What’s Your DNA Worth? The Scramble To Cash In On the Genome

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beyond the boundaries of the tests ordered by doctors. “I can imagine a day where we have a genome checkup every year, having trusted advisors give you an update on information relating to your specific genome that could help wellness or disease prevention,” Scott says.

The next horizon would be to sell to third parties information and services derived from Invitae’s customer base. For example, drug companies are desperate to recruit volunteers for clinical trials. Invitae would like to connect its customers with those companies, with the customers’ consent.

If you take Scott’s vision piece by piece, none of it is unique. Part one: As Scott acknowledges, Invitae’s tests are just cheaper versions of what’s out there (although testing companies like Myriad Genetics are fighting back, as we’ll see in a bit).

Part two: Genome management, moving beyond disease testing into the amorphous “health and wellness” space, is something Seattle-based Arivale is pushing. Arivale, born from a “wellness project” spearheaded by Institute for Systems Biology president and genetics pioneer Leroy Hood, is combining personal health data, including a whole genome scan, with counseling. Another genetics luminary, Craig Venter, just jumped into that game, too, with San Diego-based Health Nucleus.

Also angling in on consumer genomics is biotech hardware giant Illumina (NASDAQ: ILMN) of San Diego, whose machines power much of the world’s gene sequencing. With funding help from Warburg Pincus and Sutter Hill Ventures, it just spun out Helix, a $100 million attempt to build a consumer genomics business that mimics Apple’s app store.

The idea is to lure consumers to have part of their genomes sequenced via cool apps—at first, perhaps nutrition- or sports-related—at a “no-brainer price tag,” as Illumina CEO and Helix chairman Jay Flatley told Technology Review in August.

Consumers would just get the tidbit of information they pay for, but all their data, controlled by Helix, would pool with everyone else’s data, attract more app developers, and, voila, a feedback loop—all with Helix taking a cut of every transaction.

Which leads to part three of Invitae’s consumer genomics vision: being a middleman. Helix is building up to it, but 23andMe has been there, done that, letting its genetic-test customers volunteer their data for research.

People who have ordered 23andMe’s ancestry “spit kits” for $99 can check a box to say, yes, you can use my information for research purposes. (The company also offered health-related tests until the FDA shut them down in late 2013; it has promised for some time to return to the health field, and in February got FDA approval for a direct-to-consumer product that tells prospective parents if they’re carrying genes that could lead to children with the rare disorder known as Bloom syndrome. 23andMe expects to have more carrier tests to provide together as a set later this year.)

Of its 1 million-plus customers, more than 80 percent have consented to participate, according to a 23andMe spokesman. The company has sold those data, aggregated, sliced, and diced, to companies like Pfizer (for irritable bowel research) and Genentech (Parkinson’s). What’s more, 23andMe is using that treasure trove of data to create an in-house drug discovery group. Top Genentech scientist Richard Scheller was so impressed that he joined 23andMe to run the new group.

In other words, 23andMe’s customers have paid $99 apiece to help 23andMe vault to a billion-dollar valuation—as of its recent $115 million fundraising—but 23andMe generally doesn’t pay for their participation unless they go above and beyond by giving blood or filling out extra surveys. (A spokesman noted that the company’s research is overseen by an institutional review board.)

Invitae’s Randy Scott sees a potential competitive advantage there. He says Invitae will share revenues with customers who share their data, although when and how are “difficult to predict.”

“We plan to help patients to share their information when appropriate and only with their consent,” says Scott. “We plan to be open and transparent with patients about opportunities that rise on a case by case basis.”

As he squares off with all the well-heeled competition, Scott thinks sharing will be good business: “If you go to a social networking site, and every time an advertiser was pinging you the network made money and you also got a piece of the action, would you still stay in a network where they’re taking your private information and making money off you?”

Scott invokes Walmart and Amazon as models for his “one stop” gene-test shop. He invokes Google and Facebook as models for an information platform. But when he talks about market reach, he thinks Invitae will end up like “AT&T or Verizon or Sprint”—one of a few behemoths that dominate a massive sector. He adds quickly that Invitae hopes to have better customer service than the phone and cable companies.

Without that scale, the other parts of the business—the genome management, the data brokerage—won’t work.

So that’s the vision. What’s the reality? In a low-margin, high-volume business, promises of disruption can outstrip actual results. Case in point: The Wall Street Journal exposed the gap between marketing and reality last week with its investigation of Palo Alto, CA-based Theranos, which touted new technology that required only a few drops of blood—and a finger prick instead of a needle—for run of the mill blood tests. The accuracy of that technology, and how much Theranos has actually used it, was thrown into question. In a follow-up story, the Journal reported the FDA has told Theranos to stop using its finger-prick technology for all but one of its 200-plus tests.

This isn’t to imply Invitae is the next Theranos. For one, unlike Theranos, Invitae is submitting its work to peer reviewed journals. But it’s fair to say that Invitae has a lot of crawling to do before it walks, runs, or flies.

First, it needs to convince doctors and insurers that its tests are worth ordering and paying for. It has a $475 per test option for people who want to pay out of pocket, but real revenues require insurance payments. Convincing insurers to cough up is a long process, and even at Invitae’s relatively modest $1,500 or $975 price points, they will need to see data. As Scott told analysts on a call this summer, “Every conversation starts with some level of skepticism because… almost everybody coming to them claims they can reduce cost.”

By mid-2016, Invitae says contracts with several insurers should be in place. It continues to make its case. For example, the company is touting a study, run with Massachusetts General Hospital, Harvard University, and Stanford University, that shows Invitae’s … Next Page »

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