Genetic Testing Delivers Startup Hits And Misses

When submitting a genetic check, one often has a desired final result in thoughts. That doesn’t imply the outcomes will bear it out.

Investing in DNA testing startups is way the identical. Through the years, startup traders have poured billions of {dollars} into corporations within the area. To this point, the outcomes have delivered each big successes and flops.

On the flop entrance, one of many extra high-profile disappointments for traders has been genetic testing supplier 23andMe. The corporate introduced final week it will lay off around 40% of remaining staff and wind down its medical trials.

The information follows years of declining inventory market fortunes for Silicon Valley-based 23andMe, which is finest recognized for check kits that provide individuals details about their ancestry and well being dangers. The corporate, which went public through SPAC in 2021 and raised over $1 billion in non-public funding, had a current market cap of lower than a tenth that sum.

In fact, one firm’s travails aren’t trigger for traders to flee a complete sector. And whereas 23andMe has struggled, different enterprise bets round genetic testing have fared higher. This consists of one of many earlier entrants — Natera — a supplier of prenatal and different genetic assessments that’s at present a $21 billion public firm.

The place VCs are investing now

Extra not too long ago, enterprise traders have backed good-sized rounds for quite a few startups targeted on genetic testing. Utilizing Crunchbase data, we made a listing of seven such corporations funded prior to now three quarters.

The most important funding recipient is BillionToOne, a Silicon Valley firm growing expertise to detect and measure tiny and sparse disease-related DNA fragments. The startup says its findings might allow huge enhancements in prenatal screening and oncology testing.

Traders apparently like what they see. The 8-year-old firm secured $130 million in Sequence D funding in June at a valuation of over $1 billion. It picked up one other $140 million in debt financing in September.

The second-largest spherical went to Genome Medical, a startup that companions with healthcare suppliers to supply genetic counseling telehealth companies. The South San Francisco-based firm raised $75 million in contemporary fairness financing, per a September securities filing.

One other investor favourite is Legacy, a males’s fertility startup primarily targeted on sperm testing and freezing that has raised $47 million to this point. Its choices embrace an choice for semen analysis of sperm’s genetic well being.

Revisiting the bubble

However whereas traders are nonetheless enthused about some corporations tied to genetic testing, the shadow of extra from the bubble years nonetheless looms.

Along with 23andMe, others who tried exits in frothier market occasions haven’t executed effectively. This consists of Invitae, a supplier of genetic diagnostics for hereditary issues that filed for chapter earlier this yr and offered its belongings to testing supplier LabCorp. To a lesser extent, Personalis, a supplier of most cancers genomic assessments, has additionally lagged following its 2019 IPO.

VC curiosity in pet genetics, once a sought-after startup niche, has additionally waned. Canine DNA testing firm Embark, which raised $75 million in a 2021 SoftBank-led spherical, hasn’t secured funding since. Rival Basepaws, targeted on cats and canines, offered to animal well being firm Zoetis in 2022 for an undisclosed sum.

Development market

On the intense facet, nevertheless, more cash is being spent on genetic testing than ever earlier than.

Final yr, genetic evaluation constituted a $10.55 billion trade globally, per BioSpace research.

Its report predicts the quantity will develop to over $23 billion by 2033. If startups generate even a small share of this complete, it might add as much as some very giant outcomes.