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The company, DeCode Genetics, based in Reykjavík, says it has collected full DNA sequences on 10,000 individuals. And because people on the island are closely related, DeCode says it can now also extrapolate to accurately guess the DNA makeup of nearly all other 320,000 citizens of that country, including those who never participated in its studies.

That’s raising complex medical and ethical issues about whether DeCode, which is owned by the U.S. biotechnology company Amgen, will be able to inform members of the public if they are at risk for fatal diseases.

Kári Stefánsson, the doctor who is founder and CEO of DeCode, says he is worried about mutations in a gene called BRCA2 that convey a sharply increased risk of breast and ovarian cancers. DeCode’s data can now identify about 2,000 people with the gene mutation across Iceland’s population, and Stefánsson said that the company has been in negotiations with health authorities about whether to alert them.

“We could save these people from dying prematurely, but we are not, because we as a society haven’t agreed on that,” says...