At-home DNA testing companies 23andMe and Ancestry each laid off about 100 employees over the past month, cutting around 14 and 6 percent of their workforces, respectively.

23andMe pointed to declining sales as the reasons for the layoffs, and Ancestry CEO Margo Georgiadis cited a slowdown in demand across the entire DNA category in a blog post. Interest in DNA testing skyrocketed through 2016, 2017, and 2018, with millions of people buying kits from direct-to-consumer companies. But in 2019, interest started to wane Illumina, which makes products used by these companies, said that the market was weak.

Thats probably because the market is saturated, and most people who would want to buy a DNA test kit already have, says David Mittelman, founder and CEO of the forensic genomics company Othram and former chief scientist at Family Tree DNA. That market is a certain size, and its being tapped out, he says.

It may also just be that all of the early adopters have bought and used DNA testing kits, says Shawn Baker, a genomics consultant and former scientist and manager at Illumina. They need to broaden out past the early adopters to everyone else, he says.

Compounding the problem, the service doesnt lend itself to repeat customers. You get tested once and youre done, Baker says. Theres also no real reason for users to return to the platform, except to see if any previously unknown or distant relatives have joined the service. But even then, the companies dont see additional revenue.

23andMe CEO Anne Wojcicki speculated that genetic privacy concerns could be one reason for the dip in sales. But Mittleman doesnt think that plays a big role. Im sure some people are worried about privacy, he says. I think people are burned by privacy more with Facebook than with genetic testing. Thats what they worry about.

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

Ancestrys growth was also linked to their advertising spending they spent over $100 million on television ads in 2016, for example. Their growth was proportional to their spending, but thats since plateaued, Mittelman says. Acquiring more customers, who arent already inclined to be interested in existing products, would be expensive, he says.

But bringing in more customers for personal testing kits may no longer be the priority at these companies: instead, theyre turning their focus towards health. Ancestry says its shifting focus towards Ancestry Health, and plans to introduce new products that give customers information about their health risks. 23andMe plans to concentrate its research on a drug development arm, which has already proven lucrative: it started partnering with pharmaceutical companies in 2018, and in January, the company sold the rights to a drug it developed in-house.

The companies may want to keep pulling in customers to bolster their databases of genetic information, Baker says. Subscriber growth matters in terms of how good that database is.

But over the past few years, both companies have built up their databases of genetic data, and they may already be large enough to answer health care questions. These databases only need so much information before they can be useful to researchers and drug developers. If theyve reached that point, and it will take expensive marketing and advertising to pull in new customers, it might not be worth the investment to try and expand the pool, Mittelman says.

From the outside, that seems to be what the situation is, he says. You dont see 23andMe running sales trying to get people on board. Its not the priority.

Read more from the original source:
Layoffs at genetic testing companies reflect the changing market - The Verge

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