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Former deCODE VP takes the stand

Hakonarson testifies deCODE loses partnerships because Stefansson won't share corporate information

By | October 16, 2006

A former vice president at deCODE Genetics Inc. testified in U.S. District Court in Philadelphia on Friday that the Icelandic biotech firm has been eager to line up new partnerships with other drug development and research firms, but potential deals have died because the company's chief executive refused to share corporate information with possible partners. Hakon Hakonarson, who had been the firm's vice president of business development, said deCODE CEO Kari Stefansson wanted to form more development deals with other firms, but was not willing to share enough corporate information for serious negotiations to continue. "Dr. Stefansson was always conservative and somewhat insecure about sending information, even if it was under a confidentiality agreement," said Hakonarson. deCODE has sued Hakonarson for allegedly stealing trade secrets when he defected from the firm earlier this year to become director of the new Center for Applied Genetics at The Children's Hospital of Philadelphia (CHOP). The center plans to genotype 100,000 children and develop new treatments with private-sector partners. In its case against Hakonarson and four other former deCODE employees, the company alleges thousands of computer files were stolen from deCODE with the intention of duplicating the company's business model and operations at CHOP in order to compete directly with deCODE. The company is seeking a preliminary injunction to enforce employment contracts that would prevent its former scientists from working at CHOP for two years. CHOP's lawyer, William Hangley, elicited responses from Hakonarson indicating that earlier this year, deCODE was in need of new outside partners because some key revenue-generating relationships were winding down. An agreement with Roche Diagnostics was set to expire at the end of June, while another clinical trial program with Merck was in effect, but inactive, Hakonarson testified. He also said he had tried to get Cephalon interested in taking a larger role in deCODE. Bayer was invited to work on clinical trials for a cardiovascular drug, but the deal never happened, Hakonarson testified. Earlier this month, deCODE announced it was discontinuing work on the drug because of problems with the formulation. Hakonarson said he became alarmed earlier this year when he saw other biotechs forming partnership deals even though he felt deCODE had a superior pipeline. "I felt we had significant resources and we could not get this done because Dr. Stefansson never allowed it to materialize." Hakonarson's testimony also touched on computer files. A forensic computer expert hired by deCODE to analyze its systems gave earlier testimony that Hakonarson or people using his login identity and password copied at least 46,795 files from the Hakonarson folder on the deCODE home directory. "In all reasonable probability, those files were written to the Western Digital 250GB external hard disk drive or other smaller removable media devices that Hakonarson is known to have used at deCODE," according to a report filed by John F. Ashley, a forensic computer analyst hired by deCODE. In his testimony, Hakonarson described one case in which he did remove files from deCODE computers. He said he took files related to a presentation about gene chip equipment by Illumina Inc., which provides technology to deCODE, off the company's 30-day open file system in late May or early June after Stefansson had asked him to resign. Hakonarson and Stefansson have both testified that even after Hakonarson announced he would be taking the job at CHOP in February, the two attempted to work out a collaboration in which Hakonarson would also work part-time for deCODE. Eventually those talks broke down and deCODE filed its suit, which was unsealed Sept. 26. Hakonarson also said he had been in discussions with Cephalon about working as a consultant until he received a letter from deCODE's attorneys this summer. He said the letter contained some inaccuracies, particularly a charge that deCODE first learned about his intention to move to CHOP in July when the center put out a press release. Harkonarson insisted Stefansson knew about his plans in February and said he was concerned the letter was setting him up for legal problems later. "I was concerned Kari had been as a chess player making valuable moves to go forward," Hakonarson said. The complex hearings, which have been before Judge Jan E. DuBois since the suit was unsealed, have been closed frequently as the parties discuss parts of the case they contend are confidential. Hearings are scheduled to resume in November. Susan Warner mail@the-scientist.com Links within this article: deCODE Genetics http://www.decode.com/ Kari Stefansson http://www.decode.com/Company/Management.php S. Warner, "deCODE sues former employees," The Scientist, Oct. 15, 2006 http://www.the-scientist.com/news/display/25040/ The Children's Hospital of Philadelphia http://www.chop.edu/consumer/index.jsp "Large-scale genomics project will hunt genes behind common childhood diseases," CHOP Press Release, June 7, 2006 http://www.eurekalert.org/pub_releases/2006-06/chop-lgp060606.php

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