By Brady Huggett
The deal between population genetics company deCode Genetics Inc. and F. Hoffmann-La Roche Ltd. for DNA-based diagnostics could land deCode as much as $300 million.
The five-year agreement isn¿t new ¿ the letter of intent was signed in March ¿ but the $300 million valuation is. When the companies agreed to work together in the spring, financial details of the deal were not disclosed, remaining between Reykjavik, Iceland-based deCode and Basel, Switzerland-based Roche. Now, however, how much the deal could help deCode fiscally is clearer to the public. (See BioWorld Today, March 7, 2001.)
¿As far as the impact on our companies, [the deal] will very, very dramatically increase our R&D funding,¿ deCode CEO Kari Stefansson said. ¿It will come close to doubling it.¿ Also, Stefansson said the royalties involved should bring in significant revenue down the road, but he declined to break the deal down further.
The companies will develop DNA-based diagnostics, predisposition screening products and expect to develop point-of-care informatics products to help doctors evaluate the results of the diagnostic tests. Stefansson said the foray into diagnostics is ¿a natural extension, or natural addition¿ to the work in genetics deCode has done in the past. Also, it puts the companies at the forefront of where he said medicine is heading.
¿We will be doing predictive testing for the development of disease,¿ he said. ¿We want to help people that are healthy and see how likely it is that they will get ill. I think we will see a shift more and more into preventive medicine.¿
Stefansson said one way to deal with the escalating costs of health care is through preventive medicine, testing for predisposition to diseases and stopping afflictions before they start. But, like with many new trends, there are glitches to be addressed.
¿How do you define the need when you are going into a new area?¿ Stefansson said. ¿Who is going to pay for predictive testing? Those are the questions.¿ Stefansson said preventive medicine ¿has enormous implications, for both the long term and the short term in our society.¿
And how the population readies itself could shape the collaboration, Stefansson said.
¿We will be working with many diseases, but which one will be selected first or how soon we can get it to market will be dictated by how quickly society will be able to accept this,¿ he said, adding that he didn¿t find the prospect of getting something to market in three years unrealistic.
DeCode signed with Roche in 1998 to discover disease genes in a deal valued at $200 million. In February, the companies said they had moved to the drug discovery stage in that collaboration, a jump that triggered milestone payments to deCode. That work, done with the pharmaceutical wing of Roche, has progressed well and greased the tracks for the deal with Roche¿s diagnostic arm, Stefansson said. (See BioWorld Today, Feb. 3, 1998, and Feb. 15, 2001.)
¿It has gone better than I would have dared to hope,¿ he said. ¿We¿ve pulled out disease genes and they have been taken into the drug discovery stage in [Roche¿s] organization.¿ Because of that work, Stefansson said, those at Roche¿s diagnostic division ¿had a very easy time doing due diligence on us.¿
But, just because deCode now potentially has half a billion dollars in deals with Roche, that doesn¿t mean deCode isn¿t looking elsewhere.
¿Roche is a customer of ours and it comes easy for us to market out stuff with them,¿ Stefansson said. ¿They¿ve been a stellar organization to work with. But we will continue to see alliances with others.¿
DeCode¿s stock (NASDAQ:DCGN) fell $2.41 Monday, or about 20 percent, to close at $9.90. The stock, however, closed Friday at $12.31, up about 42 percent from Thursday¿s close of $8.65.