Diagnostics, Health Tech

Faced with slowing demand, 23andMe cuts 100 employees

The DNA testing company confirmed on Thursday that it would lay off about 100 employees. The restructuring was a result of slowing consumer demand.

Consumer DNA testing company 23andMe will cut about 100 employees, with fewer users buying its at-home testing kits. A company spokeswoman confirmed 23andMe had announced the restructuring on Thursday. The layoffs amount to roughly 14 percent of the company’s workforce.

The cuts are tied to a larger slowdown in demand for at-home DNA testing. Sales for 23andMe’s kits have declined, the spokeswoman confirmed in an email. 23andMe’s DNA testing kits retail for $100 to $200, with the pricier version including both ancestry results and health screenings.

Results range from the whimsical — whether you’re likely to have a sweet tooth — to the more serious, such as screening for BRCA1 and BRCA2 mutations, which are linked to an increased risk for breast and ovarian cancers.

Sales for 23andMe, AncestryDNA and other at-home DNA testing services skyrocketed in 2018, but now they appear to be coming back down to earth.

23andMe CEO Anne Wojcicki told CNBC, who first broke news of the layoffs, that she was “surprised” at the shift in demand. It’s not quite clear why consumers are no longer as keen on DNA tests. But Vijay Kumar, managing director of healthcare services and technology research for Evercore ISI, pointed out two likely factors: privacy concerns and less hype.

“Concerns around privacy seem to be a drag,” Kumar wrote in an email. “Some are confused by pharma partnerships… whether data is being shared.”

In 2018, 23andMe struck a deal with GlaxoSmithKline that would give the drugmaker exclusive rights to search aggregated, de-identified customer data for potential drug targets. Although customers had consented to the terms, the deal still caught many of them off guard.

The Golden State Killer’s arrest also drew more attention to the unique privacy implications of sharing DNA data. Investigators were able to identify the suspect using GEDMatch, a free database where users can share their DNA test results.

Other companies had hinted at the decrease in demand. Illumina, which provides equipment to 23andMe and AncestryDNA, saw its stock fall in October after it reported lower sales for its microarrays, a tool used to detect gene mutations. The company reported a 24 percent decrease in microarray sales from the third quarter in 2018, largely due to lower direct-to-consumer volumes.

Kumar wrote in an email that it felt like the market was in a “classic hype cycle,” and it’s now adjusting to meet the actual underlying demand.

23andMe did not specify which positions were affected by the layoffs, but noted that the company would focus on its core consumer business and its therapeutics business, which includes the partnership with GSK.

Photo credit: 23andMe