The merger is expected to boost investment in 23andMe’s consumer health and therapeutics businesses
After years of spectacular growth, the popularity of direct-to-consumer (DTC) genetic testing is beginning to wane. Nevertheless, opportunities still exist in the DTC genetic testing market for visionaries with funds to invest.
One such visionary is billionaire Richard Branson, founder of the multinational venture capital conglomerate Virgin Group (VG). Branson’s VG Acquisition Corp. (NYSE:VGAC), a special purpose acquisition company (SPAC), announced it is merging with 23andMe of Sunnyvale, Calif., to create a publicly-traded company with the New York Stock Exchange ticker symbol ME.
In a VG press release, Branson states his reason for the merger. “Of the hundreds of companies we reviewed for our SPAC, 23andMe stands head and shoulders above the rest,” he said. “As an early investor, I have seen 23andMe develop into a company with enormous growth potential. Driven by [CEO Anne Wojcicki’s] vision to empower consumers, and with our support, I’m excited to see 23andMe make a positive difference to many more people’s lives.”
According to a 23andMe press release, the deal values the company at approximately $3.5 billion and will net the consumer genetics and research company as much as $759 million in additional cash. Wojcicki and Branson each invested $25 million themselves as part of the $250 million fund to take the company public.
“As a fellow industry disruptor as well as an early investor in 23andMe, we are thrilled to partner with Sir Richard Branson and VG Acquisition Corp. as we approach the next phase of our business, which will create new opportunities to revolutionize personalized healthcare and medicine,” 23andMe co-founder and CEO Anne Wojcicki (above) said in the press release. “We have always believed that healthcare needs to be driven by the consumer, and we have a huge opportunity to help personalize the entire experience at scale, allowing individuals to be more proactive about their health and wellness. Through a genetics-based approach, we fundamentally believe we can transform the continuum of healthcare.” (Photo copyright: Inc. magazine.)
Participation in Research Key to Future of DTC Genetics Testing
Though DTC genetic testing kit sales have slowed in recent years for both 23andMe and rival Ancestry, Wojcicki believes the company’s database of 10 million customers—with 80% of customers agreeing to participate in research—is the key to its future.
“We have always seen health as a much bigger opportunity” than genealogy, Wojcicki told The Wall Street Journal (WSJ).
According to the WSJ, 23andMe customers fill out more than 30,000 surveys each day on health and related issues. With that information, the company has determined its database includes 1.7 million people with high cholesterol, nearly 1.6 million with depression and 539,000 with Type 2 diabetes, information that is highly valued by medical researchers and those running clinical trials.
Personalizing Healthcare through DTC Genetic Testing
Wojcicki expects the merger will propel the consumer DNA-testing company into personalized medicine and therapeutics. “We have always believed that healthcare needs to be driven by the consumer, and we have a huge opportunity to help personalize the entire experience at scale, allowing individuals to be more proactive about their health and wellness,” Wojcicki said in a statement. “Through a genetics-based approach, we fundamentally believe we can transform the continuum of healthcare.”
In August 2020, the US Food and Drug Administration “granted 23andMe a 510(k) clearance for a pharmacogenetics report on two medications—Clopidogrel, prescribed for certain heart conditions, and Citalopram, which is prescribed for depression,” 23andMe announced in a blog post.
“This impactful pharmacogenetics information can now be delivered without the need for confirmatory testing, a testament to the clinical validity of 23andMe results,” said Kathy Hibbs, 23andMe Chief Legal and Regulatory Officer, in the blog post. “23andMe remains the only company with direct-to-consumer pharmacogenetic reports cleared by the FDA.”
23andMe’s trove of genetic data already has netted it a partnership with GlaxoSmithKline (GSK). According to a GSK press release, in 2018, the two companies signed a four-year research and development agreement. The collaboration targets novel medicines and potential cures using human genetics as the basis for discovery.
COVID-19 Boosts 23andMe’s Sales
During a joint interview with Branson in Bloomberg News about the merger, Wojcicki said, “COVID-19 has really opened up doors.” Now more than ever, she said, people are interested in preventative healthcare. “I’ve had this dream since 2003 that genetics would revolutionize healthcare and that’s really the era I see we can now usher in,” she added.
As 23andMe pushes further into personalized therapeutics, clinical laboratories and pathology groups would be wise to watch and see if this new entrant accelerates healthcare’s shift to the precision medicine model of personalized care.
At-home genetic test kits face scrutiny for providing information that may provide consumers with an incomplete picture of their genetic health risks and ancestry
Genetic testing for disease risk and heritage are hugely popular. But though clinical laboratory and pathology professionals understand the difference between a doctor-ordered genetic health risk (GHR) test and a direct-to-consumer (DTC) genetic test, the typical genetic test customer may not. And misunderstanding the results of a DTC at-home genetic test can lead to confusion, loss of privacy, and potential harm, according to Consumer Reports.
To help educate consumers about the “potential pitfalls” of at-home DTC testing kits offered by companies such as Ancestry and 23andMe, Consumer Reports has published an article, titled, “Read This Before You Buy a Genetic Testing Kit.” The article covers “four common claims from the manufacturers of these products, whether they deliver, and what to know about their potential pitfalls.”
Are Genetic Ancestry Tests Accurate?
Ancestry and 23andMe are the DTC genetic test industry leaders, with databases of genetic information about 18 million individuals and 10 million individuals respectively. According to a Consumer Reports survey, as of October 2020 about one in five Americans had taken a DTC genetic test. Reported reasons for doing so included:
66% of respondents wanted to learn more about their ancestry.
20% wanted to locate relatives.
18% wanted to learn more about their health.
11% wanted to learn if they have or are a carrier for any medical conditions.
3% wanted to get a medical test they could not get through their doctor.
Though DTC genetic tests remain popular, Consumer Reports is now warning consumers to view the genealogical or medical insights gleaned through these tests with caution. “If you go in there thinking that this test is going to tell you who you are, you’re going to be wrong,” Wendy Roth, PhD (above), Associate Professor of Sociology at the University of Pennsylvania, told the publication. (Photo copyright: University of Pennsylvania.)
As Consumer Reports notes, doctor-ordered genetic health risk (GHR) testing typically aims to answer a specific question about a patient’s risk for a certain disease. DTC at-home genetic testing, on the other hand, examines a “whole range of variants that have been linked—sometimes quite loosely—to a number of traits, some not related to your health at all.
“Think of it this way: When your doctor orders genetic testing, it’s akin to fishing for a particular fish, in a part of the ocean where it’s known to live,” Consumer Reports noted, “A DTC test is more like throwing a net into the ocean and seeing what comes back.”
In its article, Consumer Reports addressed four common DTC genetic test claims:
The Tests Can Find Far-Flung Relatives: While the tests can unearth people in its database whom you might be related to, 9% of respondents in the Consumer Reports survey discovered unsettling information about a relative.
Testing Can Uncover Where Your Ancestors Are From: Genetic tests may show the percentage of your DNA that comes from Europe or Asia or Africa, but accuracy depends on how many DNA samples a company has from a particular region. As genetic test manufacturers’ reference databases widen, a customer’s genetic ancestry test results can “change over time.” Also, finding a particular variation in genetic code does not definitively place someone in a specific region, or ethnic or racial group.
Genetic Tests Can Reveal Your Risk for Certain Diseases: Testing companies such as 23andMe are authorized by the Food and Drug Administration (FDA) to offer physician-mediated tests, which are analyzed in a federally-certified clinical laboratory. However, test results may provide a false sense of security because DTC tests look for only select variants known to cause disease.
The Tests Can Tell What Diet Is Best for You: Incorporating genetic information into diet advice has the potential to be transformative, but the science is not yet there to offer personalized nutritional advice.
Consumer Reports pointed to a 2020 study published in the MDPI journal Nutrients, titled, “Direct-to-Consumer Nutrigenetics Testing: An Overview,” which evaluated 45 DTC companies offering nutrigenetics testing and found a need for “specific guidelines” and “minimum quality standards” for the services offered. For example, the study authors noted that more than 900 genetic variants contribute to obesity risk. However, weight-loss advice from DTC test companies was based on a “limited set of genetic markers.”
In the Consumer Reports article, Mwenza Blell, PhD, a biosocial medical anthropologist and Rutherford Fellow and NUAcT Fellow at Newcastle University in the United Kingdom, said “genetic ancestry tests are closer to palm reading than science.”
Seattle Cancer Care Alliance and an Associate Professor of Oncology at the University of Washington, fears consumers “miss important limitations on a test’s scope” or “misunderstand critical nuances in the results.”
Cheng says the ability to use flexible or health savings accounts (HSAs) to cover the cost of 23andMe’s GHR assessments, as well as the FDA’s approval of 23andMe’s Personal Genome Service Pharmacogenetic Reports test on medication metabolism, may have added to the confusion.
“This may further mislead people into thinking these tests are clinically sound. Again, they are not,” Cheng wrote.
As an oncologist, Cheng is particularly concerned about consumer GHR testing for heritable cancer risk, which screen for only a handful of genetic variants.
“The results are inadequate for most people at high risk of cancers associated with inherited mutations in BRCA1 or BRCA2 genes, including families whose members have experienced ovarian cancer, male breast cancer, multiple early breast cancers, pancreatic cancer, or prostate cancer,” Cheng wrote. “Put simply, this recreational test has zero value for the majority of people who may need it for true medical purposes.”
DTC genetic health-risk assessments may one day lead to consumers collecting samples at home for tests that aid in the diagnosis of disease. In the meantime, clinical laboratory professionals can play a role in educating the public about the limitations of current DTC genetic test offerings.
Though gene sequencing is touted as a key component of precision medicine, the medical value of direct-to-consumer testing has yet to show up in improved health outcomes, nor have clinical laboratories benefitted
In a recent example that the market for genetic genealogy testing may have peaked and the days of spectacular growth in the number of direct-to-consumer (DTC) genetic test orders and revenue is over, private-equity firm Blackstone—in a $4.7 billion deal—announced it will acquire a majority stake in Ancestry, which also does some clinical laboratory genetic testing as well.
Blackstone (NYSE:BX) acquired Ancestry of Lehi, Utah, one of the two largest genealogy testing companies (the other being 23andMe of Sunnyvale, Calif.), from a group of equity holders led by investment firms Silver Lake, GIC, Spectrum Equity, and Permira, noted a press release. GIC will retain a “significant minority stake” in Ancestry.
“We are very excited to partner with Ancestry and its management team. We believe Ancestry has significant runway for further growth as people of all ages and backgrounds become increasingly interested in learning more about their family histories and themselves,” David Kestnbaum, a Senior Managing Director at Blackstone, said in the press release. “We look forward to investing behind further data, functionality, and product development across Ancestry’s market leading platform to continue to provide a differentiated service.”
Is Genetic Testing for Genealogy Still a Growth Industry?
Ancestry is the global leader in digital family history services, operating in more than 30 countries with more than three million paying subscribers across its Ancestry online properties and more than $1 billion in annual revenue.
However, some experts say the road ahead may not be smooth for Ancestry or its major competitor, 23andMe.
“The business landscape fell off a cliff last year,” Laura Hercher, Director of Human Genetics Research at Sarah Lawrence College in New York, told STAT. “Fads pass,” she added.
Hercher points out that Ancestry has “this enormous database, which inherently has a lot of value hidden in it—potential energy. But they have not figured out how to get that information out in the way 23andMe has.”
23andMe’s pivot into medical research gained steam in 2018 when pharmaceutical giant GlaxoSmithKline (NYSE:GSK) purchased a $300 million stake in the company with the aim of using 23andMe’s resources to develop new medicines. That collaboration began bearing fruit earlier this year when GlaxoSmithKline started human trials of the first medicine (a cancer drug) to emerge from the partnership, STAT reported.
The public’s declining interest in at-home genealogy, however, has caused both companies to reduce staffing. 23andMe began the year by laying off about 100 employees—an estimated 14% of its workers—and Ancestry followed suit in February, letting go a similar number of employees, representing roughly 6% of its workforce.
According to MIT Technology Review, direct-to-consumer genetic genealogy testing reached its zenith in 2018 when consumers purchased as many DNA tests in one year as they had in all previous years combined, propelling total sales from Ancestry, 21andMe, and other DTC gene testing companies to roughly $26 million.
In 2019, CNBC reported that, market-wide, roughly 30 million tests had been sold across the globe. However, in recent years, sales have fallen short of expectations as the number of people willing to pay $99 to learn about their ancestry has dwindled. “I suspect those that are curious about this information are thinning out and there’s less people to go around to grow,” Greg Yap (above), Partner at Menlo Ventures, told CNBC. “I think there’s a broader issue, which is that the ultimate medical value is still really unproven,” Yap added. “There’s lots of research being done, but value for mass market consumer isn’t there yet, so it keeps a ceiling on the size of that market.” (Photo copyright: VentureBeat.)
Privacy Still a Concern
Ancestry has begun to insert itself into the genetic testing healthcare arena. In a press release, the company announced the launch of AncestryHealth, a $179 DNA testing kit that uses next generation sequencing (aka, high-throughput or massive parallel sequencing), aimed at providing adult consumers information on their inherited health risks.
However, as MedCity News points out, the sale to Blackstone has increased privacy concerns around the direct-to-consumer DNA testing market. Ancestry’s consumer privacy and data protections remain unchanged under the new ownership, but Alan Butler, Interim Executive Director at Electronic Privacy Information Center (EPIC), told MedCity News, “This is one example of a very troubling trend. It’s something regulatory agencies are not up to date to deal with. It’s one of the reasons we need comprehensive privacy law in the US.”
As genealogy companies such as 23andMe and Ancestry shift their focus from providing genetic histories to improving consumers’ health through genetic testing, clinical laboratories should be mindful of the logical next step, which is predicted to be genetic tests where the consumer collects the sample at home and the test is used to aid in diagnosing and treating patients.
Following the raid, the company’s co-founders resigned
from the board of directors
Microbiome testing company, uBiome, a biotechnology developer that offers at-home direct-to-consumer (DTC) test kits to health-conscious individuals who wish to learn more about the bacteria in their gut, or who want to have their microbiome genetically sequenced, has recently come under investigation by insurance companies and state regulators that are looking into the company’s business practices.
CNBC
reported that the Federal Bureau of
Investigation (FBI) raided the company’s San Francisco headquarters in
April following allegations of insurance fraud and questionable billing
practices. The alleged offenses, according to CNBC, included claims that
uBiome routinely billed patients for tests multiple times without consent.
Becker’s
Hospital Review wrote that, “Billing documents obtained by The Wall Street
Journal and described in a June 24 report further illustrate uBiome’s
allegedly improper billing and prescribing practices. For example, the
documents reportedly show that the startup would bill insurers for a lab test
of 12 to 25 gastrointestinal pathogens, despite the fact that its tests only
included information for about five pathogens.”
Company Insider Allegations Trigger FBI Raid
In its article, CNBC stated that “company insiders”
alleged it was “common practice” for uBiome to bill patients’ insurance
companies multiple times for the same test.
“The company also pressured its doctors to approve tests
with minimal oversight, according to insiders and internal documents seen by CNBC.
The practices were in service of an aggressive growth plan that focused on
increasing the number of billable tests served,” CNBC wrote.
FierceBiotech reported that, “According to previous
reports, the large insurers Anthem, Aetna, and Regence BlueCross BlueShield
have been examining the company’s billing practices for its physician-ordered
tests—as has the California Department of Insurance—with probes focusing on
possible financial connections between uBiome and the doctors ordering the
tests, as well as rumors of double-billing for tests using the same sample.”
Becker’s Hospital Review revealed that when the FBI
raided uBiome they seized employee computers. And that, following the raid,
uBiome had announced it would temporarily suspend clinical operations and not
release reports, process samples, or bill health insurance for their services.
The company also announced layoffs and that it would stop
selling SmartJane and SmartGut test kits, Becker’s reported.
uBiome Assumes New Leadership
Following the FBI raid, uBiome placed its co-founders Jessica
Richman (CEO) and Zac
Apte (CTO) on administrative leave while conducting an internal
investigation (both have since resigned from the company’s board of directors).
The company’s board of directors then named general counsel, John Rakow, to be interim CEO,
FierceBiotech
reported.
John Rakow (center) is shown above with uBiome co-founders Jessica Richman (lower left) and Zac Apte (lower right). In a company statement, Rakow stressed that he believed in the company’s products and ability to survive the scandal. His belief may be based on evidence. Researchers have been developing tests based on the human microbiome for everything from weight loss to predicting age to diagnosing cancer. Such tests are becoming increasingly popular. Dark Daily has reported on this trend in multiple e-briefings. (Photo copyrights: LinkedIn/uBiome.)
After serving two months as the interim CEO, Rakow resigned
from the position. The interim leadership of uBiome was then handed over to
three directors from Goldin
Associates, a New York City-based consulting firm, FierceBiotech
reported. They include:
SmartFlu: a nasal microbiome swab that detects bacteria and viruses associated with the flu, the common cold, and bacterial infections.
What Went Wrong?
Richman and Apte founded uBiome in 2012 with the intent of
marketing a new test that would prove a link between peoples’ microbiome and their
overall health. The two founders initially raised more than $100 million from
venture capitalists, and, according to PitchBook,
uBiome was last valued at around $600 million, Forbes
reported.
Nevertheless, as a company, uBiome’s future is uncertain. Of
greater concern to clinical laboratory leaders is whether at-home microbiology
self-test kits will become a viable, safe alternative to tests traditionally performed
by qualified personnel in controlled laboratory environments.
For blood brothers Quest and LabCorp this is good news, since the two medical laboratory companies perform most of the testing for the biggest DTC genetic test developers
Should clinical laboratories be concerned about direct-to-consumer (DTC) genetic tests? Despite alerts from healthcare organizations about the accuracy of DTC genetic testing—as well as calls from privacy organizations to give DTC customers more control over the use of their genetic data—millions of people have already taken DTC tests to learn about their genetic ancestry. And millions more are expected to send samples of their saliva to commercial DTC companies in the near future.
This growing demand for at-home DTC tests does not appear to be subsiding. And since most of the genetic testing is completed by the two largest lab companies—Quest Diagnostics (NYSE:DGX) and Laboratory Corporation of America (NYSE:LH)—other medical laboratories have yet to find their niche in the DTC industry.
Another factor is the recent FDA authorization allowing DTC company 23andme to report the results of its pharmacogenetic (PGx) test directly to customers without requiring a doctor’s order. For these reasons, this trend looks to be gaining momentum and support from federal governing organizations.
Dark Daily has
reported on DTC genetic
testing for many years. According to MIT’s Technology Review, 26 million people—roughly
8% of the US population—have already taken at-home DNA tests. And that number
is expected to balloon to more than 100 million in the next 24 months!
“The genetic genie is out of the bottle. And it’s not going
back,” Technology Review reports.
The vast majority of the genetic information gathered goes into the databases of just four companies, with the top two—Ancestry and 23andMe—leading by a wide margin. The other two major players are FamilyTreeDNA and MyHeritage, however, Ancestry and 23andMe have heavily invested in online and television advertising, which is paying off.
In an op-ed response to a NYT editorial that warned readers to avoid 23andMe’s DTC genetic testing, 23andMe CEO and co-founder Anne Wojcicki (above) wrote, “We believe that consumers can learn about genetic information without the help of a medical professional, and we have the data to support that claim.” The FDA agreed and in February approved 23andMe to report pharmacogenetic test results directly to its customers. How this will play out for clinical laboratories remains to be seen. (Photo copyright: Inc.com.)
As more people add their data to a given database, the likelihood they will find connections within that database increases. This is called the Network Effect (aka, demand-side economies of scale) and social media platforms grow in a similar manner. Because Ancestry and 23andMe have massive databases, they have more information and can make more connections for their customers. This has made it increasingly difficult for other companies to compete.
Quest Diagnostics and LabCorp do the actual gene sequencing
for the top players in the DTC genetic testing sector. The expected wave of new
DTC genetic test costumers (74 million in the next 24 months) will certainly
have a beneficial revenue impact on those two lab companies.
Why the Explosion in Genetic
Testing by Consumers?
In 2013, just over 100,000 people took tests to have their
DNA analyzed, mostly using Ancestry’s test, as Dark Daily reported. By 2017, that
number had risen to around 12 million, and though Ancestry still had the
majority market share, 23andMe was clearly becoming a force in the industry,
noted Technology Review.
And now there are several health-related reasons as well. For
example, the study of pharmacogenetics has led clinicians to understand that
certain genes reveal how our bodies process some medications. The FDA’s clearance
allows 23andMe to directly inform customers about “genetic variants that may be
associated with a patient’s ability to metabolize some medications to help
inform discussions with a healthcare provider. The FDA is authorizing the test
to detect 33 variants for multiple genes,” the FDA’s press
release noted.
Controversy Over DTC
Genetic Tests
The use of DTC genetic tests for healthcare purposes is not without scrutiny by regulatory agencies. The FDA removed 23andMe’s original health test from the market in 2013. According to Technology Review, the FDA’s letter was “one of the angriest ever sent to a private company” and said “that the company’s gene predictions were inaccurate and dangerous for those who might not fully understand the results.”
23andMe continues to refine its DTC tests. However, the debate continues. In February of this year, the New York Times (NYT) editorial board published an op-ed warning consumers to be wary of health tests offered by 23andMe, saying the tests “look for only a handful of [genetic] errors that may or may not elevate your risk of developing the disease in question. And they don’t factor into their final analysis other information, like family history.”
Anne Wojcicki, CEO and co-founder of 23andMe, responded with her own op-ed to the NYT, titled, “23andMe Responds: Empowering Consumers.” In her letter, Wojcicki contends that people should be empowered to take control of their own health, and that 23andMe allows them to do just that. “While 23andMe is not a diagnostic test for individuals with a strong family history of disease, it is a powerful and accurate screening tool that allows people to learn about themselves and some for the most common clinically useful genetic conditions,” she wrote.
Nevertheless, privacy concerns remain:
Who owns the results, the company or the
consumer?
Who can access them?
What happens to them a year or five years after
the test is taken?
When they are sold or used, are consumers
informed?
Even as experts question the accuracy of DTC genetic testing
in a healthcare context, and privacy concerns continue to grow, more people
each year are ordering the tests. With predictions of 74 million more tests
expected in the next 24 months, it’s certain that the medical laboratories that
process those tests will benefit.
