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Consumer Genomics Poised for Growth in 2019 as Providers Diversify Offerings

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NEW YORK (GenomeWeb) – Consumer genomics companies ended the year 2018 with record kit sales. By the time those samples are processed over the next few weeks, industry observers estimate that about 30 million people will have taken a direct-to-consumer DNA test to date.

With ever more data in hand, providers such as Ancestry, 23andMe, MyHeritage, Insitome, Family Tree DNA, Living DNA, and Helix are seeking to enhance their services, providing more detailed ancestry estimates while introducing new offerings around genetic traits and genetic health that they expect will sustain customer interest.

"What we're really going for is a snackable experience, something for the client to go through at their own pace, rather than seeing everything at once," said David Sanchez, vice president of products at Ancestry.

The Lehi, Utah-based online family history company announced record sales of its AncestryDNA kits in November and disclosed that following Black Monday marketing campaigns, it had sold 14 million kits worldwide, more than double the number of test results it had in its database a year ago.

Toward the end of the year, the company also introduced AncestryDNA Traits, a new feature. For $9.99, customers who have already tested their DNA with the company can unlock 18 genetic traits, from having blue eyes, freckles, or a cleft chin to an aversion to cilantro or an affinity for sweets.

That move into traits — out of AncestryDNA's core genetic genealogy experience, based on ethnicity estimates and relative matching — reflects consumers' desire for more information about how genetics impacts their daily lives.

"Our customers were asking us, 'What more can you tell me?' and it brought us down this path," said Sanchez. Other industry observers agreed that customers are hungry for more information than services have provided to date, a demand firms will try to meet throughout the coming year.

"That [Ancestry is] moving away from being only [about] ancestry to these other areas that historically 23andMe was involved in is meaningful because they command a tremendous market share," said David Mittelman, CEO of forensic genomics firm Othram and former CSO of Houston, Texas-based Family Tree DNA. "The fact they are getting into that space is a big deal," Mittelman said of AncestryDNA's Traits offering.

Ancestry also implemented an enhanced ethnicity algorithm at the end of 2018, providing users with ancestry estimates that, in some cases, go to the subregional level. Customers of Irish descent, for instance, are now informed what region of Ireland their ancestors came from.

These enhancements in ethnicity estimates are being powered by the growing size of the company's database, with links to genealogical records, Sanchez noted. "That is the culmination of a lot of the data that we now have," he said of the new ethnicity algorithm. "The accuracy of that algorithm would not have been possible with a smaller dataset."

Going forward, the company will leverage its database to add even more detail to its service. "It enables us to add additional ethnic communities with granularity more quickly over time," he noted.

Mountain View, California-based 23andMe also rolled out improved ethnicity estimates in 2018, moving from breaking down a customer's ancestry into 33 regions to about 150. In addition to relying on its growing database — which contained 5 million samples as of early 2018 — to enhance its estimates, 23andMe has also been involved in a number of research projects to diversify its database, such as its Global Genetics Project, which it launched last year.

Joanna Mountain, senior director of research at 23andMe, said the company has enrolled 5,000 people in the project to date from 60 underrepresented countries, mostly in Africa and Asia. To take part in the study, participants must be US residents but have all four grandparents from one of the target countries. As participants, they receive ancestry and personal health data, while helping to build out 23andMe's reference population data.

"Everyone wants more detail, and we don't want to leave anybody out," Mountain said. "When we started out telling people about their ancestry back in 2008, we divided the world into Africa, Asia and the Americas, and Europe," she noted. "Since then, we have managed to gather more data, particularly for European populations, but there are some locations that continue to be underrepresented," she said. "Those are the ones that are the focus of our initiative."

Even with that new data, Mountain said, 23andMe is "very focused on accuracy" and takes time to implement changes into its offering. "Many people don't realize that this is an evolving service," she said, requiring the firm to fine-tune its analysis gradually in order to meet customers' requests for more detail.

Arguably, Ancestry and 23andMe's improved offerings reflected industry trends at large during the year: branching out into new applications of genetics while refining those in place.

Insitome, an Austin, Texas-based company that makes applications it sells on the Helix marketplace, has like Ancestry sought to address market demand for new genetic insights by launching applications that deliver information on customers' metabolism or their Neanderthal ancestry.

"I think it shows that people want to go beyond ancestry percentages to learn more about how their genome affects traits that they carry today, basically what the functional consequences of the DNA you carry are," said Insitome CEO Spencer Wells of Ancestry's new offering. "It's the same desire that motivates our Neanderthal and metabolism apps."

Wells has been one of the instigators of the consumer genomics market and is already an old hand. At National Geographic, he spearheaded the Genographic Project from its launch in 2005, when it offered STR-based Y chromosome and mitochondrial DNA testing, through the introduction of Geno 2.0 in 2012, which offered autosomal DNA analysis and provided customers with ethnicity estimates and Y and mtDNA haplogroup assignments. In 2016, though, he cofounded Insitome to offer customers a different kind of experience.

"One of the things I wanted to do at Insitome from the outset is [offer] not just the raw ancestry percentages, but [show] how your ancestry has an impact on traits that you care about," said Wells. "People are so used to admixture that it's the null expectation," he said. "You can learn about your past, but your past also has an impact on your present and your future."

For years, industry players like Wells had watched the market for a tipping point when consumer DNA testing would at last become mainstream and grow at an exponential pace. While even two years ago, Wells considered the market to still be in an early adoption stage, kit sales in 2017, particularly in late November when Ancestry sold 1.5 million kits between Black Friday and Cyber Monday, changed that dynamic. "That was a big inflection point," he said.

"We are definitely well beyond the inflection point, it's [in] the exponential growth phase and isn't near saturation at all," said Razib Khan, director of scientific content for Insitome. In a year-end post on Insitome's blog, Khan noted that the number of people who had purchased genotyping kits from consumer genomics companies between January 1, 2016 and December 2018 had increased tenfold and is now in the neighborhood of 25 million.

That could be a sound estimate, with Ancestry reporting 14 million kits sold by the end of November and 23andMe reporting 5 million samples genotyped in early 2018. Family Tree DNA has disclosed 2 million samples genotyped, while MyHeritage recently said it had 2.4 million people in its database.

Should growth continue at a similar pace, about 250 million individuals might be genotyped by January 2021, Khan speculated. In the post, he also said it's "not implausible" that by the end of 2019, as many as 50 million people might have been genotyped.

That kind of exponential growth, however, is not assured. Illumina CEO Francis deSouza was more guarded in his forecast for the consumer genomics market when he spoke at the JP Morgan Healthcare conference in San Francisco this week, predicting "low single digit growth" in the San Diego vendor's array business for 2019.

"Our outlook reflects a cautious view of the consumer opportunity as we start the year, although we expect this business to reaccelerate, as consumer health and international opportunities ramp up," deSouza said. He also disclosed that 12 million consumer tests were processed on Illumina platforms in 2018, "more than the cumulative volume in the previous three years." DeSouza noted that most of the tests were associated with genealogy, but that the company also saw "growing evidence" of an emerging consumer health market last year.

DeSouza also noted that Illumina has seen growth in consumer genomics demand abroad, citing "strong interest" in China, South Korea, and Japan, with the "number of accounts almost doubling in some geographies."

That kind of market expansion is altering the kinds of experiences that customers expect.

"What was once a tool of the hobbyists will have left its stamp on the mainstream, and the public will begin to dictate what the killer apps of the sector are going to be," wrote Khan in his post.

It's that shift — from a market of early adopters interested in genetic genealogy to a broader, mainstream market of consumers interested in how their genetics impact their everyday lives — that is driving the development of new applications and stands to shape the market in 2019.

Roberta Estes, a genetic genealogist and author of the blog DNAeXplained, agreed with Khan that consumer genomics "reached and surpassed the tipping point" within the past few years. "DNA is a household word and you can walk by tables in any US restaurant where you can catch snippets of conversations about people receiving their DNA results," she said.

In addition to enhancing ethnicity estimates — the "least reliable and most popular aspect of consumer genomics," in her words — entrenched players like Ancestry and Family Tree DNA have been introducing new features, such as AncestryDNA Traits, while others, like 23andMe, have built out their health applications over the past year, Estes noted.

In October, for instance, the US Food and Drug Administration granted 23andMe the right to sell tests for 33 pharmacogenomic variants directly to customers.

Estes also noted the growing presence of MyHeritage, a Tel Aviv, Israel-based online genealogy company, that entered the consumer genomics market two years ago and has managed to woo many international customers with a platform that is available in 42 languages.

"MyHeritage very specifically caters for a global market, whether it be developing tools to find relatives in other markets or having 24/7 support in numerous languages," Rafi Mendelsohn, the firm's director of PR and social media, said in an email. He noted that the company had 85 million users prior to launching its DNA offering in October 2016. "The global interest in MyHeritage [DNA] is a reflection of an already established global user base," Mendelsohn said.

MyHeritage noted in an end-of-year blog post that it finished 2018 with 2.4 million individuals in its DNA testing database. The company also began accepting data uploads from Living DNA and people genotyped on 23andMe's version 5 genotyping array. The company had already accepted uploads from AncestryDNA and Family Tree DNA customers, as well as those genotyped on earlier 23andMe chips.

That trend, of users uploading their raw data to various sites, in some cases for free, to take advantage of an increasing variety of analysis tools and product offerings, will continue, even as companies have been customizing the technologies used in their specific services.

"Within the next five years, our focus [as consumers] will be entirely on services and what DNA can do for us in various aspects of our life and not on the actual testing and sequencing," said Estes.

Scaling up

While customers are happy to obtain their genomic data and upload it around the market, providers are investing heavily in testing infrastructure and analysis tools to be able to scale for growth.

Ancestry's Sanchez noted that the company has invested in analysis tools in the past year to make sure customers genotyped on older arrays receive the same benefits as those genotyped using newer chips. This will also allow the firm to launch new features for its services on a tight cycle, he said. "It's not easy to do that, but we made some major [investments] and we will see a return on it," he said.

A company spokesperson said that Ancestry currently uses an Illumina-manufactured chip that contains about 700,000 markers. Illumina continues to be the main manufacturer of the arrays used in consumer genomics services, making chips for Ancestry, 23andMe, Family Tree DNA, and others.

Leerink analyst Puneet Souda noted in a November 30 research note that his firm expected Illumina to post $566 million in array sales for 2018, an increase of 25 percent year over year, driven by growth in the consumer genomics segment. However, the firm tempered its enthusiasm in a January 8 research note, noting that array sales were actually flat sequentially from the third to fourth quarters of '18, in part because a "large consumer genomics customer" overstated initial demand for consumables in Q4 and processed fewer samples than expected.

Nevertheless, consumer genomics providers are scaling up to meet what they expect will be sustained growth. Family Tree DNA CEO Bennett Greenspan said that his company in 2018 completed updating its lab's microarray pipeline to handle about 200,000 samples per month. The company also completed integration of Illumina's NovaSeq platform for sequencing whole exomes and genomes as part of its consumer genomics services. Family Tree DNA also installed a robotically controlled DNA freezer with a capacity to store 2 million samples, Greenspan said.

Looking ahead, the company is planning a new genetic genealogy application for its users called Family Tree 2.0, in addition to a new version of its next-generation sequencing-based Big Y Test. Greenspan did not elaborate.

Family Tree DNA has been selling genetic tests directly to consumers since 2000, and Greenspan noted that, in general, the company has seen "less fear of genetic testing" in recent years. That reduction in caution has paved the way for the new kinds of applications that are emerging in the marketplace. "With consumer confidence and acceptance comes market growth and product evolution," he said.

David Nicholson, co-founder of Living DNA, said the UK consumer genomics firm made similar investments in infrastructure and technology in 2018. In addition to partnering with a US laboratory in October to process its North American samples, the company also moved to a new array platform last year, manufactured by Thermo Fisher Scientific's Affymetrix, after previously using Illumina arrays.

He said that there tends to be variation between different generation of Illumina arrays, given its bead-based manufacturing process, whereas Affymetrix makes its arrays using photolithographic masks, meaning that Living DNA can always order more of the same array. The company's new custom array contains about 750,000 markers.

Shantanu Kaushikkar, director of product management for Thermo Fisher, confirmed the deal with Living DNA and said that, like Illumina, the company has been gaining traction in the consumer market, particularly outside the US. "We have a huge presence in China with multiple companies, as well as in Korea, Taiwan," he said. He noted that pharmacogenomics testing, in particular, is popular in those countries.

WeGene, a Chinese consumer genomics company and a former Affymetrix user that switched to Illumina arrays last year, for example, announced plans to expand into other markets in Southeast Asia in September.

Nicholson acknowledged that while much of Living DNA's business continues to be in the US and the UK, growth is underway elsewhere. "If you talk to people in Asia, the Middle East, Japan, and other parts of Europe, hardly anyone has heard of the fact that you can do a DNA test," said Nicholson. "What we are seeing is disparity in the great marketing dollars that are spent to raise awareness in America and the UK, and everywhere else there is limited awareness," he said. "It shows that North America and the UK are the main hubs and it is starting to spread out."

One aspect that Nicholson stressed was that consumer genomics firms are typically not making money on kit sales alone, but rather via other mechanisms. He cited 23andMe's partnerships with pharmaceutical companies, or Ancestry's service subscription sales. Living DNA has also sought out partnerships to bolster its revenues. "Selling DNA kits alone does not stack up financially at the prices they are now sold at," Nicholson said.

'In the early innings'

While San Carlos, California-based Helix is part of the ancestry testing component of the consumer genomics market — as the marketplace where Insitome's applications and National Geographic's Geno 2.0 test are offered — its approach is quite different from Ancestry or 23andMe's.

Justin Kao, cofounder and senior vice president of business development at the firm, noted Helix's "horizontal strategy" of offering customers a diverse number of applications provided by different parties that use genomic data generated by Helix, versus the "vertical strategy" of Ancestry and others, where features are part of a centralized experience. And getting those moving parts to flow in synch has been a challenge for the firm, one that Helix will work on this year, he said.

"While our experience today is good, I always think it could be improved," said Kao. "A platform model is inherently challenging compared to a fully integrated, one-product model," he noted. "You are using different products, some developed by third parties, and all of those interfaces are harder to do in a platform model and harder to get right," he said. "We will continue to invest in making sure that goes well this year."

Helix has not disclosed how many samples it has in its database. The company has invested in infrastructure though, and, as of November 2018, its San Diego-based laboratory contained 29 Illumina HiSeq sequencers of an unspecified type, as well as one NovaSeq sequencer.

Health-related tests have been a priority for the firm since its 2017 launch. Kao named the introduction of its Mayo Clinic GeneGuide earlier this year, as well as its work with the Healthy Nevada project as milestones for the firm. Helix last year also raised $200 million in Series B funding to support its efforts.

While its approach to the market is different, including the information it offers via applications sold on its marketplace, Kao noted that Helix had worked with other consumer genomics companies to develop a document governing privacy best practices for the industry last summer.

"You saw all the leading players in the space come together to say that they cared about privacy," said Kao, adding that Helix would continue to work with other players "in those areas where we are all extremely aligned." He noted that all consumer genomics firms are invested in better educating the market to make their products more accessible and appealing to a wider audience.

"I think we are still in the relatively early innings of the consumer genomics market," Kao said. "While a lot of people have decided to do ancestry testing or genealogy, I think the power of your DNA beyond that is still something that relatively few people are aware of," he continued. "We try to spend a lot of time on seeing what we can do to accelerate that trend."

With regards to other players, Kao said that consumer genomics is not yet a "market share game in terms of winning this customer versus that customer." While acknowledging that there "probably are some users who comparison-shop," Kao said that, in general, consumer genomics firms are more focused at the moment in reaching as many new customers as possible.

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