The genetic testing business is stuck in a slump. We spoke to industry giants Ancestry and 23andMe about how they're preparing for a comeback.
- Consumers aren't flocking to send their spit into genetic testing companies in as high a numbers as the industry expected.
- "The market's been down and we don't see that coming back next year," Vijay Kumar, an analyst at Evercore ISI said.
- In its wake, consumer genetics companies are starting to get creative to handle the lull.
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For years, the hot gift at the holiday season has been DNA test kits.
That's helped consumer genetics companies like Ancestry and 23andMe grow to massive scales - with more than 15 million and 10 million users respectively who've shipped off their spit with the hopes of learning more about their family trees, genetic traits, or even some health information.
Along the way, there have been been flags raised about ethics and privacy, along with a slew of tough questions about identity and family.
Still, for years, it seemed like interest in genetic testing was only increasing. But this year, the companies are starting to run into a slowdown.
The first warning was raised by Illumina, the genetics giant that makes all the tech these companies uses to read info about your genes. On an earnings call in July, the company noted "softness" in the market.
"We have previously based our DTC expectations on customer forecasts, but given unanticipated market softness, we are taking an even more cautious view of the opportunity in the near-term," said CEO Francis deSouza during Illumina's second quarter earnings call. The company repeated the sentiment in its third-quarter earnings report in October.
That's not expected to change anytime soon.
"The market's been down and we don't see that coming back next year," Vijay Kumar, an analyst at Evercore ISI who covers Illumina told Business Insider.
As demand recedes, consumer genetics companies have spent the past year grappling with what comes next. Genealogy giant Ancestry has been moving into health, a market it hadn't previously touched. 23andMe has been reckoning with evolving its business model beyond a one-time test. Helix, a company that had ambitions of being the "app store" for genetics, has been pivoting away from the consumer market toward health systems willing to foot the bill for their patients.
"The fad's over," Luke Sergott, an analyst at Evercore ISI told Business Insider.
Why convincing consumers to spit into a tube hasn't been as easy as expected
One big concern weighing on the market is the privacy of your genetic information, Sergott said. Sergott recounted a time when he got tests for his whole family, but one of his family members didn't want to send in a sample.
That means that after a surge of interest from early adopters, using ancestry reports as a way to convince people to dip their toes into the DNA-test market might be drying up.
"My personal view is that the ancestry segment itself, the genealogy segment, is not something that everyone is going to want. We may be seeing a point where most people who are interested in that have gotten in already," said Justin Kao the cofounder and senior vice president of business development and strategy at Helix. "I think a lot of players in the field are looking for what's next."
In the past few years there's also the concern of what happens if this information gets into the wrong hands. In June, laboratory giants Quest and LabCorp reported massive data breaches, in which the billing information of millions of patients was compromised.
And then there's the issue of what to do once you get health-related results. While there are clear steps to take after getting some of the results like certain cancer mutations that have been shown to respond to certain drugs, some of the tests also report on risks for conditions like Alzheimer's disease and Parkinson's disease, neurodegenerative diseases that have few treatments. For conditions like those, there's not a lot you can do with that information proactively, Sergott said.
"When you think like 5, 10 years out and the clinical utility really opens across cancer, across all rare diseases and just disease in general, then it really makes sense for every general consumer to go and get sequence because then you can take it to the doctor," Sergott said.
At that point, the doctor could ideally keep tabs on the disease for early prevention, he said.
Later down the line, ways of taking genetic information to inform preventive healthcare will be key, if medical science advances tgo the point where we can do that.
"It will ultimately be the bridge that takes us from a reactive healthcare paradigm to a proactive healthcare paradigm," Sergott said.
Ancestry's move into healthcare
In October, Ancestry launched its first health products, an area it's long avoided in favor of sticking with genealogy reports.
The company has started selling a new health product, AncestryHealth Core, and plans to offer a second, AncestryHealth Plus in 2020. Both products will provide information like carrier status for genetic conditions, cancer risk, and wellness reports and can help users get a sense of their family health history as well as ancestry. Unlike tests from rivals like 23andMe, Ancestry will require a doctor to be involved in ordering the tests and interpreting the results.
"That innate interest I don't think is going to go away," Georgiadis told Business Insider in an onstage interview at the HLTH conference in Las Vegas.
She acknowledge the challenge of convincing consumers to send in incredibly personal information at a time when there are massive questions about privacy in both the healthcare and technology industries.
"There is no question that all the broader conversation about privacy in the technology industry, I think has left some consumers on the fence," Georgiadis said. "It's our job to help consumers fill the confidence and provide the product innovation that gets the market to continue to grow."
The company is also hoping that paying a subscription fee for updates to reports could be a way to a sustainable business. Through the AncestryHealth Plus product, the hope is to have users pay roughly $100 a year for quarterly updates with new insights about their health.
23andMe is confronting the lull head-on
23andMe CEO Anne Wojcicki is fully aware of the challenges her company is facing going into the next decade.
"It's a new technology, and I think it's hit a lull," Wojcicki told Business Insider in an October interview on the sidelines of the HLTH conference.
She attributes that in large part to privacy concerns coming in from the tech industry, or what she calls the "Facebook Effect."
But in the meantime, she's preparing for what to do during a time when there's a lull as an organization.
"We're not going to hire as aggressively, we will be more cautious about our resources," Wojcicki said.
It'll also require looking critically at 23andMe's business model, as historically a company that provides a genetics test "The business model has definitely evolved. Because it was very much about one and done, and we still see a lot of our customers as being super engaged."
How that plays out is up in the air, but Wojcicki pointed to 23andMe's My Health Action Plan, a feature the company launched in June as a first step toward finding new ways to engage consumers beyond reports. For instance, the Action Plan feature might suggest consulting your doctor about getting blood sugar tests if you have a predisposition for diabetes and list out recommendations for lifestyle changes consistent with national guidelines.
Ultimately, she's optimistic that the lull will be temporary.
"I think it's going to come back," Wojcicki said. "Genetic testing is here to stay, and the market's barely tapped."
Genetic tests have made their way into popular culture, a reason to contend that the business is here to stay, with the potential for more people to get comfortable with sending in their spit in the future.
For instance, in her song "Truth Hurts," Lizzo sings the line "I just took a DNA test, turns out I'm 100% that b---h," referencing the genealogy reports companies like 23andMe provide.
On Halloween, Lizzo donned a costume that evoked a bejeweled 23andMe test kit. The results inside were, of course, "100% that b---h."
And Wojcicki has joined in on the fun. In September, she posted a tweet that read "#JustookaDNAtest and turns out I'm 49% that b---h! At least I'm 49% related to you @Lizzo! #23andMe #TruthHurts." The tweet had an accompanying screenshot of her 'test' results from a site powered by Spotify.
"One of the things I'm super proud of and I really love is that genetics is a part of pop culture now," Wojcicki said.
Pivoting to health systems is Helix's strategy
When Illumina spun out Helix in 2015 with $100 million in funding, it had the lofty goal of becoming something like an "app store" for your genetics. That is, instead of sending in new samples for each test, Helix could reanalyze the sample again and again for different tests - whether for ancestry, wine preferences, wellness, or more health-focused screens.
The "app store" officially launched in 2017, at which point Helix appealed to consumers directly to send in their samples. That ultimately didn't pan out.
"Because the online acquisition has consolidated so much around primarily Google and Facebook, user acquisition one by one has gotten harder and harder," Kao, the Helix cofounder said.
It's not easy to go around explaining to people what distinguishes Helix from other companies who run their tests on different data, he said. Unlike genotyping, which looks for specific parts of DNA and pieces them together, next-generation sequencing like Helix uses looks at only the protein-encoding parts of your genome, called the exome. Ideally, that set of information is more complete than genotyping, giving a broader picture of patient's genetic health information.
Working with partners instead has helped Helix extend its reach. For instance, in 2018, Helix started supplying tests for the Healthy Nevada Project.In the first four days, 10,000 people signed up to submit their samples using Helix's collection kits, Kao said.
In May, the company cut its workforce. Kao said most of those cuts came from the direct digital marketing and advertising teams. Instead, Helix has staffed up more into working with health systems to cover the cost of the test, rather than going directly to consumers.
By working with health systems to cover the cost of the test, the hope is to broaden the number of people who might have access beyond those who could get insurance coverage for clinical tests.
Helix isn't alone at testing out enterprise channels.
Color, a consumer genetics company that provides a physician-ordered test, has been partnering with health systems and life-sciences companies like Verily to provide genetic screenings. Invitae, another provider of genetic tests, works with health systems as well to provide the test.
"Our belief is that health itself will always be the killer app for genetics," Kao said. There, it's an advantage to have a direct relationship with a provider, Kao said. Over time, perhaps individuals will get more comfortable accessing the health information provided in a genetics test on their own, he said. "I just don't think that market's there yet," Kao said.
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