8-Humans: 'Decode was meant to save lives ... now it's destroying them'
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TITLE: 'Decode was meant to save lives ... now it's destroying them'
SOURCE: The Guardian, UK, by James Meek
DATE: Oct 31, 2002
------------------ archive: http://www.gene.ch/genet.html ------------------
'Decode was meant to save lives ... now it's destroying them'
James Meek on the biotech company that was going to help the world and make
Iceland rich - till reality caught up with the hype
Before the cyclist hit him in 1996, Hinrik Jonsson was a strong, skilled,
energetic craftsman, a 35-year-old with a young family, whose hand-made
furniture could be seen in houses all over Reykjavik. In an instant, the
accident destroyed his livelihood. He suffered brain damage which left his
mind fully functional but his body reluctant to obey its commands. Some
days, he cannot walk. It took him two and a half years to wring
compensation out of a web of insurance companies while his wife took
multiple jobs to feed the family.
He was finally awarded 23m Icelandic kronas - about £180,000 at today's
exchange rates, not much for 35 lost working years (Icelanders retire at
70). Anxious to invest it wisely, he thought carefully, discussed the
matter with his family, and decided to put a hefty chunk of the money -
five million - into the stock market. In the spring of 2000, he walked into
a state-owned bank, the National Bank of Iceland, where a broker swapped
his money for shares in the hottest Icelandic company on the country's
thriving but unregulated grey market, Decode Genetics, at $56 a share.
Earlier this year, Jonsson returned to the bank to sell his shares. They
were worth not much more than a 10th of what he had paid for them - just
under $6 apiece. Jonsson had lost tens of thousands of pounds of the
compensation that had to see him through a lifetime of disability. "I'd
never bought stocks before," he says. "I watched the TV news carefully and
saw the stock prices rising consistently. You had stories in the media
telling people how high Decode stocks were rising. My heart is crying."
Like thousands of other naive Icelanders, Jonsson had fallen victim to the
extraordinary genetics frenzy which gripped his tiny country in 1999 and
In a place where genealogical records have long been cherished as a
national treasure, ordinary Icelanders, encouraged by the government, banks
and brokers, suddenly came to believe that, thanks to Decode, their genes
were going to both make them rich and make the world a healthier place.
Decode did nothing to dissuade them, and poured millions of shares on to
Reykjavik's unregulated grey market. At their peak in 2001, grey market
shares were changing hands for $65, valuing a small Icelandic company which
had never made a profit (it still hasn't) at more than $2bn. Today, the
shares, now listed on the Nasdaq index in New York, have slumped to about
In the past decade, we have grown hardened to tales of investor greed and
folly, from collapsing markets in the Far East, through pyramid schemes in
Russia and Albania, to the spectacular bankruptcies and burst tech-stock
bubbles of the US. But there is something unusually poignant about the
Decode story because those who have been burned have given the company not
just their money but - with the blessing of their leaders - their genes.
The Decode saga raises uncomfortable questions about how fundamental
medical research is going to be funded in the future; about the turning of
private, individual medical data into a commodity; and about what happens
when scientists decide they want to be businessmen, too.
Kari Stefansson, the native Icelander and former Harvard professor who
founded Decode in 1996 and has run it since, intrigued and disturbed the
world at the end of last century, when he declared that the firm would lead
the global hunt for disease genes by using the north Atlantic island's
unique genetic resource: its complete population of 286,000 people, their
family relationships meticulously recorded in genealogical records going
back 1,000 years. Against opposition from other Icelandic scientists and
doctors, he won the right to a commercial monopoly over research access to
the medical records of all Icelanders.
Medical ethicists on both sides of the Atlantic were appalled that an act
which was eventually passed by Iceland's parliament, setting up the health
sector database, assumed the consent of all Icelanders to having their
medical records, albeit anonymously, stored in Decode's computers. There
was no question of seeking volunteers: those who did not want to take part
had to actively opt out. Children, and the dead, did not even have that
Yet for all the local and international wringing of hands over ethics, most
Icelanders embraced the project. They believed strongly in helping the
world by volunteering for medical research. They believed in grand,
enriching national science projects. They trusted Stefansson and his close
ally, the prime minister, David Oddsson, who pushed the enabling law
through parliament. Consequently, they believed it was right to accept
Decode's request to give them blood samples for genetic analysis - tens of
thousands have now done so - and they believed the brokers who told them
that buying Decode shares, even before they were listed on a stock
exchange, was a no-loss proposition. The result was a short period of
madness, and a long, cruel awakening.
One morning I visit Kristjan Jonasson, an editor with Edda, an Icelandic
publisher about to bring out a book on the still evolving Decode affair.
His office looks out across a cluster of sports stadia towards Kolla Fjord
and the yellow slopes of Esja. Beneath the flimsy-looking, prettily painted
corrugated metal covering Reyjavik's houses and apartment blocks are walls
of thick, steel-reinforced concrete, against earthquakes. I ask Jonasson
about a theory I have heard, that Icelanders are en thusiastic about
science and technology because, for them, nature remains a threat.
He disagrees. "People here are interested in new gadgets, but I think it's
got much more to do with how young the society is. Most of the buildings
here were built after the second world war. This city is young and people
feel there's a lot of opportunity, that science opens up new possibilities
for us to flourish, to take part in a new world. I think people are very
optimistic about everything that relates to companies like Decode.
"People had a firm belief in the power of genetics long before it was
explained scientifically. This belief in the inheritance of characteristics
is one of the reasons Decode established itself so firmly, so quickly, and
why people were ready to embark on this new journey."
Only with the collapse of Decode's share price, says Jonasson, has enough
doubt been cast about the company for the book - Our Genes, by a science
history researcher, Steindor Erlingsson - to find an audience.
"People were totally naive," he says. "Nobody in America would have bought
a share in a company that wasn't registered on the stock market."
Today, Decode and the Icelandic government are desperate to disassociate
themselves from the grey market frenzy of 1999-2000. Yet it was Decode
which deliberately poured millions of shares on to the Icelandic grey
market in 1999, selling them to a Luxemburg-registered company understood
to represent a con sortium of Icelandic financial institutions. Far from
Decode standing aloof from the frenetic trading, the company had a vested
interest in the unregulated market taking off because it had signed a deal
with the Luxemburg group that triggered a second payment if the grey market
price stayed high. To financially untutored Icelanders, every TV appearance
in which Stefansson and his allies in government talked up the wonderful
opportunities Iceland's genetic specialness presented was both reason to
offer their blood for analysis and reason to dig into their pockets.
"Ministers were showing up with Stefansson whenever they had the chance,"
said Egill Helgason, a popular Icelandic current affairs presenter on the
Skjar 1 channel. "He was always in the company of the government elite. Of
course, everyone got the impression this was foolproof. There were only a
handful of left wing politicians shouting that something was wrong ... at
that time he had absolute control of the media.
"Everyone was talking about buying Decode shares. Young people in their 20s
who had no money at all. I got a bit of a fright when even my mother
mentioned buying stock. When a civil servant like her is talking about the
stock market, somebody is bound to be losing money."
Respectable banks in which the state still held a majority stake, such as
the National Bank of Iceland and the Agricultural Bank of Iceland, were
buying Decode shares, advising customers to buy them, carrying out the
deals themselves and even lending buyers money if they couldn't afford to
A lawyer, Hrobjartur Jonatonsson, recalls one of his clients being rung
three times by a broker from a bank urging him to buy shares. The broker
said that he guaranteed the buyer would make a profit if he bought the
shares and then sold them. After the third call, the client reasoned the
guarantee meant he had nothing to lose and agreed. Yet by the time the
broker had put the shares in the client's name, they had fallen in value.
Only after Jonatonsson intervened, pointing out to the bank that there was
no recorded evidence of the conversation, did the bank stop pressuring him
to pay for the shares - which are now almost worthless.
Another buyer has not been so lucky. Like many Icelanders who have lost
money on Decode shares he is ashamed to have his name published,
particularly by a foreign newspaper. Call him buyer E. He lives in a flat
in a small block in Reykjavik surrounded by rowan trees. In his sitting
room, over full of heavy furniture, there are two tiny stuffed deer heads
on the wall, watching events with beady little eyes.
E was bitten badly by the Decode bug. In 2000 he bought 30m kronas' worth
of shares - more than £230,000 at today's exchange rates - when prices were
at their peak. They are now worth considerably less than £10,000 and he
He bought shares on the grey market on three separate occasions. For the
second tranche, he borrowed money from the same bank he bought the shares
from, the state-owned National Bank, mortgaging his house to do so. He
bought the third tranche from the Agricultural Bank and arranged a loan
from the Bank of Iceland. The next day, however, the Bank of Iceland lost
its nerve and cancelled all loans to buy shares. But the shares were
already bought. "I called the Agricultural Bank and told them the Bank of
Iceland had lost all faith in the shares and didn't want to lend any more
money. They said: 'You have to get the money from somewhere. Sorry, but you
have to take the shares.'
"It took a month to raise the money I needed. I had only told them on the
phone that I wanted to buy the shares and they forced me to buy them. In
that month the price fell from $64 to about $50, but I still had to pay
Now the National Bank is trying to foreclose on its loan. "I asked them if
I could wait at least until the shares rose to $15. The lawyer from the
bank said, 'You must know these shares won't go up.' I said, 'You sold me
these shares, telling me they would go up to $100.' He said, 'If you're
going to blame us you'd better pay up.'
"This has devastated my personal life. I will lose this apartment and I
will become bankrupt. Decode was supposed to save human lives. Now it's
destroying human lives."
It wasn't just individuals who caught Decode fever. The Icelandic Heart
Association is reported to have bought an incredible 200,000 grey market
shares in the company when they were selling at $38 to $40 each, and to
have hung on to them when they plunged in value. If true, the charity would
have lost the equivalent of about £5m. The organisation's chairman has
refused to comment.
Kari Stefansson is an unusual man. He fits the cliche of being fiercely
clever but he also has a tendency to lash out for no apparent reason, even
at those who praise his firm. Three times in our difficult first interview
in Reykjavik I try to quote to him people who have spoken well of Decode,
only for him to interrupt and dismiss them all. An innocuous, generally
friendly article in a local magazine is deemed out of bounds because he
doesn't like the journalist who has translated it for me, a fellow
scientist who had lavished plaudits on Decode is said to be producing
inferior work, and a Wall Street analyst who has actually recommended
Decode's unloved stock as a possible buy is characterised as not fully
understanding his subject.
I had encountered Stefansson before, at a presentation in London in 2000.
Then, he had seemed avuncular, charming, self-deprecating, witty. Now, in
his office at Decode's attractive new Reykjavik headquarters, built of
anodised metal, glass and dark wood, he is defensive. In Decode's heyday,
journalists often described him as resembling a Viking, as if that was
understood to be a good thing. If a Viking is a brooding, grey-haired, 6ft
5in man with a nasty temper who wears tight T-shirts over a heavily muscled
upper body, Stefansson is a Viking.
The Icelanders who lost money after buying Decode shares on the grey market
were, Stefansson said, the victims of their own recklessness; of banks and
brokers he didn't control; of local politicians who had demanded he let
Icelanders share the profits from a gene bonanza; of global financial
markets which didn't put a high enough value on science; of anyone, in
short, save Decode. Stefansson suggests that only a politically motivated
left-wing journalist would think of asking him questions about the grey
"To come to the management of a company like ours and try to hold us
responsible for the way in which shares have been traded in Iceland is
somewhere between laughable and ridiculous," he says.
"We are not in the business of selling shares. We did not create a grey
market in Iceland. We were not the ones who decided how this would be done.
We sold a significant number of shares on the grey market because there was
pressure on us to do that. There were people, politicians even,
representing the left, who insisted we would have to sell shares in Iceland
because they expected there would be great profits and they wanted
Icelanders to share in that. All of a sudden the financial market turned
"I always insisted, when asked, that I would not comment on the wisdom of
buying shares or the value of shares, and I always said people should not
buy unless they had the backbone to suffer some losses."
Stefansson says Decode has made as much information available about its
prospects for the grey market offering as it had later been obliged to make
by US law for its offering on Nasdaq. "Most of the people that have bought
shares haven't even bothered to get the information," he says. "I'm
absolutely convinced it was available for those who wanted it."
Stefansson argues that, having failed to block legislation on the medical
records database on ethical grounds, his opponents - centred on Mannvernd,
the Association of Icelanders for Ethics in Science and Medicine - are
trying to cast doubt on Decode by another route.
He is right to say that, so far, despite the collapse of the company's
share price, most Icelanders, the media and the government seem disposed to
give him and the company the benefit of the doubt. "His position is still
quite strong here. He still has this aura about him. I think people still
believe the company will rise from the ashes with some brilliant discovery
that will make us all tremendously rich," says Helgason.
A smell of sulphur seems to follow you wherever you go in Reykjavik. It
pours out from the hot water tap and the shower head, turning silver
jewellery a golden colour. Yet there has been no volcanic activity near the
city for quite a while. The same is true of dissent. Iceland is a
democracy, but there have not been serious political protests in the
country since local communists rioted against the decision to join Nato in
1949. The government has enormous powers of patronage, giving it the
ability to quieten opposition without appearing to do so. A citizenry both
patriotic and trusting of authority helps. Besides, the country is visibly
thriving, and there is no unemployment. Sometimes Iceland seems like one of
those science fiction dystopias portrayed in the films of the 1960s and
1970s, when everyone lives comfortable, prosperous, safe lives providing
they do not question society's darker secrets.
Steindor Erlingsson, author of the forthcoming Decode book, likes to
present himself as a dissident. "I don't think people have been blaming
Decode enough," he says. "Taking into account the close relationship that
existed between the government and Decode, and the fact that Decode had
free access to the media in Iceland and was bragging about what it was
doing ... Kari has as much responsibility as the brokers. To my mind, the
brokers didn't only gain courage from how well the the biotech industry in
general was doing on Nasdaq, but you had this company here with the
politicians and Decode spokesmen talking like it was going to save the
The government of David Oddsson - who was too busy to meet me - remains so
besotted with Decode that, to the consternation of other business leaders,
it has pushed through parliament a law allowing the government to
underwrite a $200m bond issue by the company. Rather than showing gratitude
for this largesse - currently being scrutinised by regulators from the
European Free Trade Association - Stefansson suggests that it was not his
idea and that his company would be doing Iceland a favour if he took it, as
a form of compensation for building up a new drug development unit on the
island instead of in the US.
The extreme version of criticism of Decode - that it has done little good
science, that its methodology is flawed - is unfounded. Decode has been
widely praised for identifying a gene linked to schizophrenia
susceptibility, and for a high-resolution map of gene markers. The question
is, whether the science justifies the approach the Icelandic government has
taken. By giving a listed company control over such an ethically delicate
resource, Oddsson risks sacrificing his people's altruism to the fickle
gods of the market.
Icelanders' genetic homogeneity is something of a myth - contrary to what
Hitler, who yearned to conquer it, thought, it is not a country of blonde,
blue-eyed giants. They all look different - tall and short, fat and thin,
cute and rough - and blonde hair is less common than in Denmark. The era of
the mail-order bride means that there are now hundreds of women of
Filippino extraction in Iceland, busily having children with their new
The obsession with genealogy, however, is real. It is possible to trace
ties far across and far up the family tree. This enables Decode to create
three linked databases: one recording the way in which everyone in Iceland
is related, another of medical records, and a third - to which people must
voluntarily opt in - of blood samples, which yields an individual's
particular pattern of genes. Due to the way genes are shuffled when they
are passed from generation to generation, Decode can use the databases, a
map of known waypoints on the genome, and some clever software to work out
whether a particular stretch of DNA is linked to a disease, and where that
It is an approach that has already yielded results, and some revenue as a
result of partnerships with drugs companies such as Roche of Switzerland.
But can it be profitable? Linkage analysis, as Decode's technique is known,
can be carried out anywhere and thousands of scientists in academia and the
commercial sector have long been doing so. Some argue that Iceland's
population is too small to provide a good sample. Most diseases are not
caused by genes but by the interaction between genes and the environment,
and Stefansson is not getting lifestyle data on Icelandic citizens to mesh
into the other databases. And, curiously, Decode has yet to actually begin
digitising the medical records.
I meet Stefansson again two days after our first meeting. He apologises for
his temper the first time around, but still can't quite keep the lid on it.
The question that intrigues me is why it was necessary for Iceland to allow
its genetic treasurehouse, if such it is, to become a commercial monopoly.
The government could have put Stefansson in charge; they could have had a
reverse brain drain of scientists to Iceland, they could have had the same
level of partnership income as Decode is getting from companies like Roche,
but in a conventional, state-owned, academic institution. Even without the
issues of consent, why trust the market to deliver high-level, fundamental
science, as opposed to drugs?
Stefansson is having none of it. He contrasts the rival public and private
efforts to sequence the human genome, saying that the private sequencing,
led by Craig Venter's Celera, has been cheaper and quicker than its
publicly-funded counterpart. When I suggest that the public sequencing had
not cost $4bn, as he said, and that many scientists consider Venter would
not have reached its goal without using data from the public project, he
explodes. "I don't understand why I'm wasting my time talking to you when
you haven't done your homework," he says.
He unleashes his full contempt for his colleagues at the University of
Iceland. "I'm absolutely convinced that a partnership with the government,
let alone a partnership with this lethally bad university here in Iceland,
would have been disastrous. You have to realise this university has all
kinds of obligations ... for example, you can't fire a professor - that
seems to be particularly difficult."
With its stock market value now lower than its cash in the bank, Decode
looks vulnerable to a takeover bid but, for the time being, Stefansson is
safe in the love of the government, and continues to have the wary respect
of the people. But it is not necessarily an informed respect.
As one victim of the grey market says: "The reason I don't want to blame
Decode is because I don't understand what it is that they do."
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