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8-Humans: Interview with deCODE CEO

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                                  PART I
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TITLE:  The Icelandic Man Cometh
SOURCE: Bio-IT World, by John Dodge and Mark Uehling / Kari Steffansson
DATE:   Jan 13, 2003

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The Icelandic Man Cometh

Interviewing Kari Stefansson - the profane, philosophical, and hot-
tempered founder, president, and CEO of Icelandic genomic company deCODE
Genetics - is not for the faint-hearted. His intense irritation over a
clattering laptop almost prematurely curtailed our recent conversation.
Once calm was restored, however, Stefansson discussed his company's
latest efforts in tracking down genes associated with dozens of common
diseases. With government cooperation, deCODE utilizes a genealogy
database of most of the country's 280,000 citizens to track disease
patterns and then analyze DNA samples from affected family members.
DeCODE says it has pinpointed genes associated with 20 major diseases,
including schizophrenia. But Stefansson is feeling the heat as deCODE's
stock price hovers around $2 from a high that tipped $30 a share since it
went public in July 2000. In September 2002, deCODE cut 200 jobs and
posted a third-quarter loss of more than $85 million.

Bio·IT World editors John Dodge and Mark Uehling interviewed Stefansson
in the company's office in Waltham, Mass.

Q: What proportion of the population in Iceland has contributed DNA at
this point?
A: About 80,000 people, or 33 percent of our adult population ... We have
a facility that generates about 15 million genotypes a month. The biggest
output in the States [is the Marshfield Clinic in Wisconsin] with about 8
million genotypes a year. [Soon] we will be generating about 30 million
to 40 million genotypes a month. We are currently genotyping more than
the rest of the world put together. And the reason we can do that is we
have put together software systems that allow us to do automatic allele

Q: Can you describe the software systems?
A: I have no interest in discussing software systems with you. If you
want to see it, just come to Iceland. Don't ask me silly questions like
this. I am not going to describe to you [expletive] software systems!

Q: If I was going to volunteer my DNA and I was an Icelandic citizen, how
would I do it?
A: This is a fairly complex question you are asking. It is a question
with innuendos that do not interest me.

Q: I was not looking for innuendos ...
A: They come naturally to you!

When we are working on specific diseases, we establish relationships
[with those physicians] who are taking care of patients with a particular
disease. They put together a list of patient names. That list is
encrypted by [the Icelandic government's] Data Protection Commission. The
encrypted IDs are sent to us. We call in a representative from the Data
Protection Commission [who encrypts deCODE's genealogy databases using
the same code]. The list [of patients] is cross-referenced with the
genealogy database, and out come family trees with encrypted IDs. We send
that list with the encrypted IDs back to the physicians. They call in a
representative from the Data Protection Commission who encrypts our
genealogy database ...

One day, the Americans are going to put together a system like that.

When the physicians get the list of patients who we feel could help us
solve the problem, they call in the representatives [from the Data
Protection Commission] who decode the list. The physicians who have names
send out letters to patients, asking them to participate. If they are
willing, they are called in and given information on that study and
[asked if] they want to sign an informed consent form. The tubes [of
blood contributed by consenting patients] are labeled with the same
encrypted IDs that we have before, and the tubes are sent to us. This is
a fairly arduous process.

Q: What is the percentage of those not consenting?
A: Nine percent.

Q: Could you do what you're doing in any other country in the world,
given the privacy and social barriers?
A: Yes, I believe we could do this in any country in the world.

The notion that patients and relatives are concerned about privacy when
it comes to biomedical research is simply not correct. I've worked in
[the United States] for 20 years, and I don't remember a single study
where I didn't get at least 90 percent participation rate. Patients and
their relatives are concerned about focus and research on the disease.
They want to see research progress. One of the interesting things is that
when patient organizations visit our company, the first thing they
complain about is the complex third-party encryption system to protect

Q: DeCODE is also a drug discovery company. Is that a new direction, or
has that always been part of your charter since deCODE's inception?
A: The question is, how are you going to turn these discoveries into
monetary value? The idea was always to isolate disease genes to use them
on [their] biological pathways ... The idea has always been to market
some of this to big pharmaceutical companies and then take some of this
and develop it ourselves.

Q: Where does F. Hoffmann-La Roche Ltd. (which signed a $200-million deal
with deCODE in 1998) factor into the equation?
A: Roche is just one of these pharmaceutical companies that we want to
work with. Roche has absolutely no influence on what we do except that
they pay some money for the things we do. We feel that they should pay
more for it, but they are not of the same opinion. We will be signing
more deals in the future with big pharmaceutical companies, but that is
not necessarily the goal. The goal is to bring products to the market. We
will have pharmacogenomics tests on the market within two years. It's
going to take us seven to 10 years to get drugs on the market.

Q: Are other partners on an equal standing with Roche?
A: We don't have other partners on equal standing with Roche. We are
working with Pharmacia [Corp.], which will now be part of Pfizer [Inc.].
We're working with [Applied Biosystems Group] and Applera [Corp.]. We
sold them a software system to do allele-calling on their machine that is
10 times faster than the system they are selling now. We are working with
Vertex [Pharmaceuticals Inc.], and we will be signing more deals in the
future with big pharmaceutical companies (deCODE has since allied with
Merck & Co. to find treatments for obesity - Eds.), but that is not
necessarily the goal. The goal is to bring products to the market.

Q: How much will you rely on partners?
A: The issue is how we are going to survive during these long years until
we have significant products on the market. That is the fundamental
question. We are going to do it in two ways. One is to work with partners
like Roche so they take most of the risk and they also get most of the
upside when there is a drug on the market. The other is by selling
services. We are selling medicine and chemistry services. We are selling
pharmacogenomics studies. We are selling clinical trials. We are selling
software systems that function as services. What you have is two ways of
sustaining ourselves during the time that it takes to develop drugs for
the market. We are going to break even next year because we have to break

Q: What kind of impact did the downward spiral of ImClone Systems Inc.
have on drug discovery?
A: I don't think that ImClone had any impact whatsoever. How can I put
this? There is a problem for our industry and a problem for most
industries because of the place where the market is now. It is much more
difficult to raise money. It is particularly difficult to raise money for
early development because the market does not seem to have any interest.
I'm convinced this is going to have a very negative effect on
biotechnology in the drug industry.

Q: Did ImClone [create this situation]?
A: I don't think ImClone [did]. [Former ImClone CEO Sam Waksal] was one
loser [who was] less than candid. He was not particularly [effective] in
the way he responded to tremendous stress. I don't think that means he is
a bad man or particularly dishonest ... he just cracked. There are many
other things that have happened in biotech and in the pharmaceutical
industry across the board that have undermined the confidence.

Q: How important is deCODE's Neuregulin 1 finding in terms of treating
schizophrenia? (See American Journal of Human Genetics, October 2002,
vol. 71, pp. 877-892. )
A: We have now reproduced this in a lot of populations. It is the most
solid piece of work of the genetics of complex diseases so far. It's a
very, very difficult disease.

Q: What percentage of schizophrenia cases does Neuregulin 1 affect?
A: Of the haplotypes that we have pulled out, it's about 30-some percent
of patients with schizophrenia where we can [trace] the abnormality to
Neuregulin 1.

Q: Will there be a drug out in seven to 10 years that might exploit this
A: I don't know. Let's say that is at least seven to 10 years out. The
beauty and importance of this is if you look at the medications that are
currently used with schizophrenia, they are not likely to influence the
disease process. They attack [only] the symptoms. Schizophrenia is indeed
a progressive disease. It's a disease where the patient deteriorates over
years. The beauty of this discovery is that it may lead us to not only
attack the science and symptoms, but to influence the focus of the disease.

Q: How far along are you with developing diagnostic products?
A: DNA-based diagnostics is a whole sort of new chapter because these are
the tests that allow us to measure the probability that someone is going
to develop a disease. I'm absolutely convinced there are tests that are
going to dramatically [change] the health-care system - shift it from
intervention to preventive health care.

Diagnostics is always going to be half of therapeutics, because you have
to be able to diagnose before you can treat. I think that DNA diagnostics
are not going to lead us into any kind of genetic determinism. They are
not going to decrease our freedom - they are going to increase our freedom.

Q: What have you learned about aging in the Icelandic population?
A: Aging is inherited. [There is] an allele that confers the risk of
becoming more than 90 years of age, but we have not isolated it. That is
one thing we can do in Iceland that you cannot do anywhere else.

We took individuals over 90 years of age and asked, 'Are they related
more to each other than the control groups?' It turned out people 90
years of age were much more related to each other than the control
groups. When you are looking at an entire nation, it basically means
there is a basic component to [longevity] ... Once you are 65 years of
age, if one of your parents became 90 years of age, you have
statistically significantly less probability of dying in the next year
than someone who had parents who died before the age of 90.

Then the question comes up, what the hell have you inherited? Are you
ducking the disease genes, or are you inheriting a positive asset? If you
are avoiding the disease, it would have to be a very complex condition
because the disease genes are so many. So it looks like in Iceland that,
when you look at population of genomics, longevity can be conferred by a
single gene.

We have mapped the gene ... and are in the process of [isolating] the
gene. If you stepped in front of a truck, the longevity gene is not going
to protect you. If you have a mutation of BRCA1 and BRCA2 [breast cancer
genes], the longevity gene is not going to help. So what we are talking
about here is a gene that sends a very strong signal. It's extremely
difficult to isolate a gene like that.

Q: How close are you to pulling out the gene?
A: I don't know that. I've so often been wrong. I have always predicted
that we would be much quicker at isolating the genes than we have been.
That's not because I am trying to mislead people. It's just that I am so

Q: If you isolate that gene, could you create drugs to disrupt the aging
A: Behind this is the question of death. There is a playwright by the
name of William Shakespeare, who was talking about Julius Caesar, who had
a premonition that he would be killed that day. And he answers with the
following passage (gaps filled in courtesy of "Bartlett's Familiar
Quotations" - Eds.):

Cowards die many times before their deaths. The valiant never taste of
death but once. Of all the wonders that I have heard, It seems to me most
strange that men should fear; Seeing that death, a necessary end, will
come when it will come.

... The longevity [gene] is not going to change that. You're going to die!

                                  PART II
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TITLE:  IBM joins genetics firm in drug search
SOURCE: CNET/The New York Times, USA, by Ed Frauenheim
DATE:   Jan 23, 2003

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IBM joins genetics firm in drug search

IBM and Icelandic company Decode Genetics will announce on Thursday a
partnership to offer technology and services for applying genetic
information to the hunt for new drugs.

Under the three-year agreement, the two companies will jointly sell
Decode's system for analyzing genetic, genealogical and clinical data,
running on IBM software and hardware.

The product should be available by the middle of year and is aimed at
pharmaceutical and biotechnology companies, government-sponsored research
organizations, research hospitals and medical care facilities, the
companies said.

IBM, one of the front-runners in the race to provide information
technology to the growing life sciences market, also sees the partnership
as a step toward the goal of more personalized health care. With so-
called information-based medicine, doctors would assess and treat
patients based on their particular genetic makeup.

"This alliance could bring significant business value to drug companies
that are under pressure to design better drugs and get them to the market
faster," said Dr. Caroline Kovac, general manager of IBM Life Sciences.
"More importantly, by delivering on the promise of information-based
medicine, the alliance has the potential to forever change the way
medical care is delivered, with better predisposition and diagnostic
assessments, as well as targeted treatment solutions."

The partnership focuses on Decode's Clinical Genome Miner Discovery
system, a statistics-based application for isolating and analyzing genes
and gene variations associated with particular diseases. The company used
its technology in studies in Iceland, saying it has pinpointed genes and
drug targets in nine common diseases. Iceland is ideal for genetic
research because the population has extensive genealogical records,
according to company representative Edward Farmer. Decode's Genome Miner
system now incorporates statistical lessons from the company's gene-
hunting work, Farmer said.

The Decode system will be paired with IBM hardware, including eServer
pSeries systems running the AIX operating system and xSeries systems
running the Linux operating system. On the software side, the joint
product will feature IBM WebSphere Internet infrastructure software and
DB2 database software. Other components are IBM's DB2 Intelligent Miner
search tool and IBM's DiscoveryLink technology, which sifts through a
range of life sciences databases and provides search results in a
consistent format. The two companies will offer joint consulting and
integration services for the product.

The system also includes technology for protecting individual privacy,
the companies said. The Decode Identity Protection System securely and
automatically makes clinical and genetic data anonymous, the companies said.

Pricing for the integrated product will range from about $800,000 or
$900,000 for a small biotech firm to a couple of million dollars for a
larger customer, said Anne-Marie Derouault, director of business
development for IBM's Life Sciences unit.

The agreement between the companies is not exclusive, Derouault said,
meaning Decode may sell its software to run on technology platforms other
than IBM's. But Decode will recommend IBM technology to customers, and
also use a majority of IBM products for its internal IT needs, Derouault said.

Besides helping researchers home in on key genes or drug therapies, the
joint product also might help identify patients for clinical trials more
effectively, the companies said. In particular, the system might help
with what Derouault called "drug rescue"--when a drug has failed Food and
Drug Administration tests, but may be appropriate for a smaller group of
people with a similar genetic makeup. "Maybe we actually missed a drug
that would be very good for a subset of the population," she said.

A bright spot for IT IBM's vision of personalized, information-based
health care is probably a few years away, said Michael Swenson, an
analyst with market research firm IDC. But he called the Decode deal a
sound one for IBM. It's a "fairly important step for them because they
didn't have really good coverage in the clinical space," Swenson said.

IDC ranks IBM near the top of the heap when it comes to outfitting life
sciences organizations with information technology. IBM pulled in $1.36
billion in life sciences sales in 2001, according to IDC, while Hewlett-
Packard and Compaq Computer--now merged--combined for $1.77 billion. Dell
Computer ranked third with $821 million.

With its drive to find lucrative new drugs and the need to make sense of
growing mounds of genetic data, the life sciences market is among the
bright spots for IT companies trudging through an economic slump. IDC
predicts IT spending in the life sciences will jump from $12 billion in
2001 to $30 billion in 2006--or average annual growth rate of about 17

IBM's Decode partnership is part of a three-pronged approach to the life
sciences, Derouault said. First, the company is trying to handle the
industry's supercomputing needs. Last fall, IBM announced a win in this
area by landing a deal to install a cluster of servers to run the
operations of life sciences company Applera.

Second, Big Blue is seeking to make headway in the data management arena
with partnerships like the Decode deal. IBM also has an alliance with
Applied Biosystems, a division of Applera that sells software and
laboratory equipment to biotech companies. Derouault said teaming with
Decode will complement the offering of that earlier partnership.

Third, IBM is aiming to help companies with the task of achieving
compliance with regulatory and clinical guidelines, and has linked up
with partners including document management software company Documentum.

Although Decode and IBM are still working on integrating their
technology, they have a few prospective customers, Derouault said. Some
are biotech companies, and some are research centers, she said.