Stefansson, deCode won an exclusive 12-year license from the government to use the data in 1998 after a bitter, year-long national debate.
Like several of the genomics start-ups in the U.S., including Human Genome Sciences (HGSI), deCode is trying to use its genetic findings to develop novel drugs and diagnostic tools for a number of serious illnesses. It also wants to sell subscriptions to its data (a business called "informatics"), much the same way U.S. rival Celera Genomics (CRA) does.
So far, the company seems to be onto something. In March 1999, deCode pinpointed the location of the gene that causes osteoarthritis, a degenerative bone disease that afflicts 40 million people. And together with Swiss drug company Roche Holding, deCode mapped a gene that contributes to the risk of suffering a stroke.
Roche has committed up to $200 million as part of a five-year collaboration with deCode to identify genes related to 12 common diseases, including stroke, hypertension and diabetes. Independently, deCode is exploring the origins of another 20 diseases like psoriasis, lung cancer and melanoma.
To find the genes, deCode uses a technique called positional cloning. It takes DNA from people with a history of disease to identify genes first by location and then by function. It's a method that other companies, such as Millennium Pharmaceuticals (MLNM), have tried with less success on more diverse populations. The search works better on a well-defined population such as Iceland's, because homogeneity makes it easier to track disease to a single faulty gene. In a more ethnically diverse country, patterns are difficult to spot.
"DeCode has a special trick — a homogeneous population," says Jean-François Formela, a principal with Atlas Venture, one of the companies that seeded deCode with $12 million. (Polaris Venture Partners and Advent International are the two others.) "The problems facing it are far lower than when research is done in the open population. The results are much more accurate and the process is less expensive."
DeCode is not alone in this approach. Myriad Genetics (MYGN) is doing a positional-cloning analysis of the Mormon community in Utah; Gemini Genomics, of Cambridge, England, is studying twins; Signal Gene, of Montreal, is analyzing the genes of descendants of the original French settlers in Quebec; Newfound Genomics is looking at the DNA of Newfoundlanders.
Celera, of course, has been the headline grabber lately. It made history a few weeks ago when the company announced it had drawn a map of almost the entire human genome (see story). DeCode, though, has a different approach. While Celera seeks to sequence the entire genome before figuring out the function of the genes contained within, deCode focuses on the gene function first.
"The good thing about positional cloning is because you have started with the disease and worked your way back to the gene, you know at least the disease association of the gene," says David Webber, an analyst with Josephthal & Co. "The key is going to be how much do you know about the gene you've identified."
With its IPO, deCode hopes to net about $120 million from the sale of eight million shares at $14 to $16 apiece. Spokesman Ernie Knewitz says there's no fixed date for the IPO, only that it should happen sometime this summer. IpoPros.com, a financial Web site based in Boulder, Colo., has it scheduled to price on July 17. The offering is being handled by Morgan Stanley Dean Witter and Lehman Brothers.
Whether the beleaguered IPO market is ready for a company this speculative, however, is anybody's guess. DeCode doesn't have much revenue to speak of. Neither does it have many clients or much in the way of operating experience. So far, it has earned only about $30 million, almost all owing to the deal with Roche. Meanwhile, as of Dec. 31, its accumulated deficit was $76 million, according to its registration statement.
Kari Stefansson
After looking over the deCode prospectus, Ben Holmes, an analyst with IpoPros.com, says, "This is a weird combination. Informatics? Drug discovery? Ecckk. That's a very, very difficult sale in this market."
There's some concern, too, that deCode is being run by Stefansson, a former Harvard Medical School professor, not a businessman. "All VCs are always a little bit cautious about scientific entrepreneurs," Formela says. "It's almost the typical story that you replace the scientific founder with a businessperson."
But former scientists who are now CEOs like William Haseltine at Human Genome Sciences and Joshua Boger at Vertex Pharmaceuticals (VRTX) are proving that idea wrong, he contends.
"Kari [Stefansson] has proven he can get things done," Formela says. "He did the deal with Roche, he came out of the battle with the government and he's built a company of 300 people plus. He is meeting the milestones and delivering."
All he has to do now is convince U.S. investors that there's money to be made from Iceland's genetic purity. |
