China’s bargain alternative to Google-backed genomics startup 23andMe — Genebox — says it has developed a type of testing apparatus key to consumer-grade DNA kits that could break a global duopoly.
High-density microarrays are key to so-called direct-to-consumer genetic testing kits used in the U.S. by DNA home-testing companies like 23andMe and Ancestry.com, which encourage people to send in saliva samples that are tested to determine the likeliness that the customers might develop gene-linked diseases like Alzheimer’s. The companies also promise to map customers’ supposed ancestral backgrounds.
Also known as “gene chips,” the microarrays are made of a series of tightly packed probes that bind to specific sequences in a DNA sample that can then be read using an optical device like a laser. They have been eclipsed in many areas by more advanced, but more expensive genomic sequencing techniques such as those used to decode the genome of the virus that causes COVID-19.
Li Zhi, the founder of Beijing Lasuo Biological Technology, which trades as Genebox, told Caixin that using the company’s domestic microarrays will further reduce the costs of its testing equipment, which is already among the cheapest on the Chinese market, as part of the firm’s “inclusive” strategy.
Others have their doubts.
Two American companies produce most of the world’s high-density gene chips — Illumina, and Affymetrix, owned by Thermo Fisher Scientific.
Genebox co-founder Xu Xinyi, a research and development scientist at the company, told Caixin that its challenger tech involves a second-generation optical fiber microsphere array that is broadly similar to that of Illumina.
Xu says the accuracy rate of the company’s technology is as high as 99.9%, but the company has not revealed the kind of sample sizes required to ensure accuracy and has not published any papers in scientific journals documenting the process.
“There is still a way to go before a small-scale trial transforms into mass production,” said Zhang Chunxiu of the Shanghai Biochip National Engineering Research Center. It is in that transition to mass production that quality control issues generally emerge, as even small irregularities will affect accuracy and stability.
Li told Caixin that the company had partnered with State Grid Corp. of China to produce the chips, which at 500 nanometers in size are much less technically sophisticated than say a 7 nm smartphone chip. “The accuracy required is not that high,” Li said, “and the production line of the State Grid is more than sufficient.”
If few competitors are nipping at Genebox’s heels, that’s probably because consumer-grade genetic testing is not a blazing market in China, and because alternatives to the decade-old gene chip technology are becoming more readily available and at cheaper prices.
Chen Gang, co-founder and CEO at rival DNA testing firm WeGene, says gene chips are being replaced by high-throughput sequencing technologies, which is why few local companies have invested in them. Compared with gene chips, next-generation sequencing can detect more and has been widely used in prenatal diagnosis, pathogen detection and other fields. The main disadvantage is cost, but that is changing.
Limited market
Consumer genetic testing was popular in China a few years ago but after 2018 gradually lost investor interest. That was the year Chengdu-based 23 Mofang Biotechnology took in 100 million yuan ($15.6 million) in a B+ financing round, and founder Zhou Kun told Caixin that the company was considering listing on the Chinese mainland or in Hong Kong. Three years later and there has been no further announcement.
In December, 3-year-old Genebox said it had raised tens of millions of U.S. dollars as part of a Series A+ funding round led by Centurium Capital. It previously took in 136 million yuan from pharmacy giant Dashenlin Pharmaceutical Group.
Still, the domestic market is growing. It is expected to reach $405 million in sales by 2022, according to Bloomberg — an eightfold increase from 2018.
In the U.S., 23andMe was the first DNA testing company that marketed direct to consumers. Founded in 2006, it quickly gobbled up a $9 million funding round led by Google. Sequoia Capital led its $250 million E round in 2017, and it has raised in excess of $850 million to date.
The company’s main business was initially direct-to-consumer DNA testing. Users would pay $99 and receive a DNA kit in the mail, which they would spit in and mail back. The results were available within weeks.
Home DNA testing, while not particularly respected by doctors, grew to detail everything from the potential to develop gene-linked diseases like certain cancers to the supposed ancestry of the individuals tested, in some cases down to a percentage or global region.
Controversies soon emerged, including concerns about privacy and the results’ potential use by law enforcement. There were questions about whether they placed an inordinate emphasis on nature rather than nurture in predicting disease, creating undue anxiety or a false sense of security, as well as concerns they were promoting unscientific views on race.
In a fourth-quarter report on retail wellness technology from Pitchbook, analyst Kaia Colban found the fear that DNA testing companies might share data with insurance companies drives some of the concern, at least in the U.S. Because these companies are not legally considered medical providers, they “are not subject to the same regulations and privacy policies regarding DNA profiles, and this could prevent mass adoption,” Colban writes.
There are also questions about the “one and done” business model and market saturation. While most companies offer add-on services and more granular analysis for an additional cost, there’s little reason why someone would want to take more than one home DNA test.
“While only 30 million people globally have taken an at-home DNA test, according to public statements, 23andMe and Ancestry.com appear to be facing growth headwinds,” Colban writes of the U.S. market. Last year they announced “they would lay off 14% and 6% of their staff, respectively. We believe providers struggle to convey to users the value of the test beyond purely satisfying curiosity.”
The model has been replicated in China by companies like WeGene, 23 Mofang, and Genebox, though it’s not clear how and which concerns have translated. But after several years, demand remains relatively weak. One major reason is that there seems to be little interest in ancestral analysis among Chinese consumers, and the companies have struggled to position their tests as having medical significance.
“The applications are much smaller than that in the United States, so the products have not grown on a large scale,” WeGene’s Chen Gang said.
One place where they could break through? China’s booming pet industry. Genebox recently teamed up with Guangzhou’s Wondfo Biotech to develop DNA tests for peoples’ cats and dogs.
—
Read also the original story.
Caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Nikkei recently agreed with the company to exchange articles in English.
