Appeared in German translation in a weekend supplement to "tageszeitung" 20 April, 2002.
Springtime in Iceland and 200 Million Dollar Promises
Spring in Iceland is a magic time. As one gazes at the mountains gracing the horizon in the Reykjavík area white with snow and glistening in the glow of the evening sun one wonders how it is that a few months earlier the same mountains were hidden in the darkness of the long sub-arctic winter night. Likewise, for ornithologists and bird watchers spring is an enthralling period, for the arrival of migratory birds from southern latitudes signals that spring and summer are just around the corner. Finally, the Icelandic parliament adjourns for its summer recess in April or early May. As is the wont of democracies world-wide, this is a much prized period for rushing through the parliamentary system pieces of legislation which might fare badly if exposed to a sufficient amount of critical light and sound discussion.
Spring 2002 fits this seasonal pattern. The migratory bird Heiđlóan (Eurasian golden plover Pluvialis apricaria) has arrived, gradually it is getting lighter, and in early April just after Easter the Icelandic government announced a bill authorizing up to a $200 million dollar loan guarantee for deCODE Genetics. It is the US mother company for an Icelandic subsidiary Íslensk erfdagreining, a controversial biotechnology company doing research on the genetics of a variety of common diseases (www.decode.com). According to a recent press release from the Icelandic Ministry of Finance the loan guarantee is to be used by deCODE for entering into the field of drug development based on discoveries made by the company in population genetics and competitive advantages which it has accrued therefrom. The parliamentary bill contains similar assertions about deCODE's achievements. These claims are made without any supporting evidence.
Such evidence exists overseas in the records of the Securities and Exchange Commission (SEC) in Washington, DC. This US government agency was established in the early 1930s in the wake of the Crash on Wall Street in 1929 and it regulates stock markets in the US. In the summer of 2000 prior to the dot.com and biotech boom coming to an end deCODE launched a successful initial public offering on the NASDAQ hightech stock market. In order to protect investors and maintain its credibility as a publicly traded company deCODE must supply the SEC regularly with information on its performance. The annual report for the fiscal year ending December 31, 2001 (so-called form 10-K) and filed by deCODE with the SEC is easily available on the website of the regulatory agency. This annual report, which incidentally is not mentioned in the parliamentary bill, sheds dry factual light on the scientific achievements of deCODE.
The company deCODE was established at the end of 1996 with $12 million provided by a group of US venture capitalists. In February 1998 it signed a five-year research agreement with the Swiss pharmaceutical giant Hoffmann-La Roche potentially worth up to $200 million. In an earlier form 10-K filed by deCODE (for fiscal year 2000) it says: "Under this agreement, we may receive approximately $70 million in research funding and more than $130 million in milestone payments that are linked to our progress in research efforts and commercialization." Scrutinizing the most recent form 10-K (for fiscal year 2001) one finds out with a bit of simple arithmetic that to date deCODE has received from Roche for 1999-2001 $61,628,038 and earlier it had received for 1998 $12.7 million. This is a total of $74,328,038. Recalling that deCODE was to receive $70 million in research funding from Roche over a period of five years or $56 million during four years, the difference $74 million minus $56 million translates into scientific achievements worth $18 million or $4.5 million annually.
On the basis of meager scientific achievements worth some $18 million the Icelandic government is willing to give deCODE loan guarantees up to $200 million. The parliamentary bill has provoked strong criticism from the Icelandic financial and economic sector as it seems to favor the interests of a single company, distort the operation of market forces, and expose the Icelandic state to undue financial risk. The introduction of the bill makes it quite clear that deCODE has not continued to attract foreign capital as was hoped in the mid- to late-1990s when information technology and the completion of the human genome project seemed to offer boundless new economic vistas. The US venture capitalists who placed the seed money for deCODE in 1996 got their money back in 1999, the Roche connection has only yielded a third of the much promised $200 million of 1998 and may not continue with the same strength, and a good part of the $182 million acquired by deCODE on NASDAQ in July 2000 came presumably from Icelandic investors.
With 600 employees, weak scientific achievements and very high operating costs deCODE will soon be faced with harsh economic realities. The recoil from such events would have considerable economic repercussions in Iceland and could cast very unfavorable light on the ruling coalition government headed by Prime Minister Davíd Oddsson. As the government has been unwavering in its support of deCODE since the signing of the agreement with Roche in 1998, it is not hard to understand the introduction of the loan guarantee bill in the spring of 2002. There is little doubt that the government believes that it has acted reasonably and in the best long-term interests of Iceland by giving deCODE preferential treatment, thus hoping to spearhead the establishment of a new industry in Iceland.
The close relationship between deCODE, the government, the state bureaucracy, and the Icelandic media has made it possible to maintain such a belief system for many years and shield the system from relentless criticism and reports about rapidly dwindling fortunes of biotechnology companies like Celera and deCODE. They hoped to ride the wave of overly optimistic promises spawned by the quest for the holy grail of modern biology, the human genome project formally completed in the summer of 2000. It is only now in the spring of 2002 that the deCODE-government symbiosis is beginning to show signs of wear and the political cost of the expectations associated with deCODE has become obvious, even to stalwart supporters of Mr. Oddsson and his party.
The strength of the deCODE-government bond and the accompanying ties between Mr. Oddsson and the Chief Executive Officer of deCODE, dr. Kári Stefánsson, had become firmly cemented in 1998. In the wake of the deCODE-Roche agreement a government bill was introduced in parliament which would make it possible to issue a license to an unspecified company to establish a database containing the health records of every Icelander alive and dead. The Health Sector Database (HSD) bill had been written by deCODE and sent to the government in September 1997. On the eve of Easter 1998 it seemed a good opportunity for securing parliamentary approval of the HSD bill, yet the deCODE plan met with strong opposition delaying passage of the bill until December 1998. The HSD bill was strongly protested by the Icelandic Medical Association, scientists, concerned citizens, politicians, ethicists, and a critical non-governmental organization Mannvernd came into being (www.mannvernd.is). What has characterized the controversy ever since is the closeness of deCODE and the government, and the unwillingness of the government to listen to reasoned argument and seek scientific council from others than dr. Stefánsson and senior deCODE staff.
Since the spring of 1998 the controversy has received tremendous international media attention thus constantly undermining the government assumption that the case could be kept within Icelandic borders. The dramatic failure of containment is aptly symbolized by the fact that the best source of information about the work and promises of deCODE is the website of SEC. In 1998 dr. Stefánsson spoke eloquently of the promise of HSD which still does not exist, four years later he promises drug discovery. What he does not mention is that deCODE is now obliged to provide Roche with blood samples ($50 per unit) it has "harvested", to use the language of the most recent form 10-K, from some of the countless patients who have participated in deCODE's research on a variety of common ailments. These persons sincerely believed that they were contributing to the progress of science and medicine. But like the cod and herring swimming in the icy waters offshore they have just been turned into a new form of raw material.