Kári Stefánsson, chief executive of deCODE Genetics, says investment bank Lehman Brothers is partly to blame for his company's difficulties. Credit: I. Langsdon/Reuters

Beleaguered genomics company deCODE Genetics of Reykjavik, Iceland, is preparing to plead its case to a panel that could grant it a reprieve from being delisted from the NASDAQ stock exchange.

On 18 December, the NASDAQ Listing Qualifications Panel will hear how deCODE plans to comply with the rule that requires a minimum capitalization of US$50 million (See 'Icelandic biotech feels the pinch'). At the close of trading on 10 November, deCODE shares were valued at just $0.40, bringing the deCODE's market capitalization (the number of shares multiplied by the price per share) to $24.75 million.

Delisting would cost the company important access to investors. By securing the hearing, deCODE has pushed back a delisting deadline originally scheduled for 11 November. The NASDAQ panel can grant the company up to 180 days' reprieve from 31 October, the date the panel received notice of DeCode's imminent delisting.

The NASDAQ situation is a symptom of the dire financial scenario the company is facing, says Robin Campbell, a biotechnology-equities analyst at the London office of Jefferies International, an investment bank. If deCODE cannot find new creditors, delay payment on, or refinance, over $200 million in impending debt repayments, he says, deCODE's chances of still being in existence in January are "slim". "There's no easy solution," says Campbell.

Bank blame

Kári Stefánsson, deCODE's founder and chief executive, has said that he blames much of the company's current plight on its now-defunct US banker, Lehman Brothers.

The company handed $33 million to the once-esteemed New York financial services firm to manage. But that money — which has since depreciated to $18.2 million — is now frozen and deCODE is just one among a plethora of Lehman clients left without access to much needed cash reserves.

"These are bonds that are still performing, still paying interest, but they are illiquid for the moment. And that is what is generating the unfortunate situation that we are in now," Stefánsson said during a conference call with investors on Friday 7 November.

deCODE's third-quarter results, announced on Thursday 6 November, show the effect freezing those funds has had. On 30 September, the company had $11.8 million in cash, compared to $23.7 million at the end of June and $64.2 million on 31 December 2007.

"We must obtain further financial resources…to continue operations beyond the end of this year," said Lance Thibault, the company's chief financial officer, in the same conference call.

Spin off for survival

The company has hired the Stanford Financial Group, based in Houston, Texas, to help it quickly identify a path to profitability, by finding buyers for non-core parts of its business and intellectual property, and by sharpening the focus of what remains. The company is also trying to find partners from the pharmaceutical industry.

deCODE is a diverse company, pursuing drug discovery and diagnostics. Its diagnostics business offers genetic tests for six common diseases including breast and prostate cancer, as well as personal-genome analysis through deCODEme, launched one year ago. It was largely the diagnostics division that drove the company's revenues for the first nine months of 2008 to $42 million — $15 million higher than during the same period in 2007.

Stefánsson suggested during the conference call that part of the business may be spun off, in the interests of the company's survival. "It is distinctly possible that the right path forward is to make the company more focused — focused on one rather than on two of our major areas of business."

deCODE's troubles mirror those besetting many companies, not least other biotechnology firms, in a dismal economic climate. And some say that whatever its financial problems, the company deserves credit as a pioneer. "It has been the leader of companies and of academic research institutes in the genetics and genomics of common and complex disease research," says Myles Axton, the editor of Nature Genetics, which has published over 25 papers from deCODE since 2002.

Credit: I. Langsdon/Reuters