Why I’d never invest in a consumer-focused genomics company

The IFC’s biennial conference on emerging markets healthcare is next week in Barcelona, some thoughts on healthcare to lead up to the event.

1 of 5 part series of thoughts on developments in healthcare and technology

1. Consumer genomics – a poor value proposition
2. Ule for retail pharmacy – hurry up and exist
3. K-Clinics – a morally challenging solution to a global problem
4. Venture debt – an ecosystem designed to discourage
5. Blockchain for health and development – an actual silver bullet

Why I’d never invest in a consumer-focused genomics company

Ever since the unicorning of 23andme, there’s been a number of copycats that have entered the fray as a result of investors feeling the consumer genomics space is an amazing next frontier. Some of the buzzwords being thrown around 21st-century health and tech rest nicely within the mental construct of what genomics could be. If a company’s strategy for success involves “big data,” “precision medicine,” “quantified-self,” “wellness and lifestyle,” “tailored therapies,” and “personal healthcare,” it’s easy to believe there’s a pot of gold waiting at the end.

I won’t discount there will be some early investment winners, specialized firms able to neatly package a secondary deal to bigger fish looking for general exposure to next-gen healthcare, but the B2C and B2B business models aren’t compelling propositions.

B2C focuses on leveraging the consumers’ initial interest in knowing what their genomes are into a longer relationship that can be further monetized. The dual struggle here comes from:

1.    Convincing the consumer their genomic information has value

2.    Human genomes are static, only one read is necessary for a lifetime

On point one, no amount of hucksterism can get past the fact that out of all the biochemical processes involved in our existence, our genomes are the most detached from day-to-day functioning. Too frequently, our DNA is being sold as a black box of secrets yet to be discovered, when the role of our heritage in determining our outcomes has been studied for decades as part of the greater debate on nature vs. nurture. Twin and epidemiological studies have examined the influence of genetics on common chronic diseases, and you would be quite charitable to say it’s twenty percent.

Cancer risk is a favorite for marketing the value of these tests but look no further than a March publication in Science placing the percentage of cancer mutations that are inherited at five percent. The majority of the genetic risk for cancer is just from “bad luck.”

Some tests go even farther into dubious territories, such as making recommendations for tailored diets based on your genetics. If any of those are giving recommendations that don’t coincide with the overwhelming evidence for either DASH or Mediterranean (or even Ornish) then it’s just plain wrong.

As an example, for Celiac’s disease, genetic testing is one part of a much larger diagnostic tree to determine whether someone should avoid gluten. Consider that the most common associated haplotype, HLA-DQ2, is carried by 30% of the Caucasian population, and while most will eat wheat, only 1 in 100 develop the condition.

On point two, consumer genetic testing companies are trapped into overselling the long-term benefits of knowing a genome because otherwise there’s no additional benefit to further engagement. The fundamentals of genetic testing make it inherently “unsticky.” Companies are dependent upon preying on consumers magical thinking, plus whatever connectedness the consumer feels for the company from drooling in a plastic tube and mailing it.

Consumer genomics is in a Catch-22. As the industry matures, the increased media exposure and scrutiny will make more people realize how insignificant these tests are.

For B2B, the future isn’t any brighter. The proposition here is that new medical discoveries can be unlocked through the large genomic datasets consumer genomics companies maintain. The issue is what is the increased value of these proprietary datasets over what’s available through genome sharing initiatives, academic consortiums, or company-initiated small scale data sets.

Due to the rapidly declining costs of sequencing, genomics is one of the hottest academic research fields on the planet. We currently live in a time where the dominant genomic sequencing equipment company saw significant drops in its share price because it oversaturated the market, and where equity analysts will make such statements as “You're hard-pressed to find anybody right now, a genomics center or research academic center, that doesn't have one of these pieces of equipment."

If you’re a pharmaceutical company, consider two options for accessing population-wide genomic data. Do you choose the one dependent on consumer self-surveys taken online or one with a narrower dataset but also has clinical research grade curation? In addition, much of the academic work will be published and the results publicly disclosed.

 It wouldn’t be surprising to see one or two exploratory contracts signed between consumer genomics entities and pharmaceutical companies, purely out of curiosity. It’s challenging to envision this as a sustainable industry.

What do I recommend to consumer genomics companies?

Position yourself to be an “omics” business. Epigenomics, proteomics, metabolomics, and microbiome sequencing all have superior engagement propositions. Focus less on trying to be a lifestyle company based on genomics data, and more on your diversity of distribution channels. Highlight relationships with traditional diagnostics companies, collections facilities, and at-home services. Maybe create some IP, “patent pending,” around a new way to obtain gut flora by dissolvable toilet wipes.

Eventually, the genomics test will be offered free as part of the new enrollment package to these omni-omics products. This will relegate the consumer genomics test to its appropriate role in this new area of the quantified self, a curio that tells you how much of a Neanderthal you are.

Opinions expressed are of the author alone.