Blackstone Buys Stake in Ancestry for $4.7 Billion, While Interest in Direct-to-Consumer Genealogy Genetic Tests May Be Fading Among Consumers
Though gene sequencing is touted as a key component of precision medicine, the medical value of direct-to-consumer testing has yet to show up in improved health outcomes, nor have clinical laboratories benefitted
In a recent example that the market for genetic genealogy testing may have peaked and the days of spectacular growth in the number of direct-to-consumer (DTC) genetic test orders and revenue is over, private-equity firm Blackstone—in a $4.7 billion deal—announced it will acquire a majority stake in Ancestry, which also does some clinical laboratory genetic testing as well.
Blackstone (NYSE:BX) acquired Ancestry of Lehi, Utah, one of the two largest genealogy testing companies (the other being 23andMe of Sunnyvale, Calif.), from a group of equity holders led by investment firms Silver Lake, GIC, Spectrum Equity, and Permira, noted a press release. GIC will retain a “significant minority stake” in Ancestry.
“We are very excited to partner with Ancestry and its management team. We believe Ancestry has significant runway for further growth as people of all ages and backgrounds become increasingly interested in learning more about their family histories and themselves,” David Kestnbaum, a Senior Managing Director at Blackstone, said in the press release. “We look forward to investing behind further data, functionality, and product development across Ancestry’s market leading platform to continue to provide a differentiated service.”
Is Genetic Testing for Genealogy Still a Growth Industry?
Ancestry is the global leader in digital family history services, operating in more than 30 countries with more than three million paying subscribers across its Ancestry online properties and more than $1 billion in annual revenue.
However, some experts say the road ahead may not be smooth for Ancestry or its major competitor, 23andMe.
“The business landscape fell off a cliff last year,” Laura Hercher, Director of Human Genetics Research at Sarah Lawrence College in New York, told STAT. “Fads pass,” she added.
Hercher points out that Ancestry has “this enormous database, which inherently has a lot of value hidden in it—potential energy. But they have not figured out how to get that information out in the way 23andMe has.”
23andMe’s pivot into medical research gained steam in 2018 when pharmaceutical giant GlaxoSmithKline (NYSE:GSK) purchased a $300 million stake in the company with the aim of using 23andMe’s resources to develop new medicines. That collaboration began bearing fruit earlier this year when GlaxoSmithKline started human trials of the first medicine (a cancer drug) to emerge from the partnership, STAT reported.
The public’s declining interest in at-home genealogy, however, has caused both companies to reduce staffing. 23andMe began the year by laying off about 100 employees—an estimated 14% of its workers—and Ancestry followed suit in February, letting go a similar number of employees, representing roughly 6% of its workforce.
According to MIT Technology Review, direct-to-consumer genetic genealogy testing reached its zenith in 2018 when consumers purchased as many DNA tests in one year as they had in all previous years combined, propelling total sales from Ancestry, 21andMe, and other DTC gene testing companies to roughly $26 million.
In 2019, CNBC reported that, market-wide, roughly 30 million tests had been sold across the globe. However, in recent years, sales have fallen short of expectations as the number of people willing to pay $99 to learn about their ancestry has dwindled. “I suspect those that are curious about this information are thinning out and there’s less people to go around to grow,” Greg Yap (above), Partner at Menlo Ventures, told CNBC. “I think there’s a broader issue, which is that the ultimate medical value is still really unproven,” Yap added. “There’s lots of research being done, but value for mass market consumer isn’t there yet, so it keeps a ceiling on the size of that market.” (Photo copyright: VentureBeat.)
Privacy Still a Concern
Ancestry has begun to insert itself into the genetic testing healthcare arena. In a press release, the company announced the launch of AncestryHealth, a $179 DNA testing kit that uses next generation sequencing (aka, high-throughput or massive parallel sequencing), aimed at providing adult consumers information on their inherited health risks.
However, as MedCity News points out, the sale to Blackstone has increased privacy concerns around the direct-to-consumer DNA testing market. Ancestry’s consumer privacy and data protections remain unchanged under the new ownership, but Alan Butler, Interim Executive Director at Electronic Privacy Information Center (EPIC), told MedCity News, “This is one example of a very troubling trend. It’s something regulatory agencies are not up to date to deal with. It’s one of the reasons we need comprehensive privacy law in the US.”
As genealogy companies such as 23andMe and Ancestry shift their focus from providing genetic histories to improving consumers’ health through genetic testing, clinical laboratories should be mindful of the logical next step, which is predicted to be genetic tests where the consumer collects the sample at home and the test is used to aid in diagnosing and treating patients.
—Andrea Downing Peck
Related Information:
Blackstone Agrees to Buy Ancestry in $4.7 Billion Deal
Blackstone to Acquire Ancestry, Leading Online Family History Business, for $4.7 Billion
Cancer Drug Is First Potential Therapy to Emerge from 23andMe and GlaxoSmithKline Collaboration
More than 26 Million People Have Taken an At-Home Ancestry Test
Ancestry Launches AncestryHealth Powered by Next Generation Sequencing
Consumer DNA Testing Has Hit a Lull—Here’s How It Could Capture the Next Wave of Users
Blackstone $4.7 Billion Acquisition of Ancestry Raises Privacy Questions
