Gene testing company’s job cuts reflect changing market

In the past month, family DNA testing companies 23 and Me and Ancestry have laid off about 100 employees, about 14 percent and 6 percent, respectively, according tomedia. 23andMe pointed to the layoffs as a result of lower sales, while Ancestry CEO Margo Georgiadis noted in a blog post that “demand for the entire DNA category is slowing.” Interest in DNA testing surged between 2016 and 2018, with millions of people buying kits from direct-to-consumer companies. But in 2019, interest is starting to wane – Illumina, which makes the products used by these companies, says the market is weak.

Gene testing company's job cuts reflect changing market

David Mittelman, founder and chief executive of Othram, a forensic genomics company, and a former chief scientist of Family Tree DNA, says this may be because the market is saturated and most people who want to buy DNA test kits already have them. “The market is of a certain size and is being tapped,” he says. “

It could also be that all early adopters have purchased and used DNA test kits, says Shawn Baker, a genomics consultant and former scientist and manager at Illumina. “It will need to expand from early adopters to everyone else,” he said. Complicating matters, the service itself is not suitable for repeat customers. “The test was done after one test,” Baker said. There is no real reason for users to return to the platform.

Anne Wojcicki, chief executive of 23andMe, speculated that genetic privacy issues may have contributed to the decline in sales. But Mittleman doesn’t think it matters. “I’m sure there are people who are worried about privacy,” he says. I think people are more frustrated with Facebook’s privacy than with genetic testing. That’s what they’re worried about. “

23andMe and Ancestry did not respond to requests for comment emailed.

Ancestry’s case is also linked to their advertising spending, for example, spending more than $100 million on television ads in 2016. Mittleman says their growth is proportional to spending, but has been stable ever since. He says it will be expensive to get more customers who are reluctant to be interested in existing products.

But attracting more customers to personal test suites may no longer be the focus of these companies: instead, they focus on health. Ancestry said it was shifting its focus to Ancestry Health and planned to launch new products to provide customers with information about their health risks. 23andMe plans to focus its research on the drug development division that has proven profitable: 23andMe will begin working with pharmaceutical companies in 2018, and in January, the company will resell potential drug molecular patents to third parties for the first time.

Baker believes the two companies may want to continue to attract customers to enhance their genetic information databases. “The growth in the number of users depends on the performance of the database. “But over the past few years, both companies have built their own databases of genetic data, and they may be old enough to answer health care questions. These databases will be useful to researchers and drug developers. If they achieve this and spend expensive marketing and advertising to attract new customers, trying to expand their reach may not be worth investing, says Mittleman.

“From the outside, that seems to be the case,” he says. You won’t see 23andMe selling to attract customers. This is not a priority. “