<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q



(Mark One)


[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT


FOR THE TRANSITION PERIOD FROM _______________ TO _______________



                        COMMISSION FILE NUMBER 000-30469



                              deCODE genetics, Inc.
             (Exact Name of Registrant as Specified in Its Charter)



<TABLE>
<S>                                        <C>
            Delaware                                    04-3326704
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
 Incorporation or Organization)
</TABLE>



                         Lynghals 1, Reykjavik, Iceland
                    (Address of Principal Executive Offices)



                                  +354-570-1900
              (Registrant's Telephone Number, Including Area Code)



Indicate by check whether the registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceeding 12 months (or such shorter period that the registrant is required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes _X___ No ______



The aggregate number of shares of the registrant's common stock outstanding on
April 16, 2001 was 45,018,378.
<PAGE>   2
                              deCODE genetics, Inc.

                                      INDEX

<TABLE>
<CAPTION>
                                                                        Page Number

<S>                                                                     <C>
PART I. FINANCIAL INFORMATION ........................................       3

Item 1. Financial Statements .........................................       3

        Condensed Consolidated Statements of Operations for the
          three months ended March 31, 2001 and 2000 (unaudited)......       3

        Condensed Consolidated Balance Sheets as of March 31, 2001
          (unaudited) and December 31, 2000 ..........................       4

        Condensed Consolidated Statements of Cash Flows for the
          three months ended March 31, 2001 and 2000 (unaudited)......       5

        Notes to Condensed Consolidated Financial Statements .........       6

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations ....................................      11

Item 3. Quantitative and Qualitative Disclosures about Market Risk ...      15


PART II. OTHER INFORMATION ...........................................      15

Item 1. Legal Proceedings.............................................      15

Item 2. Changes in Securities and Use of Proceeds ....................      16

Item 3. Defaults Upon Senior Securities...............................      17

Item 4. Submission of Matters to a Vote of Security Holders...........      17

Item 5. Other Information.............................................      17

Item 6. Exhibits and Reports on Form 8-K .............................      17

        (a) Exhibits .................................................      17

        (b) Reports on Form 8-K ......................................      17

Signatures ...........................................................      18

Index to Exhibits   ..................................................      19
</TABLE>



<PAGE>   3
PART I   FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


                              deCODE genetics, Inc.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                FOR THE THREE MONTHS ENDED MARCH 31,
                                                -----------------------------------
                                                     2001               2000
                                                  ------------      ------------
                                                   (UNAUDITED)       (UNAUDITED)
<S>                                             <C>                 <C>
REVENUE
  Research collaborative contract ...........     $  5,006,667      $  4,437,222
  Other revenue .............................           26,319           181,164
                                                  ------------      ------------
          Total revenue .....................        5,032,986         4,618,386
OPERATING EXPENSES
  Research and development ..................       20,215,301         9,234,368
  General and administrative ................        3,003,556         2,946,337
                                                  ------------      ------------
          Total operating expenses ..........       23,218,857        12,180,705
                                                  ------------      ------------
Operating loss ..............................      (18,185,871)       (7,562,319)
Interest income .............................        2,620,229           771,592
Other non-operating income and (expense), net         (522,121)         (107,412)
Taxes .......................................                0                 0
                                                  ------------      ------------
Net loss ....................................      (16,087,763)       (6,898,139)
Accrued dividends and amortized discount on
   preferred stock ..........................                0        (2,379,378)
                                                  ------------      ------------
Net loss available to common stockholders ...     $(16,087,763)     $ (9,277,517)
                                                  ============      ============

Basic and diluted net loss per share ........     $      (0.37)     $      (1.25)

Shares used in computing basic and diluted
   net loss per share .......................       43,926,058         7,419,439
</TABLE>


The accompanying notes are an integral part of the condensed consolidated
financial statements.



<PAGE>   4
                              deCODE genetics, Inc.

                      CONDENSED CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                        MARCH 31,          DECEMBER 31,
                                                          2001                2000
                                                       -------------      -------------
                                                       (UNAUDITED)
<S>                                                    <C>                <C>
ASSETS
Current assets:
  Cash and cash equivalents ......................     $ 172,127,169        194,144,688
  Receivables and other current assets ...........         6,671,146         14,482,336
                                                       -------------      -------------
          Total current assets ...................       178,798,315        208,627,024
Property and equipment, net ......................        41,308,831         37,100,690
Other long-term assets ...........................         3,184,228          3,172,853
                                                       -------------      -------------
          Total assets ...........................     $ 223,291,374      $ 248,900,567
                                                       =============      =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses ..........     $  12,874,074      $  22,957,481
  Current portion of capital lease obligations ...         1,772,593          1,749,807
  Deferred research revenue ......................         3,863,332          4,404,999
                                                       -------------      -------------
          Total current liabilities ..............        18,509,999         29,112,287
Capital lease obligations, net of current portion          2,350,140          2,801,853
Other long-term liabilities ......................           681,060            717,261

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $0.001 par value;
     Authorized: 6,716,666 shares
     Issued and outstanding: none ................                 0                  0
  Common stock, $0.001 par value;
     Authorized: 60,000,000 shares
     Issued:  45,066,969 and 45,041,969 shares
     at March 31, 2001 and December 31, 2000,
     respectively
     Outstanding: 45,018,378 and 45,041,969 shares
     at March 31, 2001 and December 31, 2000,
     respectively ................................            45,018             45,042
  Additional paid-in capital .....................       349,850,143        350,398,909
  Notes receivable ...............................       (11,461,622)       (11,850,953)
  Deferred compensation ..........................        (9,881,004)       (11,568,776)
  Accumulated deficit ............................      (126,841,463)      (110,753,700)
  Accumulated other comprehensive income .........            39,103             (1,356)
                                                       -------------      -------------
          Total stockholders' equity .............       201,750,175        216,269,166
                                                       -------------      -------------
          Total liabilities, and
             stockholders' equity ................     $ 223,291,374      $ 248,900,567
                                                       =============      =============
</TABLE>


The accompanying notes are an integral part of the condensed consolidated
financial statements.



<PAGE>   5
                              deCODE genetics, Inc.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                    FOR THE THREE MONTHS ENDED MARCH 31,
                                                    ------------------------------------
                                                           2001              2000
                                                      -------------      -------------
                                                        (UNAUDITED)       (UNAUDITED)
<S>                                                 <C>                  <C>
Net loss ........................................     $ (16,087,763)     $  (6,898,139)
Adjustments to reconcile net loss to net cash
   used in operating activities:
   Depreciation and amortization ................         2,049,770            814,392
   Equity in net earnings of affiliate ..........           (30,426)                 0
   Amortization of deferred stock compensation ..         1,162,549          2,127,549
   Other stock-based remuneration and
      Stock contributions .......................            52,500                  0
   Accrued interest on receivable from share
      issuance ..................................                 0            893,836
   Loss on disposal of equipment ................         1,607,583                  0
Changes in operating assets and liabilities:
  Receivables and other current assets ..........         7,811,190           (293,059)
  Accounts payable and accrued expenses .........         3,066,593          1,457,473
  Deferred research revenue .....................          (541,667)            27,778
  Other long-term liabilities ...................           (36,201)            25,734
                                                      -------------      -------------
     Net cash used in operating activities ......          (945,872)        (1,844,436)
                                                      -------------      -------------

Cash flows from investing activities:
   Purchase of property and equipment ...........       (20,745,984)        (1,319,180)
   Investment in affiliated company, net ........                 0           (341,436)
                                                      -------------      -------------
     Net cash used in investing activities ......       (20,745,984)        (1,660,616)
                                                      -------------      -------------

Cash flows from financing activities:
  Issuance of preferred stock and warrants ......                 0         32,311,981
  Issuance of common stock ......................                 0             63,000
  Repurchase of preferred stock .................                 0        (17,467,077)
  Forfeiture of common stock ....................               (49)                (1)
  Repayment of notes receivable for common
     stock ......................................           103,313                  0
  Installment payments on capital lease
     obligations ................................          (428,927)          (540,651)
                                                      -------------      -------------
     Net cash provided by (used in)
     financing activities .......................          (325,663)        14,367,252
                                                      -------------      -------------

Net increase (decrease) in cash .................       (22,017,519)        10,862,200
Cash and cash equivalents at beginning of
     period .....................................       194,144,688         29,845,664
                                                      -------------      -------------
Cash and cash equivalents at end of period ......     $ 172,127,169      $  40,707,864
                                                      =============      =============

Supplemental schedule of non-cash transactions:
    Payables related to purchase of property
       and equipment ............................     $           0      $   1,423,000
</TABLE>


The accompanying notes are an integral part of the condensed consolidated
financial statements.


<PAGE>   6
                              deCODE genetics, Inc.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



THE COMPANY

     References in this report to deCODE and "we" and "us" refer to deCODE
genetics, Inc., a Delaware company, and deCODE genetics, Inc.'s wholly owned
subsidiary, Islensk erfdagreining ehf., an Icelandic company registered in
Reykjavik, and its subsidiaries Encode ehf., Cyclops ehf., deCODE cancer ehf.
and Digitalis ehf.

     deCODE is a genomics and health informatics company which applies and
develops modern informatics to collect and analyze data about the Icelandic
population in order to develop products and services for the healthcare
industry. deCODE was founded in 1996 and its facilities are located in
Reykjavik, Iceland, where all of deCODE's operations presently take place.


BASIS OF PRESENTATION

     The condensed consolidated financial statements included herein have been
prepared by deCODE, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The condensed balance sheet as of December 31, 2000 has
been derived from the audited financial statements as of that date, but does not
include all disclosures required by generally accepted accounting principles.
deCODE believes the disclosures included in the unaudited condensed consolidated
financial statements when read in conjunction with the financial statements and
the notes thereto included in deCODE's Annual Report on Form 10-K/A are adequate
to make the information presented not misleading.

     The unaudited condensed consolidated financial statements have been
prepared on the same basis as the annual financial statements and, in the
opinion of management, reflect all adjustments, which include only normal
recurring adjustments, necessary for a fair presentation of deCODE's financial
position, results of operations and cash flows for the periods presented. The
results of operations for the three month periods ended March 31, 2001 and 2000
are not necessarily indicative of the results that may be expected for any other
interim period or for the full fiscal year.


PRINCIPLES OF CONSOLIDATION

     The unaudited condensed consolidated financial statements include the
accounts and operations of deCODE genetics, Inc. and its wholly owned
subsidiary, Islensk erfdagreining ehf., including its subsidiaries. deCODE
conducts all of its operations through Islensk erfdagreining. No dividends have
been paid by this subsidiary. All significant intercompany accounts and
transactions are eliminated upon consolidation. Investments in which deCODE has
significant influence, but does not control, are accounted for using the equity
method.


USE OF ESTIMATES

     The preparation of the unaudited condensed consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
<PAGE>   7
                              deCODE genetics, Inc.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


REVENUE RECOGNITION AND DEFERRED REVENUE

     deCODE's revenues are currently derived primarily from research funding
under the research and collaboration agreement with Hoffmann-La Roche (Roche).
Research funding revenue is recognized on an accrual basis as services are
provided and are recorded with reference to contracted rates. Research funding
payments are not refundable in the event that the research efforts are not
successful. Milestone payments are recorded when acknowledgement of having
achieved applicable performance requirements is received and are recognized as
revenue on a retrospective basis over the contractual term of the agreement with
Roche. deCODE believes that the milestone payments represent additional amounts
of the aggregate total revenue to be earned under the arrangement with Roche,
and that such revenue is more appropriately accounted for over the service
period of the agreement. Accordingly, upon achievement of the milestone, a
portion of the milestone payment equal to the percentage of the collaboration
completed through that date is recognized. The remainder is recognized as
services are performed (generally straight-line) over the remaining estimated
term of the collaboration. Payments received in advance of being earned are
recorded as deferred revenue.


STOCK-BASED COMPENSATION AND REMUNERATION

     Stock-based compensation represents the expense charged in the statements
of operations relating to employee and non-employee stock options granted.
Stock-based remuneration represents the expense charged in the statements of
operations relating to shares of stock issued to non-employees in exchange for
services provided. Stock-based compensation and remuneration are included in the
unaudited condensed consolidated statements of operations in the following
captions:

<TABLE>
<CAPTION>
                                            FOR THE THREE MONTHS ENDED MARCH 31,
                                            ------------------------------------
                                                 2001                   2000
                                             ------------          ------------
                                             (UNAUDITED)           (UNAUDITED)

<S>                                         <C>                    <C>
Research and development expense..........   $    832,730          $    777,946
General and administrative expense........        329,818             1,349,603
                                             ------------          ------------
          Total...........................   $  1,162,549          $  2,127,549
                                             ============          ============
</TABLE>

     In addition, general and administrative expenses in the three month period
ended March 31, 2001 include a charitable contribution of 5,000 shares of common
stock amounting to $52,500.

     In March 2001, deCODE granted 406,000 stock options to employees under the
1996 Equity Incentive Plan (the "Plan"). As of March 31, 2001, 650,000 shares
were available for grant under the Plan.

<PAGE>   8
                              deCODE genetics, Inc.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


COMPUTATION OF NET LOSS PER COMMON SHARE

     Basic net loss per share is computed using net loss available to common
stockholders and the weighted-average number of common shares outstanding. The
weighted-average number of common shares outstanding during the period is the
number of shares determined by relating the portion of time within a reporting
period that common shares have been outstanding to the total time in that
period. Net loss available to common stockholders consists of the following:

<TABLE>
<CAPTION>
                                                       FOR THE THREE MONTHS
                                                          ENDED MARCH 31,
                                                  -----------------------------
                                                       2001            2000
                                                   ------------    ------------
                                                    (UNAUDITED)     (UNAUDITED)

<S>                                               <C>             <C>
Net loss.......................................    $(16,087,763)   $ (6,898,139)
Accrued dividends on Series A, Series B and
   Series C preferred stock....................               0      (2,339,225)
Amortized discount on Series A and
   Series C preferred stock....................               0         (40,153)
                                                   ------------     -----------
Accrued dividends and amortized discount on
   preferred stock.............................               0      (2,379,378)
                                                   ------------     -----------
Net loss available to common stockholders......    $(16,087,763)    $(9,277,517)
                                                   ============     ===========
</TABLE>


     Diluted net loss per share is computed using the weighted-average number of
common shares outstanding during the period, plus the dilutive effect of
potential common shares. Diluted net loss per share does not differ from basic
net loss per share in all periods presented as potential common shares are
antidilutive for all such periods and are, therefore, excluded from the
calculation. Potential common shares excluded from the calculation of diluted
net loss per share as their inclusion would have been antidilutive were:

<TABLE>
<CAPTION>
                                                      MARCH 31,      MARCH 31,
                                                        2001            2000
                                                    ------------    ------------
                                                    (UNAUDITED)     (UNAUDITED)

                                                      (SHARES)        (SHARES)
<S>                                                 <C>             <C>
Preferred stock convertible into shares of
   common stock...................................           0      23,031,525
Warrants to purchase shares of common stock.......   1,167,500       2,048,056
Options to purchase shares of common stock........   1,221,000          15,000
</TABLE>

<PAGE>   9
                              deCODE genetics, Inc.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


COMPREHENSIVE INCOME (LOSS)

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS No. 130), "Reporting Comprehensive
Income," which establishes standards for reporting and presentation of
comprehensive income. This standard defines comprehensive income as the changes
in equity of an enterprise except those resulting from stockholders
transactions. The following table presents the calculation of comprehensive
income as required by SFAS No. 130:

<TABLE>
<CAPTION>
                                           FOR THE THREE MONTHS ENDED MARCH 31,
                                           ------------------------------------
                                                2001                 2000
                                            ------------          -----------
                                            (UNAUDITED)           (UNAUDITED)
<S>                                         <C>                   <C>
Net loss................................    $(16,087,763)         $(6,898,139)
Other comprehensive income (loss):
     Foreign currency translation ......          40,459               (7,817)
                                            ------------          -----------
Total comprehensive income (loss) ......    $(16,047,304)         $(6,905,956)
                                            ============          ===========
</TABLE>


SEGMENT INFORMATION

     Management plans to organize deCODE's main business units along three
avenues of commercialization: discovery services, database services, and
healthcare informatics. Discovery services, or the development and applications
of proprietary bioinformatics tools to discover disease-related genes and
associated drug targets, are currently carried-out in collaboration with Roche
and in deCODE's own research programs. deCODE intends that this business unit
will also ultimately encompass diagnostic and therapeutic products and
pharmacogenomic services. The database services business unit will involve the
construction and commercialization of the Icelandic Health Sector Database
containing non-personally identifiable data from Icelandic healthcare records,
and the deCODE Combined Data Processing system to cross-reference data from the
Icelandic Health Sector Database with genealogical and genotypic data. deCODE
expects to derive revenues from the database business unit by providing services
through the deCODE Combined Data Processing system to pharmaceutical and
biotechnology companies, healthcare providers and other participants in the
healthcare industry. The healthcare informatics business unit will seek to
commercialize bioinformatics tools developed in deCODE's gene and drug target
discovery and database efforts. Products of the healthcare informatics business
unit are expected to include medical decision-support systems designed to assist
the decision making process in the delivery of healthcare and privacy protection
products derived from deCODE's expertise in encryption tools for complex and
sensitive medical and genetic data.

     Through March 31, 2001, deCODE's efforts have been almost entirely directed
toward discovery services. Financial information available for evaluation by
management in deciding how to allocate resources and assess performance is that
of the business as a whole. For these reasons, deCODE has a single reportable
segment. All of deCODE's revenue from inception have been generated in Iceland,
and all of deCODE's long-lived assets are located in Iceland. Roche accounted
for 96% and 99% of consolidated revenue in the three month periods ended March
31, 2000 and 2001, respectively.
<PAGE>   10
                              deCODE genetics, Inc.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


ACQUISITION - DIGITALIS EHF.

     In January 2001, deCODE issued 20,000 shares of it's common stock to
several persons, including four of it's employees, in consideration for all the
outstanding capital stock of Digitalis ehf. (Digitalis), an Icelandic software
company. The acquisition was accounted for using the purchase method, whereby
the total purchase price ($210,000) has been allocated to Digitalis' assets and
liabilities based on estimated fair values on the date of acquisition. The
excess of purchase price over the fair value of the net tangible assets acquired
has been allocated to intangibles that are being amortized using the
straight-line method over two years. The unaudited condensed consolidated
financial statements include the cash flows and results of Digitalis from the
date of acquisition.


LITIGATION

     In January 2000, Thorsteinn Jonsson and Genealogia Islandorum hf., the
alleged holders of copyrights to approximately 100 books of genealogical
information, commenced an action against deCODE in the District Court of
Reykjavik in Iceland. They allege that deCODE's genealogy database infringes
their copyrights and seek damages in the amount of approximately 616 million
Icelandic kronas, or approximately $6.7 million (as of March 31, 2001) and a
declaratory judgment to prevent deCODE from using the allegedly infringing data.
deCODE believes the suit is without merit and intends to defend this action
vigorously; however, the ultimate resolution of this matter cannot yet be
determined.

     In February 2000, Mannvernd, an organization known as the Association of
Icelanders for Ethics in Science and Medicine, issued a press release announcing
its intention to file lawsuits against the State of Iceland and any other
relevant parties, including deCODE, to test the constitutionality of the Act. In
its press release, Mannvernd indicated that it hopes to halt the construction
and/or operation of the Icelandic Health Sector Database. In April 2001, a
lawsuit was filed against the Icelandic Directorate of Public Health but
Mannvernd has not commenced litigation against deCODE; however, the ultimate
resolution of this matter cannot yet be determined.

     In April 2000, Ernir Snorrason, an original stockholder of deCODE, filed a
complaint in the Court of Chancery of the State of Delaware for New Castle
County alleging that deCODE improperly exercised an option to repurchase 256,637
shares of common stock that deCODE issued to Mr. Snorrason in 1996 pursuant to a
Founders' Stock Purchase Agreement. The complaint seeks an order requiring
deCODE to recognize Mr. Snorrason as the owner of these shares. deCODE believes
that it has good defenses to this action and intends to defend it vigorously.
However, given the uncertainties inherent in the litigation process the ultimate
resolution of this matter cannot yet be determined. A trial date has been set
for June 2001.


OTHER

     In February 2001, deCODE settled a payable for laboratory equipment of
$13,150,000, which amount is included in investing cash flows for the purchase
of property and equipment during the three months ended March 31, 2001.


<PAGE>   11
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.


     This Management's Discussion and Analysis of Financial Condition and
Results of Operations as of March 31, 2001 and for the three month periods ended
March 31, 2001 and 2000 should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto set forth in Item
1 of this report.

     This quarterly report on Form 10-Q contains forward-looking statements,
including our expectations of future industry conditions, strategic plans and
forecasts of operational results. Various risks may cause our actual results to
differ materially. A list and description of some of the risks and uncertainties
is contained below and in Exhibit 99.1 to this quarterly report, which
discussion is expressly incorporated by reference herein.


OVERVIEW

     deCODE was incorporated in August 1996. We have incurred losses since our
inception, principally as a result of research and development and general and
administrative expenses in support of our operations. As of March 31, 2001, we
had an accumulated deficit of $126,841,463. We anticipate incurring additional
losses over at least the next several years as we expand our internal and
collaborative gene discovery efforts, continue our technology development and
construction of the deCODE Combined Data Processing system and healthcare
informatics systems. We expect that our losses will fluctuate from quarter to
quarter and that such fluctuations may be substantial especially because
progress in our scientific work and milestone payments that are related to
progress can fluctuate between quarters.

     In February 1998, we entered into a research collaboration and
cross-license agreement with Roche regarding research into the genetic causes of
twelve diseases. Under the terms of the agreement, Roche has made equity
investments and is funding our gene discovery programs in the twelve diseases.
Under the agreement, we may receive a total of more than $200 million in
research funding and milestone payments and will receive royalty payments on the
sale of diagnostic and therapeutic products resulting from the collaboration.
The term of the agreement will continue until February 1, 2003 provided that
Roche elects to extend the agreement for the one-year period commencing on the
fourth anniversary of the agreement. Revenues recognized by us have consisted
primarily of revenues generated under the research collaboration and
cross-license agreement with Roche. Roche constituted 96% and 99% of our total
revenues in the three month periods ended March 31, 2000 and 2001, respectively.

     In May 2000, we entered into a strategic alliance agreement and crosswalk
development agreement with Partners Healthcare System, Inc., The General
Hospital corporation, d.b.a. Massachusetts General Hospital and The Brigham and
Women's Hospital, Inc., (collectively, "Partners") pursuant to which (a) we will
fund research by investigators of Partners pursuant to sponsored research
agreements and/or clinical trial agreements to be entered into from time to
time, (b) we will collaborate with Partners on, and provide funding for,
development of an information technology bridge, called the crosswalk, to
facilitate studies with the deCODE Combined Data Processing system and Partners'
Research Patient Data Registry and (c) we will develop and market, in
consultation with Partners, new information technology products and services
relating to the use of the crosswalk for future pharmaceutical and biotechnology
applications.

     We have a number of collaborative agreements with local medical
institutions and doctors regarding particular disease research. These agreements
generally extend for a period of five years. Under the agreements, these
institutions and/or physicians contribute data or other clinical information and
we contribute equipment, research supplies and our molecular genetics and
experimental design expertise. The agreements also require us to reimburse all
project-related expenses. If we sell project results, the agreements require us
to make specified payments and pay a portion of performance-based milestone
payments that we receive. In addition, we have a settlement agreement with a
U.S. medical institution whereby we are committed to pay royalties and milestone
payments if we are successful in developing and commercializing products which
result from a particular technology jointly owned by us and the medical
institution.

     We anticipate that collaborations will remain an important element of our
business strategy and future revenues. Our ability to generate revenue growth
and become profitable is dependent, in part, on our ability to enter into
additional collaborative arrangements, and on our ability and our collaborative
partners' ability to successfully commercialize products incorporating, or based
on, our work. There can be no assurance that we will be able to maintain or
expand our existing collaborations, enter into future collaborations


<PAGE>   12
to develop applications based on existing or future research agreements or
successfully commercialize the deCODE Combined Data Processing system.

     We intend to invest in all of our three business units, discovery services,
database services and healthcare informatics, and expect to report net losses
for the next few years. If the costs of these investments are greater than
anticipated, or if they take longer to complete, or if losses are incurred from
strategic investments, we may incur losses for a longer period of time.

     Our failure to successfully develop and market products over the next
several years, or to realize product revenues, would have a material adverse
effect on our business, financial condition and results of operations. We do not
expect to receive royalties or other revenues from commercial sales of products
developed using our technologies for at least several years, if at all.

     We have made and intend to continue to make strategic equity investments
in, and acquisitions of, technologies and businesses that are complementary to
our business. As a result, we may record losses or expenses related to our
proportionate ownership interest in such long-term equity investments, record
charges for the acquisition of in-process technologies, or record charges for
the recognition of the impairment in the value of the securities underlying such
investments.

     Our operating results through March 31, 2001 reflect the expenses incurred
in our gene discovery activities, partly offset by the revenues received
pursuant to our research collaboration agreement with Roche in connection with
these activities. We will continue these activities, but our operating results
will also reflect the substantial costs we expect to incur in commencing the
development of the Icelandic Health Sector Database and the deCODE Combined Data
Processing system. While we intend to enter into collaborations to help fund and
develop the deCODE Combined Data Processing system, until we do so there will be
no revenue from our database service activities to offset against these costs.

RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 2001 AND 2000

     REVENUES.  Our revenues increased to $5,032,986 for the quarter ended March
31, 2001 as compared to $4,618,386 for the quarter ended March 31, 2000, an
increase of 9%. Revenues attributable to our research collaboration agreement
with Roche increased from $4,437,222 to $5,006,667, an increase resulting from
the recognition of revenue on new milestone achievements. At March 31, 2001, the
total amount of deferred research revenue which will be recognized in future
periods aggregated $3,863,332.

     In connection with our July 2000 initial public offering, we adopted the
provisions of Staff Accounting Bulletin No. 101 (SAB 101) on revenue
recognition. Under SAB 101, milestone revenue is recognized on a retrospective
basis over the contractual term of the agreement with Roche. Accordingly, upon
achievement of the milestone, a portion of the milestone payment equal to the
percentage of the collaboration completed through that date is recognized. The
remainder is recognized as services are performed (generally straight-line) over
the remaining term of the collaboration. We could have significant downward
revisions to revenue under the retrospective straight-line basis of recognizing
milestone revenues in our collaboration with Roche resulting from, among other
things, extension by Roche of the contractual term of our collaboration with
them.

     RESEARCH AND DEVELOPMENT. Our research and development expenses increased
to $20,215,301 for the quarter ended March 31, 2001 as compared to $9,234,368
for the quarter ended March 31, 2000, an increase of 119%. We have continued to
expand our research and development operations, including our hiring of
additional research personnel and the resulting salary and benefits costs, an
expansion of our laboratory facilities and equipment acquisitions and the
resulting depreciation, purchase and use of consumables, and our increased
research efforts. The increase in the quarter ended March 31, 2001 is primarily
attributable to depreciation on the expanded asset base, increased purchases of
consumables in support of, among other things, our new ABI Prism 3700 DNA
Analyzers, salaries and contractor services, and the disposal of laboratory
equipment. We expect to continue to increase research and development spending
as we pursue and expand our research efforts and accelerate the development of
the database services. We also expect research and development to increase with
the establishment of our new subsidiaries, Encode, deCODE Cancer and Digitalis.


<PAGE>   13
     GENERAL AND ADMINISTRATIVE. Our general and administrative expenses
increased to $3,003,556 for the quarter ended March 31, 2001 as compared to
$2,946,337 for the quarter ended March 31, 2000, an increase of 2%. We continue
to expand our operations, including hiring of additional general and
administrative personnel. We expect that general and administrative expenses may
continue to increase in 2001.

     STOCK-BASED COMPENSATION AND REMUNERATION EXPENSE. Stock-based compensation
and remuneration expense was $1,162,549 for the quarter ended March 31, 2001 as
compared to $2,127,549 for the quarter ended March 31, 2000, a decrease of 45%.
Historical stock-based compensation and remuneration is not necessarily
representative of the effects on reported income or loss for future years due
to, among other things, the vesting period of the stock options and the fair
value of additional stock options that may be granted in future years.

     INTEREST INCOME. Our interest income increased to $2,620,229 for the
quarter ended March 31, 2001 as compared to $771,592 for the quarter ended March
31, 2000, an increase of 240%. This increase is due to higher average cash
reserves as a result of our initial public offering.

     OTHER NON-OPERATING INCOME AND (EXPENSE), NET. Our other non-operating
income and expense, net increased to a net expense of $522,121 for the quarter
ended March 31, 2001 as compared to $107,412 for the quarter ended March 31,
2000 primarily as a result of foreign exchange losses.

     INCOME TAXES. As of March 31, 2001, we had an accumulated deficit of
$126,841,463 and did not owe any Icelandic or U.S. federal income taxes nor did
we pay any in the quarters ended March 31, 2001 and 2000. Realization of
deferred tax assets is dependent on future earnings, if any. As of December 31,
2000, we had net operating losses able to be carried forward for federal income
tax purposes of approximately $458,000 to offset future federal taxable income
in the United States which begins to expire in 2018 and our subsidiary had net
operating loss carryforwards of approximately $20.2 million which expire in
varying amounts beginning in 2004.

     NET LOSS AND BASIC AND DILUTED NET LOSS PER SHARE. Net loss and basic and
diluted net loss per share were $16,087,763 and $0.37 for the quarter ended
March 31, 2001, respectively, as compared to $6,898,139 and $1.25 for the
quarter ended March 31, 2000, respectively. This is an increase of 133% in net
loss and a decrease of 70% in basic and diluted net loss per share. Although net
loss has increased, basic and diluted net loss per share has decreased primarily
as a result of the greater number of average shares outstanding as a result of
our initial public offering in July 2000.

     PRO FORMA BASIC AND DILUTED NET LOSS PER SHARE. Pro forma basic and diluted
net loss per share is computed as if the preferred shares had converted into
common shares immediately upon their issuance. Accordingly, in the calculation
of pro forma net loss per share, net loss has not been increased for the
accumulated dividends or amortized discounts on preferred stock. Pro forma basic
and diluted net loss per share increased to $0.37 for the quarter ended March
31, 2001 as compared to $0.23 for the quarter ended March 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

     As of March 31, 2001, we had $172,127,169 in cash and cash equivalents.
Available cash is invested in accordance with our investment policy's primary
objectives of liquidity, safety of principal and diversity of investments.
Inflation has not had a material effect on our business.

     Net cash used in operating activities was $945,872 in the quarter ended
March 31, 2001, as compared to $1,844,436 in the quarter ended March 31, 2000.
Cash expenditures for research and development and general and administrative
expenses during the quarter were mitigated by the collection of receivables and
other working capital sources of funds.

     Our investing activities have consisted of capital expenditures and
long-term strategic equity investments in, and acquisitions of, technologies and
businesses that are complementary to our business. Purchases of property and
equipment during the quarter ended March 31, 2001 were $20,745,984 as compared
to $1,319,180 in the quarter ended March 31, 2000, primarily due to the
expansion of our facilities and operations. Particularly,

<PAGE>   14
during the quarter ended March 31, 2001 we expended $2,802,936 in respect of a
new building to house our operations in the University District of Reykjavik and
we paid for the fifty new ABI Prism 3700 DNA Analyzers acquired in 2000. Net
cash used in investing activities may in the future fluctuate significantly from
quarter to quarter due to the timing of capital expenditures and investments.

     Net cash of $325,663 was used for financing activities in the quarter ended
March 31, 2001 as compared to $14,367,252 provided in the quarter ended March
31, 2000. Although we made installment payments on our capital leases during
both quarters ended March 31, 2001 and 2000, we did not enter into any
significant financing activities during the quarter ended March 31, 2001.

     Our cash is deposited only with financial institutions in Iceland, United
Kingdom and the United States having a high credit standing. Almost all of this
cash is invested in U.S. dollar denominated money market instruments but partly
invested in Icelandic krona denominated financial securities.

     In January 2001 we engaged a contractor for the construction of a new
building to house our operations in the University District of Reykjavik. Total
project cost is estimated to be approximately $30 million and $6.3 million has
been incurred through March 31, 2001. We expect that the new building will be
complete before the end of 2001 and occupied in early 2002. We are currently
exploring various methods for financing this project. We had no other material
commitments for capital expenditures at March 31, 2001.

     We expect cash requirements to continue to increase significantly as we:
invest in genotyping, sequencing and bioinformatics capabilities; invest in
software and hardware to support the continuing development of the database
services; continue to seek access to technologies through investments, research
and development alliances, license agreements and/or acquisitions; and continue
to make improvements in existing facilities and invest in new facilities.

     Based upon our current plans, and taking into consideration the proceeds of
the initial public offering, we believe that our existing resources will be
adequate to satisfy our capital needs for several years. Our cash requirements
depend on numerous factors, including our ability to obtain new research
collaboration agreements, to obtain subscription and collaboration agreements
for the database services; expenditures in connection with alliances, license
agreements and acquisitions of and investments in complementary technologies and
businesses; competing technological and market developments; the cost of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights; the purchase of additional capital equipment, including capital
equipment necessary to ensure that our sequencing and genotyping operations
remain competitive; capital expenditures required to expand the company's
facilities. Changes in our research and development plans or other changes
affecting our operating expenses may result in changes in the timing and amount
of expenditures of our capital resources.

     We will require significant additional capital in the future, which we may
seek to raise through public or private equity offerings, debt financing or
additional collaborations and licensing arrangements. No assurance can be given
that additional financing or collaborations and licensing arrangements will be
available when needed, or that if available, will be obtained on favorable
terms. If adequate funds are not available when needed, we may have to curtail
operations or attempt to raise funds on unattractive terms.

<PAGE>   15
 ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The primary objective of our investment activities is to preserve principal
while maximizing income we receive from our investments without significantly
increasing risk. Some of the securities in our investment portfolio may be
subject to market risk. This means that a change in prevailing interest rates
may cause the market value of the investment to fluctuate. For example, if we
hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the market
value of our investment will probably decline. To minimize this risk in the
future, we intend to maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, money market
funds and government and non-government debt securities. In general, money
market funds are not subject to market risk because the interest paid on such
funds fluctuates with the prevailing interest rate. As of March 31, 2001, all of
our cash and cash equivalents were in money market and checking accounts.



PART II  OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

     We are not a party to any material legal proceedings except as follows:

     On January 13, 2000 Thorsteinn Jonsson and Genealogia Islandorum hf., the
alleged holders of copyrights to approximately 100 books of genealogical
information, commenced an action against us in the District Court of Reykjavik
in Iceland. They allege that our genealogy database infringes their copyrights
and seek damages in the amount of approximately 616 million Icelandic kronas, or
approximately $6.7 million (as of March 31, 2001) and a declaratory judgment to
prevent us from using the allegedly infringing data. We believe the suit is
without merit and intend to defend this action vigorously; however, the ultimate
resolution of this matter cannot yet be determined.

     Mannvernd issued a press release in February 2000, announcing its intention
to file lawsuits against the State of Iceland and any other relevant parties,
including us, to test the constitutionality of the Act. In its press release,
Mannvernd indicated that it hopes to halt the construction and/or operation of
the Icelandic Health Sector Database. On April 30, 2001, a lawsuit was filed
against the Icelandic Directorate of Public Health but Mannvernd has not
commenced litigation against us; however, the ultimate resolution of this matter
cannot yet be determined.

     On April 10, 2000, Ernir Snorrason, one of our original stockholders, filed
a complaint in the Court of Chancery of the State of Delaware for New Castle
County alleging that we improperly exercised an option to repurchase 256,637
shares of common stock that we issued to him in 1996 pursuant to a Founders'
Stock Purchase Agreement. The complaint seeks an order requiring us to recognize
Mr. Snorrason as the owner of these shares. We believe that we have good
defenses to this action and intend to defend it vigorously. However, given the
uncertainties inherent in the litigation process, we cannot be certain of the
outcome of this proceeding. A trial date has been set for June 2001.


<PAGE>   16
ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

CHANGES IN SECURITIES

     (c) During the period covered by this quarterly report on Form 10-Q, we
sold the following securities that were not registered under the Securities Act:

            (1) On January 1, 2001, we issued 5,000 shares of our common stock
to Gigtarfelag Islands, an Icelandic foundation established to support
osteoporosis research, for $.001 per share, the par value. The balance of the
fair market value of the shares was a charitable contribution.

            (2) On January 1, 2001, we issued 20,000 shares of our common stock
to several non-U.S. persons, including four of our employees, in consideration
for all the outstanding capital stock of Digitalis ehf., an Icelandic limited
liability company.

            The sale and issuance of securities in the transactions described
above were deemed to be exempt from registration under the Securities Act by
virtue of Section 4(2) as transactions not involving any public offering or
Regulation S as offers and sales that occurred outside the United States. Where
appropriate, the purchasers represented their intention to acquire the
securities for investment only and not with a view to the distribution thereof
or that they were non-U.S. persons. Appropriate legends are affixed to the stock
certificates issued in those transactions. All recipients either received
adequate information about the Company or had access, through employment or
other relationships, to adequate information.

USE OF PROCEEDS

     (d) We commenced an initial public offering of our common stock, $.001 par
value, on July 17, 2000 pursuant to registration statements on Form S-1
(Registration Nos. 333-31984 and 333-41598), which were declared effective by
the Securities and Exchange Commission on July 17, 2000. Net proceeds to us
after deduction of expenses were approximately $182.0 million. Through March 31,
2001, we have used approximately $43.6 million dollars of the proceeds as
follows:

<TABLE>
<S>                                                                    <C>
Discovery and research programs.......................................  $20.1
ABI Prism 3700 DNA Analyzers..........................................   13.1
Computer equipment....................................................    1.1
Other laboratory equipment............................................    2.1
Construction of executive office and laboratory facilities............    2.8
Construction of other laboratory facilities...........................    1.7
General and administrative activities.................................    2.2
Installment payments on capital lease obligations.....................    0.4
Interest..............................................................    0.1
                                                                        -----
                                                                        $43.6
                                                                        =====
</TABLE>

     Pending use, we have invested the remaining proceeds primarily in U.S.
dollar denominated money market funds but also partly in Icelandic krona
denominated financial securities.


<PAGE>   17
Item 3.  DEFAULTS UPON SENIOR SECURITIES

None.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


Item 5.  OTHER INFORMATION

None.


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  EXHIBITS

The following is a list of exhibits filed as part of this Quarterly Report on
Form 10-Q.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER      DESCRIPTION OF EXHIBIT

<S>         <C>
3.1         Amended and Restated Certificate of Incorporation, as further amended
            (Incorporated by reference to Exhibit 3.1 and Exhibit 3.3 to the Company's
            Registration Statement on Form S-1 (Registration No. 333-31984) which
            became effective on July 17, 2000)

3.2         Bylaws, as amended (Incorporated by reference to Exhibit 3.2 to Company's
            Registration Statement on Form S-1 (Registration No. 333-31984) which
            became effective on July 17, 2000)

10.1        Employee Confidentiality, Invention Assignment and Non-Compete Agreement
            between deCODE genetics, Inc. and C. Augustine Kong, dated January 1, 2001
            (Incorporated by reference to Exhibit 10.57 to the Company's Annual Report
            on Form 10-K for the fiscal year ended December 31, 2000)

10.2        Amended and Restated Promissory Note, dated January 1, 2001, by Hannes
            Smarason and the Company

10.3        Work contract dated March 15, 2001 between Islensk erfdagreining ehf. and
            Eykt ehf., an Icelandic civil-works engineer, on the concrete casting,
            external finish work, conduits and ventilation systems, electrical and
            specialized systems in Sturlugata 8, Reykjavik.

99.1        Risk Factors
</TABLE>




(b)  REPORTS ON FORM 8-K.

None.


<PAGE>   18
                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.


Dated May 15, 2001

                                                           deCODE genetics, Inc.


                                                             /s/ Kari Stefansson
                                          --------------------------------------
                                                                 Kari Stefansson
                                                            Chairman, President,
                                            Chief Executive Officer and Director


                                                                /s/ Axel Nielsen
                                          --------------------------------------
                                                                    Axel Nielsen
                                                     Vice President, Finance and
                                                  Treasurer (principal financial
                                       officer and principal accounting officer)



<PAGE>   19
                                INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT
NUMBER       DESCRIPTION OF EXHIBIT

<S>          <C>
3.1          Amended and Restated Certificate of Incorporation, as further amended
             (Incorporated by reference to Exhibit 3.1 and Exhibit 3.3 to the Company's
             Registration Statement on Form S-1 (Registration No. 333-31984) which
             became effective on July 17, 2000)

3.2          Bylaws, as amended (Incorporated by reference to Exhibit 3.2 to Company's
             Registration Statement on Form S-1 (Registration No. 333-31984) which
             became effective on July 17, 2000)

10.1         Employee Confidentiality, Invention Assignment and Non-Compete Agreement
             between deCODE genetics, Inc. and C. Augustine Kong, dated January 1, 2001
             (Incorporated by reference to Exhibit 10.57 to the Company's Annual Report
             on Form 10-K for the fiscal year ended December 31, 2000)

10.2         Amended and Restated Promissory Note, dated January 1, 2001, by Hannes
             Smarason and the Company

10.3         Work contract dated March 15, 2001 between Islensk erfdagreining ehf. and
             Eykt ehf., an Icelandic civil-works engineer, on the concrete casting,
             external finish work, conduits and ventilation systems, electrical and
             specialized systems in Sturlugata 8, Reykjavik.

99.1         Risk Factors
</TABLE>