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Surging popularity of home DNA kits that enable consumers to uncover secrets of their ancestry and health risks has fueled speculation that the industry is set for further disruption this year.
Ancestry.com, the world’s largest direct-to-consumer genetic-testing company, is getting ready for an initial public offering amid growing investor appetite for new health and technology stocks, Bloomberg reported last week, citing anonymous sources. A representative for the Lehi, Utah-based company declined to comment to Karma Network.
Consumers’ fascination with DNA testing, growing demand for preventive care and technological advancement have spurred a range of new services expanding beyond the ancestry sector to health, fitness and beauty.
The IPO has been a long time coming: Ancestry has been planning its listing for the past two years. The company has demonstrated the market that it knows how to attract customers through aggressive marketing and advertising strategy, says David Mittelman, a geneticist and CEO of Othram, a forensic DNA testing company.
“They are mature and ready,” said Mittelman.
Direct-to-consumer DNA testing sales are projected to reach $310 million by 2022 from $99 million in 2017, according to market researcher Kalorama Information. One company, Vinome, even recommends wines based on DNA test results.
New Offerings Planned
Ancestry’s chief financial officer, Howard Hochhauser, said earlier this month that the company has plans for international expansion and new offerings “in the health space, around our DNA product.”
Ancestry has sold more than 14 million kits worldwide since it began analyzing human genome in 2002, compared with 10 million tests shipped by its largest competitor, 23andMe. The company, which also hosts online databases of historical documents and family trees, operates in more than 30 international markets and has 3 million paid subscribers.
“Ancestry is the only company that has both a very strong DNA test for ancestry and huge database for their customers,” said genealogy blogger Richard Eastman, who’s been following the company for more than 30 years. “And a properly funded company can leverage that kind of information to further its position on the market.”
The direct-to-consumer market has been largely dominated by Ancestry and 23andMe, backed by Facebook investor Yuri Milner and Google Ventures. 23andMe is the only company authorized by the Food and Drug Administration to offer genetic health risk reports, alerting consumers of chances developing certain forms of cancer and other diseases.
More than 26 million people had added their DNA to four leading commercial ancestry and health databases, including MyHeritage and FamilyTreeDNA, according to MIT Technology Review estimates. If the trend continues, the industry may surpass 100 million consumers within 24 months.
Despite the staggering growth, the industry has been plagued by controversies and consumer privacy concerns. Last year, pharmaceutical giant GlaxoSmithKline purchased a $300 million stake in 23andMe, gaining access to company’s genetic data to develop new drugs, which alarmed bioethicists and consumer advocates. Meanwhile, law enforcement solved 30-year-old cold case of the infamous “Golden State Killer” after finding a DNA match of his relative on a public genealogy website. Earlier this year, FamilyTreeDNA said that it voluntarily handed over customer data to the FBI, raising questions about the transparency of the companies’ privacy policies.
“When Americans voluntarily submit their DNA for analysis, there's just no telling who will have access to it or whether that information will one day become public,” said Peter Pitts, president and cofounder of the Center for Medicine in the Public Interest. “And unlike a credit card number or email password -- which consumers can change if a security breach occurs -- a person's genetic code is permanent.”
Ancestry’s Hochhauser this month said that the company has taken a stance “against sharing (customer DNA) with anybody” and the consumers retain “full ownership and rights for their DNA.”
"We take that extremely seriously and maintain high security protocols for the DNA product and have not shared it with pharmaceutical companies like some of our competitors have.” he said.
Ancestry had a short stint as a publicly traded company in 2009 before a $1.6 billion buyout in 2012 led by European private equity firm Permira Advisers in partnership with company’s executives. In 2016, Silver Lake Partners and GIS acquired “substantial equity stakes” in Ancestry at an enterprise value of approximately $2.6 billion. The company generated more than $1 billion in revenue in 2017.
Anastasia Ustinova is a freelance business writer based in Seattle with more than 10 years of experience reporting around the world. Her stories were featured in Bloomberg News, Businessweek, the San Francisco Chronicle and the Houston Chronicle.