Caixin
Jun 01, 2021 09:04 PM
BUSINESS & TECH

In Depth: Genebox Hypes a Fresh Breakthrough in Home DNA Testing. Will China Care?

A lack of interest in home DNA testing in China may make Genebox's technology a moot point. Photo: VCG
A lack of interest in home DNA testing in China may make Genebox's technology a moot point. Photo: VCG

China’s bargain alternative to Google-backed genomics startup 23andMe — Genebox — says it has developed a type of testing apparatus key to consumer-grade DNA kits that could break a global duopoly.

High-density microarrays are key to so-called “direct-to-consumer” genetic testing kits used in the U.S. by DNA home-testing companies like 23andMe and Ancestry.com, which encourage people send them saliva samples and identify their potential to develop gene-linked diseases like Alzheimer’s, as well as things like their supposed ancestral background.

Also known as “gene chips,” the microarrays are made of a series of tightly-packed probes that bind to specific sequences in a DNA sample that can then be read using an optical device like a laser. They have been eclipsed in many areas by more advanced, but more expensive genomic sequencing techniques such as those which were used to decode the genome of the virus that causes Covid-19.

Li Zhi, the founder of Beijing Lasuo Biological Technology Co. Ltd., which trades as Genebox, told Caixin that using the company’s domestic microarrays will further reduce the costs of its testing equipment, which is already among the cheapest on the Chinese market, as part of the firm’s “inclusive” strategy.

Others had their doubts.

Local upstart

Two American companies produce most of the world’s high-density gene chips — Illumina Inc., and Affymetrix Inc., owned by Thermo Fisher Scientific Inc.

Genebox co-founder Xu Xinyi, who works as a research and development (R&D) scientist at the company, told Caixin that its challenger tech involves a second-generation optical fiber microsphere array, which is broadly similar to that of Illumina.

Xu claimed the accuracy rate of the company’s technology was as high as 99.9%, but the company has not revealed the kind of sample sizes required to ensure accuracy, and has not published any papers in scientific journals documenting the process.

“There is still a way to go before a small-scale trial transforms into mass production,” said Zhang Chunxiu of the Shanghai Biochip National Engineering Research Center. It is in that transition to mass production that quality control issues generally emerge, as even small irregularities will affect accuracy and stability.

Li told Caixin that the company had partnered with State Grid Corp. of China to produce the chips, which at 500-nanometers in size are much less technically sophisticated than say a 7-nanometer smartphone chip. “The accuracy required is not that high, and the production line of the State Grid is more than sufficient,” Li said.

Little competition, for good reason

If few competitors are nipping at Genebox’s heels, that’s probably because consumer-grade genetic testing is not a blazing market in China, and because alternatives to the decade-old gene chip technology are become more readily available — and cheaper.

Chen Gang, co-founder and CEO at rival DNA testing firm WeGene, says gene chips are being replaced by high-throughput sequencing technologies, which is why few local companies have invested in them. Compared with gene chips, next generation sequencing can detect more and has been widely used in prenatal diagnosis, and pathogen detection and other fields. The main disadvantage is cost, but that is changing.

Limited market

Consumer genetic testing was popular in China a few years ago, but gradually lost investor interest after 2018. That was the year Chengdu-based 23 Mofang Biotechnology Co. Ltd. took in 100 million yuan in a B+ financing round, and founder Zhou Kun told Caixin reporters that the firm was considering listing on the Chinese mainland or in Hong Kong. Three years later there has been no further announcement.

In December, 3-year-old Genebox said it had raised tens of millions of U.S. dollars as part of a Series A+ funding round led by Centurium Capital. It previously took in 136 million yuan from pharmacy giant Dashenlin Pharmaceutical Group Co. Ltd.

Still, the domestic market is growing. It is expected to reach $405 million in sales by 2022, according to Bloomberg — an eight-fold increase from 2018.

In the U.S., 23andMe was the first DNA testing company that marketed direct to consumers. Founded in 2006, it quickly gobbled up a $9 million funding round led by Google LLC. Sequoia Capital led its $250 million E round in 2017, and it has raised in excess of $850 million to date.

The firm’s main business was initially direct to consumer DNA-testing. Users would pay $99, and receive a DNA kit in the mail, which they would spit in and mail back. The results were available within weeks.

Home DNA testing, while not particularly respected by doctors, grew to detail everything from the potential to develop gene-linked diseases like certain cancers, through to the supposed ancestry of individual tested — in some cases down to a percentage or global region.

Controversies soon emerged, including concerns about privacy and the results’ potential use by law enforcement. There were questions about whether they placed an inordinate emphasis on nature rather than nurture in predicting disease, creating undue anxiety or a false sense of security, as well as concerns they were promoting unscientific views on race.

In a fourth quarter report on retail wellness technology from Pitchbook, analyst Kaia Colban found the fear that DNA testing firms might share data with insurance companies drives some of the concern, at least in the U.S. Because such firms are not legally considered medical providers “these companies are not subject to the same regulations and privacy policies regarding DNA profiles, and this could prevent mass adoption,” Colban writes.

There are also questions about the “one-and-done” business model and market saturation. While most companies offer add-on services and more granular analysis for an additional cost, there’s little reason why someone would want to take more than one home DNA test.

“While only 30 million people globally have taken an at-home DNA test according to public statements, 23andMe and Ancestry.com appear to be facing growth headwinds and announced in 2020 that they would lay off 14% and 6% of their staff, respectively,” Colban writes of the U.S. market. “We believe providers struggle to convey to users the value of the test beyond purely satisfying curiosity.”

The model has been replicated in China by companies like WeGene, 23 Mofang, and Genebox, though it’s not clear how and which concerns have translated. But after several years demand remains relatively weak. One major reason is that there seems to be little interest in ancestral analysis among Chinese consumers, and the companies have struggled to position their tests as having medical significance.

“The applications are much smaller than that in the United States, so the products have not grown on a large scale,” WeGene’s Chen Gang said.

One place where they could break through? China's booming pet industry. Genebox recently teamed up with Guangzhou’s Wondfo Biotech Co. Ltd. to develop DNA tests for peoples’ cats and dogs.

Contact reporter Flynn Murphy (flynnmurphy@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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