Lance Stewart woke up many times over the past two years, and asked himself, “How did I get here?”
He had reason to be confused. Stewart had spent more than a decade building one of the world’s best structural biology research teams inside a light manufacturing facility on Bainbridge Island, WA. Revenues had climbed every year. His team of 40 people had an A-list crew of customers that included Merck, Johnson & Johnson, and the National Institutes of Health. Most importantly, his Emerald BioStructures operation had been profitable for years.
Yet there he was in October 2008, staring into the abyss. His parent company, Iceland-based deCode Genetics, was in big trouble. While deCode CEO Kari Stefansson was great at generating attention for the company’s groundbreaking genetic discoveries, its free-spending ways also had created a mountain of more than $300 million in debt. About a third of the assets the parent company had left were invested in auction-rate securities with Lehman Brothers. The country of Iceland itself, where deCode was based, had been teetering on the edge of bankruptcy. When it became obvious that much of deCode’s cash had vanished with the implosion of Lehman, deCode sought advice on how to survive from the Stanford Group. Bankers there started helping Stewart figure out how to avoid getting shut down through a deCode bankruptcy.
Then about six months later, the SEC accused Stanford of running an $8 billion fraud.
“One day we called, and they [Stanford] just didn’t answer,” Stewart says.
Through this Kafkaesque financial ordeal, Stewart’s scientific team knew the pressure was on to show they were worth more than just collateral with a bunch of expensive equipment that needed to be sold fast to pay down debt. They kept doing their work, meeting deadlines over the next 12 months. In the end, when deCode Genetics filed for bankruptcy last November, Emerald BioStructures found a way to stay intact through a divorce from its corporate parent.
The lifeline came through an undisclosed amount of financing that included three key players in the Boston area—Gemini Investors, Kendall Square Partners, and one of New England’s biotech highfliers, Cambridge, MA-based Forma Therapeutics. Emerald, through its rebirth as an independent company, said nothing publicly about what happened behind the scenes. The company said in a statement that it would remain “committed to serving a global customer base with world class service.”
It would have been a real shame if Emerald had been sliced up and sold for parts, according to Steven Tregay, the co-founder and CEO of Forma.
“Emerald has built one of the world’s premier X-ray crystallography capabilities,” Tregay says. “Occasionally you find great teams that have been high performers for a long time. The throughput these guys have is truly astounding.”
Stewart recently sat down to tell me the story, about six months after Emerald survived its brush with death. He still sounds amazed at how he got into such a jam in the first place. “We were always profitable, and we were steadily growing our revenue.”
He added: “This is a pretty wacky business.”
The Emerald story actually has even more dramatic twists and turns if you trace it to the beginning. The company was co-founded in 1998 by Stewart and Hidong Kim. At the time, Stewart was
