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Are 23andMe's Cutbacks a Harbinger of Hard Times for DTC Genomics Firms?

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By Turna Ray

This article was originally posted on Oct. 30.

Even Google-backed 23andMe isn't shielded from the economic crisis.

The Mountain View, Calif.-based direct-to-consumer genomics firm has had a round of layoffs that it said were necessary to remain in business in a difficult economic climate. With competitor Decode Genetics also cutting back, Navigenics proceeding cautiously, and TruGenetics in a holding pattern as it seeks funding, times are tough for DTC consumer genomics firms.

"We have reduced our staffing levels in a restructuring of our workforce," 23andMe said in a statement, without specifying the number of people laid off or when the cutbacks took place. "This was a very difficult decision, but one that we felt was necessary to achieve 23andMe’s long-term business development goals and maintain our strength in the industry.

"These cuts, which are a reflection of the current economic environment all companies are facing, will allow us to continue to invest in the growth of our Personal Genome Service and research endeavors," the company said.

23andMe, launched in 2007, has taken a "genetics is fun" marketing approach to attract customers for its $399 personal genome scans. However, according to a Frost & Sullivan analyst who follows the burgeoning field, during a time when people are watching their budgets consumer genomics firms would do better to promote the potential health savings consumers can incur by learning their genetic risk, through earlier implementation of disease management and prevention strategies [see PGx Reporter 01-14-2009].

23andMe in recent months appears to have shifted its focus from "spit parties" to more genomically guided disease-specific research efforts. Decode and Navigenics have similarly distanced themselves from the lighter aspects of DTC consumer genomics by educating and partnering with doctors' groups on how gene risk data can help inform patient health. Still, the economy hasn't been kind to 23andMe's competitors.

Decode announced in September that it was closing its Woodridge, Ill., facility and was eliminating around 60 positions. The company, which runs the consumer genomics service DecodeMe, expects to incur a total of around $1.5 million in cash expenditures connected with the closure of the facility and winding down of operations.

Additionally, the molecular diagnostics firm recently received a notice from Nasdaq that its stock is not in compliance with the minimum bid price rule, because the closing bid price for its shares had been below $1 per share for 30 consecutive business days. It has until March 15, 2010 to regain compliance.

Last year, Navigenics CEO Mari Baker told Pharmacogenomics Reporter the company is cautiously moving forward in the bad economy. Baker at the time acknowledged that consumer cutbacks on spending could potentially impact Navigenics' earnings.

And in August, consumer genomics firm TruGenetics added a notice to its website that it had stopped accepting new registrations for its genome scanning services as it works to raise money to fund its operations.

The news came just months after the firm announced its plan to provide free genetic profile of more than 500,000 genetic markers for 200 diseases and conditions to the first 10,000 customers to sign up for its service.

Among the top three consumer genomics firms, 23andMe, Navigenics, and DecodeMe, financial figures are not available for the first two, which are private. Although DecodeMe's parent firm Decode Genetics is publicly traded, the company does not break out financials for its consumer genomics arm, suggesting that it does not contribute significantly to overall revenues.

Industry observers have raised consumer privacy concerns should any of these DTC genomics businesses declare bankruptcy due to economic pressures. DTC genomics firms do not appear to fall under current Health Insurance Portability and Accountability Act of 1996 rules protecting the privacy of medical records since such firms aren't "covered entities." This may change if DTC consumer genomics firms become viewed as providing a healthcare service.

However, as noted in Genomic Law Report, "in the limited case of a bankruptcy scenario, even HIPAA coverage would not appear to prohibit a DTC genomics company from transferring its customers’ genomic information."

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