Firm that led the way in DNA testing goes bust

Icelandic company made brilliant discoveries but was unable to profit from them

Personal DNA testing to diagnose and cure disease – often touted as the future of medicine – was dealt a blow yesterday as the company that pioneered the technique filed for bankruptcy.

DeCODE Genetics, based in Reykjavik, Iceland, fell victim to the global credit crunch and the collapse of Iceland's financial system as it struggled to compete against rival personal genetic-testing services.

The collapse of the firm, which was one of the first in the world to offer DNA testing for disease risk, was described by the pressure group Genewatch UK as "not just the collapse of a company, [but] the collapse of an idea".

However, although DeCODE Genetics was brilliant at making new scientific discoveries – published in a series of papers in Nature magazine – it never found a way of profiting from them.

It invested heavily in research which revealed hundreds of DNA variations linked to common conditions such as heart disease, cancer and diabetes. But translating these into an individual risk proved harder.

Most diseases are influenced by dozens, if not hundreds, of genes and those identified raised people's risk only slightly. In many cases, unknown genes and environmental factors were proved more significant.

The company's personal genetic-testing service – deCODEme – was up against a dozen others offered by rival companies, including Google's 23andMe, which now dominates the market.

While scientists say the tests hold great promise for the future, enabling drugs and treatments to be more accurately targeted to those who will respond to them, existing versions have been criticised as expensive, misleading and a waste of money.

Helen Wallace, director of Genewatch UK, said: "Diseases often run in families due to shared lifestyles, environments and incomes, not because of genes. Genetic horoscopes are much less reliable than predictions of the weather, because biology is complex and poorly understood."

Dr Wallace conceded that DeCODE Genetics had played a "leading role" in identifying genetic factors underlying disease. But she criticised the gene tests it sold directly to the public. "Using a tape measure and a set of bathroom scales gave a better prediction of the risk of developing Type 2 diabetes than DeCODE's genetic test."

Genetic testing has proved valuable for families affected by rare inherited forms of diseases, such as breast cancer. But there has been concern about testing individuals who may be unaware they have a fatal inherited disease, without proper counselling.

The hype over genetic testing began with the launch of the project to map the entire human genome. In 2003, ministers claimed that genetic tests to predict common diseases would soon be developed and proposed that every baby should have its genome sequenced at birth.

The promise of personalised medicine has since been used as a marketing tool to sell supplements, medicines, functional foods and skin creams, ostensibly based on consumers' genetic make-up.

DeCODE was founded in 1996 on the back of a deal with the Icelandic government that allowed it to build up a database of genetic and medical information from 100,000 people – more than half the country's population. It used the information to link common genetic variations to disease, and to develop several diagnostic tests.