With the market for direct-to-consumer medical testing forecast to explode, investors may want to take a close look at the leading publicly traded competitors, as well as private firms that could be potential IPOs or acquisition targets.
As recently as 2012, the U.S. market for diagnostic tests done at home was a puny $29 million. It’s expected to reach nearly $353 million in 2020, according to a report from Kalorama Information, a leading health care research firm based in New York.
A number of factors are fueling the growth. For one, people want more control over their health care, including tests that diagnose potential medical problems. And regulators are helping pave the way by green-lighting tests that have traditionally been done in clinical laboratories. Fears that people receiving the results may try to diagnose and treat themselves have been assuaged by consumer demand.
Among the leading firms vying for a slice of the home testing pie are publicly traded Quest Diagnostics (DGX), Laboratory Corporation of America (LH) and Myriad Genetics (MYGN), through its Counsyl unit. Another is Illumina (ILMN) spinout Helix. Among the host of private firms are Pathway Genomics, Color Genomics, HealthCheckUSA and Home Access Health.
A big part of overall market growth will be in genetic testing, which is being driven by advances in DNA mapping. With test results, people can learn what potential health risks they face and research any steps they can take to avoid developing a health problem down the line.
"We're all about empowering consumers and making it as easy as possible for people to get these insights," Elissa Levin, director of policy and clinical services at Helix, said in a June 2018 article on NPR.
Mountain View, Calif.-based 23andMe is currently the only company that provides a genetic test to consumers that doesn’t require a doctor’s prescription. However, that’s becoming less of an impediment for other firms who have little problem finding a physician to sign off on a test for consumers.
The mainstay of 23andMe, which is also private, is a spit test that helps consumers understand how genetics can influence their risk for certain diseases. The company provides consumer data to companies like Roche (XSWX:RO) and Pfizer (PFE). In an email response, the company said the data is “from consented customers” and is not anyone’s individual information “unless they have provided a separate written consent in order to do so."
23andMe also plans to use the rich genetic information it generates to develop its own drugs, having established a new therapeutics arm of its own. “23andMe’s ultimate goal has always been to accelerate discovery through genetic research to bring new treatments, and ultimately, cures, to people,” wrote a spokesperson.
The company’s latest funding round raised $250 million in September 2017. When asked if 23andMe had any plans to go public, the company said it couldn’t comment.
But 23andMe seems to be getting closer to that step, or maybe being acquired by a member of Big Pharma, perhaps GlaxoSmithKline (GSK). Glaxo recently invested $300 million in the company for a four-year collaboration, with the option for a fifth year. The companies hope to develop new, targeted drugs based on the data gathered by 23andMe. They will split all proceeds.
Disclosure: The author holds a position in Illumina.
