High winds and cold rain certainly make a first impression – and that was even before I’d picked up my luggage. But the welcome I received on that first trip to Iceland was — in many ways – far warmer than the reception we received at big pharma, over the next few months.
I joined deCODE genetics in July of 2010 to head up business development, a clearly necessary tool in the turnaround of this once-powerhouse of human genetics. deCODE had been founded in 1996, and then essentially wrapped up its first incarnation (read: gone bankrupt and been recapitalized) at the end of 2009. The mission that lay ahead of CEO Kari Stefansson, myself, and the deCODE team was to realize – this time — the founding premise of this grand experiment: that human genetics could directly improve the endeavor of discovering new drugs – that it was, indeed, ready for primetime.
In the almost three years since deCODE’s acquisition by Amgen in December 2012, I’ve reflected on the path that we took to get there – one that involved much skill, lots of luck, personal relationships and chance encounters.
At its core, though, was a change in the ready-for-prime-time-ness of human genetics — an area of scientific exploration that had been generating interesting data and some measure of insights for decades, but that had provided but a small portion of the biological knowledge required to discover and develop new cures for patients – not the revolution that so many first expected from whole-genome analysis using SNP maps, or that was so highly trumpeted by scientists looking for backers of the human genome project.
In deCODE’s first incarnation, human genetics was clearly bleeding edge. Fortunately, in its second one, it was leading edge instead.
As for that first incarnation – separate even from deCODE itself, one need only consider the excitement about – and then disappointment with — the Human Genome Project, or Celera’s rise and fall (and eventual $345 million sale to Quest Diagnostics in 2011). And, perhaps resulting from institutional memory of these times, we could convince neither of the players who had the two major deals with deCODE 1.0 – Merck or Roche – to engage with us substantively.
As for the second incarnation, while at the time of the deal, many industry watchers expressed surprise at the $415 million pricetag (e.g., John Carroll’s ‘head scratching’ in FierceBiotech: http://www.fiercebiotech.com/story/amgen-lunges-lead-role-genetics-research-bags-decode-415m/2012-12-10), soon companies like Regeneron were launching their own sequencing projects, Roche was bidding to acquire sequencing leader Illumina, and, and bloggers were lauding the utility of genetics [including LifeSciVC, here. Eventually, even the US government decided to launch its Precision Medicine initiative, one element of which was strikingly close to what deCODE had envisioned almost two decades previously: “development of a voluntary national research cohort of a million or more volunteers to propel our understanding of health and disease and set the foundation for a new way of doing research through engaged participants and open, responsible data sharing.”
What effected this shift from bleeding to leading edge? How much was external to the company and how much was internal? How could investors have better assessed their likelihood of being successful in backing the second vs. the first?
I’ve thought a lot about this topic – not merely because of my deCODE experience. Or because it’s a topic of interest – and value – to both investors and entrepreneurs. But also because I found that the most appealing professional opportunity for me after Amgen bought deCODE was a neuroscience discovery company – talk about an area littered with bleeding edge mistaken for leading.
So, what can we learn from the deCODE case?
In a nutshell lots had changed inside and out of the company, and we were reasonably smart about how we pursued the turnaround strategy. And, of course, were lucky as well.
Inside the company, culture had evolved; a passion for building the platform’s relevance to pharma/biotech drug discovery and development had replaced a previously more go-it alone orientation – all while retaining what was core to deCODE: a focus on doing the best possible genetics and statistics. Outside the company, the technologies enabling analysis of human genomes had continued to develop rapidly, driving down the cost and improving the information yield.
Strategy-wise, we took a staged approach, didn’t oversell, but rather connected the dots for folks, and – importantly – used a combination of personal relationships and scrappiness to do a handful of deals that then enabled the quality and utility of what we had to speak for itself.
All of that would have been irrelevant, however, for the fact that:
The science was finally ready for primetime – Kari, I, the investors, and the team realized – at the time of the turnaround – that we had an extraordinary advantage compared to every other group and institution in the world, at that moment. The combination of the detailed SNP maps that deCODE had built in its first go-round (i.e., when the science wasn’t ready for primetime – since SNP maps by their very nature focus on common variants; and common variants are of limited utility when it comes to genetic validation of possible targets) and the decrease in the cost of DNA sequencing meant that deCODE effectively had a 100 times advantage over any other group in identifying rare variants – that special sauce in human genetic validation of targets. Of course, having the complete genealogy of Iceland and best-in-class bioinformatics capabilities, as well as phenotypic and disease data on a broad set of Icelanders was also integral to this advantage.
Hence, we were able to make our deals count. The very first deal we did yielded discovery of a variant in the APP gene which conferred protection from Alzheimer’s disease, hence validating the concept of BACE inhibitors; and, along with the Genentech team who had been our collaborators on the study, resulted in a Nature publication (Jonsson, et al. Nature 488, 96–99 (02 August 2012).
Immediately after this, folks in pharma and biotech who had been scoping single-disease projects with us, suddenly wanted to talk bigger and broader stuff. Suddenly, acquisition was a much more attractive financial prospect for them, compared to the economics of multiple single disease projects.
We had an exceptional – though not lacking in eccentricity – team. To a man and woman, deCODE’s turnaround leadership team was hungry, willing to learn from experience (including many of those icy first receptions). And, importantly, well-networked — all of our deals resulted from long-standing relationships based on scientific respect, that Kari and I had each developed – in many ways by chance – over decades.
We had backers who were impatient and yet also committed to realizing the vision. When Bob Nelsen of Arch and Terry McGuire of Polaris first re-capitalized deCODE, they knew that there was something special there; as Terry McGuire described in a blog post at the time of Amgen’s acquisition of deCODE, “Kari Stefansson never lost sight of what was truly important, which is pioneering the genome.”
At the same time, they left it to management to determine the most value-creating path – be it diagnostics, drug discovery or informatics. They supported us in evaluating and playing out those paths, but always with a strong impulse for value realization rather than scientific exploration.
Obviously, these characteristics are ones that are translatable to any opportunity – the trick for any investor or entrepreneur being in how to simultaneously (in reference to the above) evaluate (1), build (2), and ensure (3).
Ah, but if it were easy, how much fun would it be? Which is a perfect segue to why Luc Therapeutics managed to get this molecular geneticist to shift her sights and energies to neuroscience. But, you’ll have to wait for the next blog post on that one.