By Kevin Davies
April 1, 2009 | Despite some signs of improved financial performance for 2008, Decode Genetics “is in a tough spot,” admitted founder and CEO Kari Stefansson in an earnings call today. The company reported a loss for 2008 of more than $80 million, which although a smaller loss than the year before, leaves the company with only enough money to run operations through the second quarter.
“Decode is not yet profitable and requires additional liquidity,” said CFO Lance Thibault. He added that the company’s strategic review had been concluded and that negotiations were ongoing. Those appear to include divesting the drug development business, which currently has three drugs in the clinic for heart attack and arterial thrombosis.
Stefansson said the diagnostics business, which includes the firm’s gene discovery operations, had seen revenues grow by 100%, while spending has been cut in half. That spoke to growing income from contract genotyping work, diagnostics tests for prostate and breast cancer, and the deCODEme personal genomics service introduced in November 2007. But as of the end of 2008, the company had less than $4 million in liquid assets, with $12 million owed in deferred compensation.
2009 was the year in which the concept of personalized medicine “becomes something more than a concept, and become implemented in our society,” Stefansson said. He pointed to the rapid growth in the medical literature in personalized medicine, and the solid performance in the financial markets of DNA-based diagnostics companies. He also approved of the sentiments of President Obama on the necessity of cutting healthcare costs.
“The ability to assess individual disease risk and response to treatment is at the heart of personalized medicine,” said Stefansson, adding that Decode has led the world in the development and implementation of these methods.
It is tough for a world leader to acknowledge its financial plight, but Stefansson did just that. “We are in a very tough spot at the moment,” he said, citing three major reasons: 1) Decode’s convertible bond debt of some $230 million; 2) the loss of funds through the collapse of Lehman Brothers; and 3) the firm’s “complex corporate structure” that necessitated a refocusing. He did not lay any blame for Decode’s plight on Iceland’s larger financial debacle.
Stefansson did not offer much in the way of specifics. He said the company was making progress in restructuring its debt, which would be finished in the coming weeks. He said that investors were willing to come in “with new money once we’ve restructured the debt.”
He also said he intended to simplify the corporate structure with a future focus on diagnostics, and would be selling assets that were “non-essential to the diagnostics business.” He also spoke of the prospect of new diagnostic technologies that would emerge “on the basis of large-scale [genome] sequencing” as costs for next-gen sequencing operations continue to plummet.