Consumer DNA tests used to determine ancestry and health factors grew in popularity for several years, but that trend has diminished due to consumer privacy concerns. That's according to 23andMe CEO Anne Wojcicki, who co-founded the genomics and biotechnology company back in 2006.
Another contributor to declining sales could be testing price, which can range from a hundred to several hundred dollars, in light of predictions of an upcoming recession. DNA testing companies 23andMe and AncestryDNA (NASDAQ:ACOM) have both chosen to lay off 100 employees to match pace.
Former chief scientist at Family Tree DNA David Mittelman is less convinced that privacy is a driving factor for the reduction in sales. "I think people are burned by privacy more with Facebook (NASDAQ: FB) than with genetic testing," he said. Mittelman believes that another possible explanation is the DNA test consumer market being used up, considering there's little room for repeat customers. "That market is a certain size, and it's being tapped out," Mittelman said.
23andMe
After 23andMe was hit with a regulatory probe by the U.S. Food and Drug Administration (FDA) in 2013, the company was able to bounce back and resume sales in 2015 with full force. However, there's been a steady decline in DNA test purchases since 2019. As a result, CEO Anne Wojcicki has chosen to lay off 100 people, approximately 14% of her company's staff.
For a time, 23andMe was flourishing. Wojcicki was able to work with the pharmaceutical company GlaxoSmithKline (NYSE: GSK), hire a team, and market to new customers based on $786 million raised in venture capital. Interestingly, Google (NASDAQ: GOOGL) is an investor in 23andMe, and Wojcicki's sister, Susan Wojcicki, is the CEO of YouTube.
Wojcicki believes that consumer distrust in DNA testing companies has dwindled which has led to a decline in sales, and she's committed to building that trust again. "I think the tech world needs to own this [and] better communicate privacy standards to build trust," Wojcicki said. "I want to jump in and really own it."
AncestryDNA
A major competitor of 23andMe, AncestryDNA has also made the decision to lay off 100 people, or 6% of its employees. President and CEO Margo Georgiadis cited the same root reason as 23andMe regarding her company's layoff decision: lack of trust.
"Future growth will require a continued focus on building consumer trust and innovative new offerings that deliver even greater value to people," said Georgiadis.
In addition to the difficult choice to layoff employees, consumer decisions to choose DNA tests less have undoubtedly not been easy in their own right, considering what else can be at stake. AncestryDNA boasts an over 99% average accuracy rate and can be used to find unknown biological siblings and parents.
AncestryDNA, a subsidiary of the popular Ancestry, has its testing performed by Quest Diagnostics (NYSE: DGX).