by Dr. Hsien-Hsien Lei
Posted March 5, 2008 in Business of DNA, DNA Testing
With the many genomics and genetics companies launching left, right, and center in recent months, you’d think the market is pretty robust. Not so, says deCODE CEO Kari Stefansson whose company is laying off 60 employees out of a total of 390 or about 15% of its workforce.
It is natural for us to operate the company in such a way that we can make the money that we have last longer than what we had expected to begin with. These are very simple and clear operational standpoints and it would even be wise for other companies in our community to follow our example. [emphasis added]
If what Stefansson says is true, then others like 23andMe, Navigenics, and DNATraits might be looking to tighten operations as well. Although it appears that most personal genomics companies operate with small staffs of less then 50-100, downturns in the market could mean that work is outsourced to independent contractors rather than being performed by full-time employees. (So if you’re looking for a job in the genomics industry, you know how to approach it.) However, not all companies suffer from as much pessimism as deCODE. bizjournals reported last week that Family Tree DNA led by Bennett Greenspan and Max Blankfeld saw
a profit gross revenue of around $12.2 million in 2006.
deCODE is behind several genetics products available direct to consumers including:
deCODEme – A whole genome scan using Affymetrix DNA chips to analyzing over one million single nucleotide polymorphisms (SNPs) per customer.
deCODE T2 – A genetic test for type 2 diabetes that detects a variation in the TCF7L2 gene.
deCODE MI – A genetic test for myocardial infarction (aka heart attack, coronary artery thrombosis, or coronary artery occlusion).
Given their wide range of products, it’s surprising that deCODE is suffering from cash flow problems in which earnings, balance sheet, and profits from markets are not enough for them to continue growing. Perhaps this is an indication that the market is starting to experience saturation in the number of companies and services being offered yet has not seen a concomitant rise in the number of consumers willing to pay for personal genomic services.
What’s more interesting is that the price of technology continues to drop. BusinessWeek surveyed the DNA sequencing market and found that new technologies are faster and cheaper. Soon we will even have the coveted $1,000 genome. This means that companies should have to spend less to earn more. For example, Illumina’s margins are declining and their revenues are expected to rise 35% in 2008. And production costs will continue drop as labs open up in countries with lower overhead, e.g., China. So shouldn’t it be easier to make a profit now off of personal genomics than ever before?
In any case, while 23andMe and Knome focus on the rich, famous, and elite, there is a great need to show the general public how genetic testing of all types is relevant to their everyday lives. There aren’t enough millionaires like Dan Stoicescu to fund the entire personal genomics market. Until genetic testing is widely adopted for a variety of commercial uses by a greater segment of the consumer population, the pot of profits will not be big enough to share. In 2008, we will surely see companies drop out and others consolidate.
deCODE Genetics Sinking Low...
Eye on DNA Headlines for 10 March 2008...
DNA Video: deCODEme...
SNPs on Chromosome 15 Associated with Smoking and Lung Cancer...
Affymetrix and Illumina Moving Gene Chip Manufacturing to Singapore...
DNA Video: Dr. Kari Stefansson of deCODE genetics...
Using Disposable Income for Genetic Tests...
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