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Icelandic Bioinformatics Company, DeCode Genetics, Considers Initial Public Offering

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REYKJAVIK--Iceland's first bioinformatics company is considering going public just two years after it was established with $12 million in seed capital. DeCode Genetics recently won government approval to develop a controversial genetic database of the entire Icelandic population, and the company is now exploring ways to raise the estimated $200 million required to develop it. "It is likely that we will take the public offering route," said DeCode CEO Kari Stefansson.

The company presently operates an advanced high-throughput sequencing operation, capable of generating more than 300,000 genotypes each month. The system is used to compare the DNA of healthy and diseased groups to identify differences and locate genes that may be responsible for specific diseases. The government's recent decision to grant a license for the national database was in spite of concern among doctors and medical rights groups that the system might violate patient privacy and be open to abuse.

But DeCode's big selling point is precisely this access to a population that remained isolated for 1100 years and consequently is genetically homogeneous. While monogenetic diseases can be studied in families, the Icelandic population is expected to be valuable in elucidating mechanisms of polygenic diseases, which are more common. DeCode will have the genealogy of the entire Icelandic population, going back centuries, in a database.

The company is expected to be valued at more than $300 million if it decides to proceed with a listing in New York and Reykjavik this spring. Investment bankers close to DeCode estimated its current value at $327 million. "We estimate the value of the company at about $11 a share, compared with $1 a share when it was formed," said one banker. Last year DeCode raised about $30 million by selling 20 percent of its stock to Icelandic investors in a partial listing.

DeCode has already attracted widespread interest from international pharmaceutical groups after setting up the world's first genetic research center that offers customers the chance to track progression of diseases across an entire population. In February 1998 Hoffmann-La Roche announced a collaboration to focus on gene discovery to facilitate developing new therapeutic and diagnostic products. Under terms of the agreement, Roche will receive rights to develop small molecule drugs and drugs based on the gene products, as well as diagnostics. DeCode will retain rights to gene and antisense therapies.

Establishment of the planned database could dramatically cut the cost of medical research once scientists are able to track individual disease mutations over several decades. It will also facilitate comparison of DNA from families with a hereditary disposition to certain illnesses, in order to detect which genes are the cause. Stefansson said it will take three years to develop the database fully and five years before it can be marketed internationally.

--Paul Wymer

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