deCODE's lay-offs: market saturation, or just one struggling company?

Eye on DNA's Hsien-Hsien Lei notes the recent lay-off of around 60 employees from deCODE genetics, the company responsible for personal genomics venture deCODEme. In a press-release quoted by Hsien, deCODE CEO Kari Stefansson suggests that this is a broader omen of things to come within the personal genetics community:

It is natural for us to operate the company in such a way that we can make the money that we have last longer than what we had expected to begin with. These are very simple and clear operational standpoints and it would even be wise for other companies in our community to follow our example.

Hsien goes on to suggest that deCODE's troubles may stem from a premature expansion of the personal genetics market in the absence of real consumer demand:

Perhaps this is an indication that the market is starting to experience saturation in the number of companies and services being offered yet has not seen a concomitant rise in the number of consumers willing to pay for personal genomic services.

I'm sceptical that the personal genetics market is anywhere near saturation at this stage. Instead, deCODE's problems seem to stem from poor strategic decisions (or, more charitably, from long-term investments in R&D that are yet to bear fruit). Bear in mind that this is a company that has never actually made a quarterly profit, and has declared total losses of $600 million since it was founded in 1996. This quarterly report from September 2007 tells the story:

We incurred a net loss of $63.1 million and $62.2 million for the nine-months ended September 30, 2007 and 2006, respectively, and $85.5 million for the year ended December 31, 2006, and had an accumulated deficit of $598.8 million at September 30, 2007. We have never generated a profit and we have not generated revenues except for payments received in connection with our research and development collaborations with Roche, Merck and others, from contract services, Emerald BioSystems products and instruments, and under grants. [...] It may be several years before product revenues materialize, if they do at all. As a result, we expect to incur net losses for several years. If the time required to generate product revenues and achieve profitability is longer than we currently anticipate or the level of losses is greater than we currently anticipate, we may not be able to continue our operations.

I don't get the feeling that deCODE's fundamental problem is market saturation - it's just running out of money because it's failed to turn a huge investment in research into marketable items. But hey, I'm no market analyst, and I'd be very interested in hearing about this from experts (calling David Hamilton?).

Hsien finishes with an excellent point about the need for personal genetics companies to sell the wider public on the utility of their products:

In any case, while 23andMe and Knome focus on the rich, famous, and elite, there is a great need to show the general public how genetic testing of all types is relevant to their everyday lives. There aren’t enough millionaires like Dan Stoicescu to fund the entire personal genomics market. Until genetic testing is widely adopted for a variety of commercial uses by a greater segment of the consumer population, the pot of profits will not be big enough to share. In 2008, we will surely see companies drop out and others consolidate.

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