Decode Genetics announces Q2 2009 financials

deCODE genetics (Nasdaq: DCGN) today announced its consolidated financial results for the quarter ended June 30, 2009. A conference call to discuss these results and recent developments in the company's business will be webcast live tomorrow, Tuesday, August 11, at 8:00am Eastern Daylight Time/12 noon GMT/1pm British Summer Time (details below).

The financial results presented below reflect deCODE's strategic focus on utilizing its leadership in human genetics to develop and commercialize DNA-based risk assessment tests, personal genome scans, and intellectual property. deCODE is pursuing various options aimed at underpinning and advancing product development and commercialization in this core business. One likely component of this effort is the sale of some or all of deCODE's US medicinal chemistry and structural biology units. Although these units continue to operate and contribute to deCODE, in view of their prospective sale the company has accounted for these businesses as "discontinued operations." With the exception of combined net loss figures, the operating results discussed below are thus all for deCODE's continuing operations in its core business of employing the company's capabilities in gene discovery to advance DNA-based diagnostics, personal genome analysis, intellectual property licensing opportunities, and contract genotyping. The results of operations and related cashflows from deCODE's US operations, and for the company's core and US operations combined, for the three and six-month periods ended June 30, 2009 and 2008, are broken out in the table at the end of this presentation.

Net loss for the quarter ended June 30, 2009 was $12.1 million, compared to $17.6 million for the second quarter 2008. Net loss for the first six months of 2009 was $24.3 million, compared to $43.6 million for the first six months of last year. Figures for both 2008 periods include non-operating losses resulting from the revaluation of auction rate securities (ARS) then held by the company. Basic and diluted net loss per share was $0.20 and $0.39 for the second quarter and first six months of 2009, respectively, compared to $0.29 and $0.71 for the same periods last year. At June 30, 2009, the company had approximately 61.8 million shares outstanding. For continuing and discontinued operations combined, net loss for the quarter ended June 30, 2009 was $13.1 million, compared to $18.4 million for the second quarter 2008. Net loss for the first six months of 2009 for combined operations was $25.8 million, compared to $45.0 million for the first six months of last year. Basic and diluted net loss per share for combined operations was $0.21 and $0.42 for the second quarter and first six months of 2009, respectively, compared to $0.30 and $0.73 for the 2008 periods.

Revenue for the second quarter 2009 was $3.5 million, versus $9.0 million for the second quarter last year. Revenue for the first half of 2009 was $7.6 million, compared to $18.1 million for the first half 2008. These figures reflect the impact of lower year-on-year contract service revenues. At June 30, 2009, the company had $21.3 million in deferred revenue, to be recognized over future reporting periods, including the upfront payment from the Celera partnership signed in April.

Research and development expense for proprietary programs was $2.8 million for the second quarter of this year, compared to $8.0 million for the same period last year. For the first six months of the year, research and development expense was $6.9 million in 2009 and $20.6 million in 2008. Selling, general and administrative expenses were $4.3 million for the second quarter 2009, compared to $5.9 million for the second quarter 2008, and $8.6 million for the first half 2009 versus $11.7 million for the first half of last year. These figures reflect the company's current focus on controlling costs in its core genetics activities creating intellectual property and novel content for its diagnostic tests, deCODEme scans, and outlicensing opportunities, as well as costs related to the restructuring of the company.

At June 30, 2009, the company had cash and cash equivalents of $3.8 million, compared to $3.7 million at December 31, 2008. In early 2009 the company sold its ARS for approximately $11.0 million in cash, and in April the company signed licensing agreements with Celera Corporation under which it received an upfront payment and will receive royalties on sales of Celera testing products and services incorporating deCODE genetic risk markers. The company believes it has sufficient resources to fund operations only into the latter half of the third quarter. It is simultaneously pursuing several options to ensure sufficient funding to take it to the execution of strategic options that can support the near- and longer-term viability of its core business.

"As the focus of our healthcare system shifts toward prevention, measuring and controlling individual risk of disease will become a central part of everyday medicine. DNA-based risk assessment tests and personal genome scans such as those we have developed offer a novel and personalized means of more accurately gauging risk. The goal of our strategic review is to recast deCODE as a diagnostics company positioned to lead in this growing new market. Over the past quarter we have made our gene discovery engine more efficient, and shown that it continues to be second to none in delivering the content required to create effective genetic risk tests for common diseases. We are also advancing our strategic negotiations on several fronts, including the sale of our US medicinal chemistry and structural biology units; finding buyers or licensing partners to take forward our therapeutics programs; additional licensing deals for our intellectual property and diagnostic tests; and securing new equity financing. All of these are steps towards the same goal: to provide the company with the operating structure and financial means to advance a product portfolio that we believe will play an important role in improving healthcare," said Kari Stefansson, CEO of deCODE.

Recent operating highlights include: Corporate and Product Development - Celera. In April, deCODE entered into agreements with Celera Corporation under which it has granted Celera non-exclusive worldwide licenses to deCODE's genetic markers for increased risk of major cardiovascular and metabolic diseases, including heart attack, stroke, atrial fibrillation (AF) and type 2 diabetes (T2D). Celera plans to incorporate them into risk assessment and testing services offered by its subsidiary Berkeley HeartLab, and deCODE will receive royalties on sales of tests and services utilizing its markers. - deCODE AF(TM). The company continued to expand the predictive power and clinical utility of its reference laboratory test for measuring risk of atrial fibrillation (AF) and stroke. Last month, deCODE scientists published the discovery of another common single-letter variation (SNP) in the sequence of the human genome conferring risk of AF and stroke. More than a third of people of European descent carry at least one copy of this new SNP on chromosome 16, putting them at more then 20% greater risk of AF and stroke than non-carriers. - Gene discovery. deCODE continues to reinforce its global leadership in the discovery of genetic risk factors for common diseases. In June, a deCODE team presented several new common SNPs linked to risk of skin cancer, three of which appear to confer risk through underlying mechanisms that are not modulated by sensitivity to the UV radiation in sunlight. These variants were integrated into the deCODEme(TM) and deCODEme Cancer(TM) scans, and one in particular, located in the keratin 5 gene, may make a promising drug target. In another study, deCODE scientists discovered a SNP on chromosome 21 that modulates risk of both kidney stones and osteoporosis. As both conditions are related to dysfunctional calcium metabolism, this finding may mark a new pathway for drug discovery. deCODE has also led the largest ever study of the genetics of schizophrenia, and, last month, the deCODE team and colleagues from the SGENE consortium published the discovery of several novel common SNPs linked to increased risk of the disease. - CAP Certification. Supporting the company's efforts to broaden the marketing and reimbursement of its DNA-based risk assessment tests, deCODE's CLIA-registered DNA isolation and genotyping laboratory has been accredited by the American College of Pathologists (CAP). The laboratory processes the company's deCODEme(TM) personal genome scans and risk assessment diagnostic tests. The US Centers for Medicare and Medicaid Services (CMS) has granted the CAP Laboratory Accreditation Program deeming authority, and its accreditations can also be used to meet many state certification requirements. Finance - Nasdaq Global Market reinstatement. In June, the listing of deCODE's common stock was reinstated to the Nasdaq Global Market. The reinstatement followed the Nasdaq Hearing and Listing Review Council's reversal of a decision in February by the Nasdaq Listing Qualifications panel under which the listing of deCODE's common stock was transferred to the Nasdaq Capital Market. Subsequent Events - On July 30, 2009, deCODE's stockholders approved the increase in deCODE's authorized shares of common stock from 150,000 to 1,150,000 and also approved the amendment of its Amended and Restated Certificate of Incorporation to allow for a reverse stock split at the discretion of deCODE's Board of Directors. These steps position the company to bring in new equity investment and to renegotiate its debt.