More on 23andMe and the Future of Personal Genomics

(MoneyWatch)  I've been remiss in addressing a particularly thoughtful response to my earlier post on 23andMe's price-cutting and its potential consequences for the future of personal genomics. So let me remedy that.

To recap briefly: 23andMe, the spit-to-read-your-genome company, dropped its subscription price to $399 from $999, a level that seemed to turn its service into a loss leader for what the company has suggested will be a burgeoning pharmacogenomic business -- that is, one based on selling access to its customers' (anonymized) data to deep-pocketed drug companies. The pharmacoeconomic gambit has always seemed questionable to me, however, and furthermore looks to be endangered by steadily falling prices for gene chips and the development of open databases that will offer the same, and maybe even better, information for academic and industrial studies.

Over at Genetic Future, Daniel MacArthur offers qualifed support for personal genomics as a business, if not necessarily for its current model. His main points:

• 23andMe has already started assembling groups of customers with a particular disease, as with its May agreement to collaborate with the Parkinson's Institute, that may be especially valuable to researchers.
• In so doing, the company may have an advantage over academic researchers because it can offer participants significantly more personal information about their genomes.
• Even if that doesn't work out, 23andMe and some of its competitors (especially deCODEme, a unit of Decode Genetics) can simply emphasize the "fun" side of personal genomics -- namely, genetic genealogy, ancestry and inheritance of particular traits -- and make a decent business out of that.
• Such a "forced shift to pure customer service," however, would undercut a lot of the industry's financial assumptions, potentially resulting in a "fairly major contraction in the personal-genomics industry."

These are all excellent points, although to me the key item is the last one. My (admittedly hyperbolic) point in suggesting the "end" of personal genomics was more or less exactly the same as Daniel's suggestion of a "fairly major contraction," but with one further caveat.

The main reason we're focused on personal genomics as a business at all is that some major investors -- primarily Google, along with some high-profile VC firms such as Kleiner Perkins Caufield & Byers -- pumped tens of millions of dollars into these startups. That money is obviously seeking a fairly major return, and while genetic genealogy may prove to be a popular service, it's far from clear that it will generate margins that can justify investments of that scale. What's more, that sort of shift would also delay break-even considerably, which means that these startups will keep burning cash until they need fresh investment. Are investors going to pony up again without the prospect of drug-company millions flowing into these companies? I have my doubts.

Of course, the wild card here is Google itself, which has long been suspected of wanting to index genetic information the way it indexes everything else. It wouldn't take much more than pocket change for Google to bail out or even acquire 23andMe and Navigenics (both of which it's invested in, by the way). That would certainly put a novel cast on the entire business.

Image by Flickr user dumbledad, CC 2.0