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Direct-To-Consumer Genetic Testing: Business Prospects in the United States


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This report will address genetic testing services as a consumer business. It will focus on the health-related segment sold over the Internet called Personal Genomics, the DTC business of scanning or …

This report will address genetic testing services as a consumer business. It will focus on the health-related segment sold over the Internet called Personal Genomics, the DTC business of scanning or sequencing genomes for health-related, and sometimes other, genetic information, which has only recently come into its own in a significant way. How certain will the business outlook be once the “curiosity factor” subsides?

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  • 1. Direct-To-Consumer Genetic Testing: Business Prospects in the United StatesReport SummaryDirect-To-Consumer Genetic Testing: Business Prospects in the United States covers thebusiness of genetic tests marketed and sold directly to consumers (DTC), with specialattention paid to the small, emerging, and definitely attention-getting segment calledPersonal Genomics. Thanks to the confluence of two transformational technologies thatderive from the invention of the Internet and the completion of the Human Genome Project,the availability of genetic tests is migrating from the scientist- and health professional-controlled domains of research (hospital and clinical laboratories) to the wild, wild world ofcyberspace, available to anyone, almost anywhere, with the click of a mouse.Buy Now: Direct-To-Consumer Genetic Testing MarketBrowse All: Newly Published Market Research ReportsThis report will address genetic testing services as a consumer business. It will focus on thehealth-related segment sold over the Internet called Personal Genomics, the DTC businessof scanning or sequencing genomes for health-related, and sometimes other, geneticinformation, which has only recently come into its own in a significant way. How certain willthe business outlook be once the “curiosity factor” subsides?According to the National Institutes of Health (NIH), almost 1,500 genetic tests are alreadyin use, primarily in clinical settings, and some remain in research laboratories. Most of themare for rare, inherited diseases, and only those studying rare diseases know they exist. Theaverage, or even the highly educated, consumer has likely never heard of them, unless theyhappen to know someone affected.In a June 2007 article, Piper Jaffray said that doctors and patients worldwidespend $730 million per year on genetic tests, and the market is growing 20% per year.* Ifthis figure and the 20% growth rate are accurate, that would make the global marketapproach about $950 million by early 2009.Clearly, the genetic tests sold DTC over the Internet, and the newer genome scans orgenome sequencing offered by the newest personal genomics companies, comprise only atiny slice of this larger pie. The vast majority of all firms offering gene analyses and servicesare privately held, a number are startups, and those that are public have other well-established lines of business to lean on while testing the waters with their first foray sellingtests and counseling through cyberspace. The newest entries, prominent for their scientificplatforms as well as wide coverage in the media and especially in the genetics blogosphere,are well-funded firms dedicated to DTC genetic testing barely a year out of the gate.
  • 2. But marketing or selling genetic tests to consumers is not really that new. Though notcovered in this report, various parentage and identity tests have been available toconsumers since the late 1980s. Some firms that specialized in this space early on nowhave Web sites with these and additional offerings such as ancestry tests, variouspharmacogenetic tests, and nutritional tests based on DNA assessments. Firms offeringnutritional (“nutrigenomic”) tests got started in the early 1990s. However, none of these“old timers” have received the attention of the newer genomic scan companies looking atSNPs (single nucleotide polymorphisms) or gene sequencing, for either disease markers orother personal traits, using the latest in gene chip or sequencing technologies.Historically, genetic testing referred to testing for heritable diseases by examining themetabolic products of single genes, rather than direct DNA analysis. These types of tests arestill in active clinical use, such as in the newborn screening programs present in every state,though some may be using more modern chromatographic or spectrophotometric methodsfor their analyses. By 1995, the NIH redefined genetic testing for a new age, as the“analysis of human DNA, RNA, chromosomes, proteins, and certain metabolites in order todetect heritable disease-related genotypes, mutations, phenotypes, or karyotypes forclinical purposes which include predicting risk of disease, identifying carriers, andestablishing prenatal and clinical diagnosis or rognosis”.Myriad Genetics paved the way for DTC personal genomic testing because they took thecontroversial step of advertising their BRACAnalysis tests for hereditary breast and ovariancancers directly to consumers. Initially, these tests could be obtained only through aphysician. The consumer response to the advertising campaign was sufficiently strong thatit was clear that at least one segment ofconsumers, women concerned about breast cancer(regardless of their family history), wanted genetic information…a clear signal to other firmscontemplating the benefits of selling DTC rather than exclusively through physician practicesthat the time was right for them to launch their businesses. Today, Myriad’s tests areavailable for consumers to purchase on some DTC genetic testing Web sites.Many doctors and researchers have vigorously criticized the consumer genomics field,saying the nascent industry is trying to ramp up faster than the science can interpret whatgenomic scans really mean. Some critics have even called for a ban on DTC marketing ofsuch services and for greater oversight from the US Food and Drug Administration (FDA).These concerns, the wave of new gene-chip technologies, and the ease of starting aconsumer business offering genetic information has definitely captured the attention of theDepartment of Health and Human Services (DHHS), which oversees the FDA, and otherorganizations with regulatory oversight of laboratory tests, as well as the Federal TradeCommission (FTC), an independent agency within the Executive Branch. The federal dialoghas started over the medical legitimacy of the genetic tests offered to consumers; theirsometimes uncertain clinical validity and utility; how the information is being used; privacy
  • 3. issues; the appropriate way to make sure that good scientific, medical, and ethicalstandards are set and not compromised and consumers are protected from fraud—all at atime when current regulatory oversight is shared between several agencies. State healthdepartments have already taken action against 13 DTC genetic testing firms. Somecompanies have faded away as a result, and others passed regulatory muster with flyingcolors.The latest market entries that offer genomic scans or gene sequencing for disease markersor other personal traits currently have similar business models but appeal to very differentconsumer segments. At least one firm is evolving toward a more traditional “medicalmodel,” already partnering with physician groups to help them incorporate geneticinformation into their practices. For another firm, increasing physician referrals, in additionto consumer orders for specific genetic tests for disorders for which a patient has a familyhistory, are driving the business. Other firms have goals that will lead them in this samedirection. But some have put their corporate positioning stake in the ground as being astrictly consumer business, and how they adapt to the realities of a consumer products andservices marketplace remains to be seen. Will new consumers keep coming to learn abouttheir predisposition to diseases they have never heard of? Should negative pressaccumulate about the lack of clinical validation of the tests, andhow the same set of genes can obtain different interpretations from different companies,how will consumers and these companies respond? How will securing repeat business bemanaged? Will companies adopt any of the well-established consumer researchmethodologies long relied upon by consumer goods companies to guide their businessdecisions? When properly executed, consumer research methods have the built-in rigor toforecast with considerable accuracy the market size in units and revenues for a newconsumer product or service. The investor community specializing in consumer businessesoften demands this kind of information early on, but it appears that biotech investors havenot.For the 40+ DTC companies offering genomic or genetic testing services on the Web—fromDNA dating services to scientifically valid, medical genetic tests—it will be more than justtechnology developments and regulations that shape the future: It will be the consumersthemselves. After taking a look at the history, the regulatory environment, and the currentbusiness dynamics of DTC genetic testing, and having conversations with executives atsome of these dynamic firms, thisreport will tell you why.
  • 4. Table Of Contents:Chapter 1GENETIC TESTING: YESTERDAY AND TODAY1.1. PKU: The First Genetic TestPhenylketonuriaSuccess with PKU Testing Initiates Screening of Newborns for Other Inherited DiseasesNewborn Screening Is the Largest Segment of Testing for Gene-Based Disorders Today1.2. Societal Issues Emerge as Testing for Genetic Diseases EvolvesSickle Cell Trait and Tay-Sachs DiseaseTay-Sachs Disease: Incidence, Etiology, and PathogenesisGenetic Testing of Asymptomatic Gene Carriers Influences Family Reproductive DecisionsThe Next Wave of Carrier Screening: Neural Tube Defects, Cystic Fibrosis, andHuntington’s Disease1.3. NIH Helps Redefine Genetic Testing for a New AgeAdoption of DNA “Fingerprinting” Is Embraced1.4. BRCA1 and BRCA2: A New Breed of Genetic Testing for Hereditary Breast andOvarian Cancer (HBOCBackground on Hereditary Breast and Ovarian CancerMyriad Genetics Commercializes HBOC Genetic TestingDTC Genetic Testing Rapidly Expands Following Myriad’s DTC Marketing Success1.5. Genetic Testing in Medicine TodayChapter 2TODAY’S REGULATION OF GENETIC TESTING2.1. The Emerging Business EnvironmentAn Evolving Supply Chain Embracing New Technologies Drives a Growing Need forRegulatory Reform2.2. Regulatory OversightSeveral Agencies Have Oversight of Clinical Laboratory Tests and Devices, but RegulatoryGaps ExistAn Overview of How Genetic Testing Is Currently Regulated in the United StatesFDA’s Role Covers Equipment, Reagents, and Laboratory TestsMedical Devices and In Vitro Diagnostics (IVDs)Analyte Specific Reagents (ASRs)Laboratory Developed Tests (LDTs)Centers for Medicare & Medicaid Services (CMS) Regulates Laboratories, TheirTesting Services, and Their ReimbursementThe Federal Trade Commission (FTC) Oversees All Print, Media, and InternetAdvertisingThe CDC’s Role Is Primarily One of Scientific AdvisorDHHS Addresses Issues Associated with Genetic Testing under the Secretary’sAdvisory Committee on Genetics,Health, and Society (SACGHS)2.3. Business ImplicationsThe US Federal Regulatory Environment Favors Entrepreneurial Genetic Testing Companies…But Each of the 50 States Has Its Own Suite of Regulations, Creating Confusion for DTCCompaniesRecent Regulatory Initiatives: States Step In When Federal Regulators Appear Slow to ActNew York State Quietly Begins the ChallengesCalifornia’s Recent Citations to DTC Companies Were Accompanied by Print Media
  • 5. and Online Fanfare, Especially in the Gene-Blogosphere CommunityWhat Was At Stake for Personal Genomics Companies in the California Order?How Did Companies Respond to Regulatory Challenges?The Outcome and Remaining IssuesImplications of the California DecisionWhat Remaining Issues Could Surface With Other State or Federal RegulatorsPersonal Information Services versus Medical Testing DataHow Are a “Diagnostic” or Clinical Laboratory Test and an “Authorized Provider”Legally Defined?Does Telling Someone They Have a Certain Genetic Profile, or Providing ThemWith a Genetically Based Disease-Risk Assessment, Constitute Relevant ClinicalInformation?California Regulators, As Well As Others in the Medical and Federal PolicyCommunities, Have Argued That DTC Genetic Testing Companies Pose a Dangerto Consumers2.4. The Regulatory Outlook: Federal Regulation Grows More LikelyCongressional ActivitiesWhat Lies Ahead2.5. Points to Ponder for Personal Genomics Companies2.6. The Genetic Information and Non-Discrimination Act of 2008 (GINA)GINA Removes Some, But Not All, Concerns Relating toProtection from Genetic DiscriminationChapter 3DIRECT-TO-CONSUMER GENETIC TESTING: THE INDUSTRY TODAY3.1. Will Medical Genetics Evolve To A Consumer Business?The “Distribution Revolution”3.2. Direct-To-Consumer Genetic Testing CompaniesIndustry Segmentation TodayLaw Enforcement/Forensics“Recreational Genomics/GeneticsAncestry/Genealogy TestingPersonal TraitsNutritional Genetics/GenomicsA Dynamic and Fluid Marketplace3.3. For Personal Genomics, Myriad Genetics Helps Set the Stage3.4. Direct-To-Consumer Genetics and Genomics: Personal Genomics CompaniesLaunched in November 2007New Genome-Scan Entrants Celebrated Their First Birthday in November 200823andMeNavigenicsdeCODEmeKnome3.5. Other DTC Genetic Testing Companies Debuted a Little Earlier, With LessFanfareDNA DirectOther Genetic Testing Companies AboundChapter 4UNDERSTANDING CONSUMERS…THE BIGGEST VARIABLE IN THE PERSONALGENOMICS BUSINESS EQUATION
  • 6. 4.1. A Survey Sampling: Attitudes about Genetics, Genomics, and Genetic TestingAmong Different Consumer GroupsBurrill & Company/ChangeWave Research’s Personalized Medicine and Wellness Survey,May 2008Cogent Research’s “Cogent Genomics Attitudes and Trends” (CGAT) Survey, 20084.2. Consumer Segmentation: Sorting the US Population by Opinions, Attitudes,and Values Regarding Use of Genetic Information for Health Optimization4.3. Physician Market Research: Important, But Still Limited4.4. The Bottom Line Derived From Preliminary ResearchChapter 5THE BUSINESS OUTLOOK FOR DIRECT-TO-CONSUMER GENETIC TESTING5.1. Rapid Technology ChangeThe Archon X PrizeThe Race to Commoditization…The $1,000 GenomeInformation Overload: So We Can Sequence an Entire Human Genome…Now What?5.2. Likely Regulation5.3. An Uncertain Future with Consumers5.4. Will Consumer Genomics Be a Means to a Different End?Chapter 6EXPERT INTERVIEWS6.1. Linda Avey, Cofounder, 23andMe, Mountain View, CA6.2. Mari Baker, Chief Executive Officer, Navigenics, Redwood Shores, CA6.3. George Church, PhD, Professor of Genetics, Harvard Medical School, Director, LipperCenter for Computational Genetics, Boston, MA; Founder, Knome, Cambridge, MA6.4. Fred Ledley, MD, Professor and Chair, Natural Sciences Department, BentleyUniversity; Founder and Chair of My Genome6.5. Gilbert Leveille, PhD, Executive Director, Wrigley Science Institute, William Wrigley Jr.Company, Chicago, IL; Scientific Advisory Board Member, Sciona, Aurora, CO6.6. Ryan Phelan, Chief Executive Officer, DNA Direct, San Francisco, CA6.7. Dietrich Stephan, PhD, Cofounder and Chief Science Officer, Navigenics, RedwoodShores, CA6.8. Peter Vitulli, Chief Executive Officer, Sciona, Aurora, CO6.9. Christy White, Founder and CEO, Cogent Research, Cambridge, MAAppendix ARECOMMENDED NEWBORN SCREENING TESTS FOR US BIRTHSAppendix BGENERIC COPY OF CALIFORNIA DEPARTMENT OF PUBLIC HEALTH’S “CEASE-AND-DESIST”LETTER SENT TO 13 GENETIC TESTING COMPANIESAppendix CSELECTED COMPANY PROFILES23andMeManagement Summary and Board of DirectorsCompany Vision and Mission
  • 7. Genetic Testing ServicesBioMarker PharmaceuticalsCompany DescriptionProducts and ServicesDietary Supplement ProductsManagement TeamBoard of DirectorsScientific Advisory BoardTechnology PlatformsConsumer GeneticsCompany Description and MissionManagementCyGene Direct (CyGene Laboratories)Background and DescriptionMission and VisionProducts and Services Offered (since 2006)ManagementTechnology DevelopmentsAlliancesScientific Advisory BoardFinancial SummarydeCODE geneticsCompany DescriptionRecent Scientific DevelopmentsFinancial SummaryDNA DirectCompany DescriptionMissionBusiness ModelCompany Standards and Criteria for Offered TestsThe Test Purchasing ProcessPrivacy and SecurityInvestorsManagementServices OfferedOther Company InitiativesBoard of DirectorsMedical AdvisorsGenelex CorporationCompany DescriptionCompany MissionProducts and ServicesAwards and RecognitionCompany LicensesManagement
  • 8. Other Products OfferedKnomeCompany DescriptionPartnershipsManagement and AdvisorsTechnologyProducts and ServicesLabCorpCompany DescriptionManagement TeamBoard of DirectorsGenetic Testing CapabilitiesLifeCodeCompany DescriptionNavigenicsCompany BackgroundManagementMission and VisionGenetic Testing ServicesOther InformationNavigenics’ Clinical Advisory BoardNavigenics’ Scientific Advisory BoardNavigenics’ Genetics Counseling Task ForceNavigenics’ Policy and Ethics Task ForceScionaCompany DescriptionInvestorsProducts and ServicesManagementTechnologyBoard of DirectorsScientific and Business Advisory BoardCurrent Research CollaborationsSeqWrightCompany DescriptionMissionProducts and ServicesOverview of Genomic Profiling ServiceProfessional StaffScientific Advisory BoardRegulatory Compliance
  • 9. Smart GeneticsCompany DescriptionMissionManagement TeamBoard of TrusteesExpert AdvisorsProduct OfferingsSuracellCompany DescriptionManagement and Advisory TeamProduct LinesPartnershipsFinancial SummaryReferencesCompany Index with Web AddressesList of FiguresFigure 2.1. Direct-To-Consumer Genetic Testing: Challenging Traditional Business ModelsFigure 2.2. U.S. Department of Health & Human Services Organizational ChartFigure 4.1. The Health Managment ModelTMList of TablesTable 1.1. Myriad Genetics: Genetic Testing Launch TimelineTable 1.2. Current Applications of Genetic Testing in MedicineTable 2.1. DTC Genetic Testing Companies In Receipt of Advisory Letters from the NYState Department of HealthTable 2.2. California Issues Cease-and-Desist Orders to 13 DTC Genetic TestingCompanies in June 2008Table 3.1. Genetic Testing and the Internet Foster a „Distribution Revolution“Table 3.2. Companies Selling Genetic Tests Directly to Consumers Identified Online (as ofFebruary 2009)Table 3.3. National Society of Genetic Counselors’ Direct-to-Consumer Genetic TestingRecommendationsTable 3.4. American College of Medical Genetics’ Direct-to-Consumer Genetic TestingGuidelinesTable 5.1. Representative Next-Generation Sequencing CompaniesLatest Market Research Reports: Strategic Management of Resources and Portfolios MVNO Business Plan Comprehensive MVNO/MVNE Package China Wind Turbine Gearbox Industry, (2011 Deep Research Report) China coal mining and washing industry, 2011 Markets for OLED Materials
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