The Massachusetts-based startup that sequences customers’ entire genomes is “temporarily” pulling the plug on its US operations and is rumored to be on the hunt for a buyer, CNBC reports. While it’s withdrawing from the US market, Veritas’ service will still be available to customers in Europe and Latin America. The news comes months after the company slashed the prices of its whole genome sequencing product 40% to $600 in an attempt to rope in more consumers.
We think shrinking demand for DTC genetic testing services, substantial competition to gain consumer mindshare, and political tensions likely catalyzed Veritas’ decision to withdraw in the US:
- Veritas is operating in the direct-to-consumer (DTC) genetic testing space, which is experiencing a slowdown. Despite skyrocketing uptake of DTC genetic testing services over the last decade, industry leaders are skeptical that sales will keep up. Illumina — which develops the tech backbone for many genetic testing companies — pointed out that there’s “unanticipated market softness” in the DTC genetic testing sector in its recent earnings call. Some are pegging heightened privacy concerns as a culprit leading to the market slowdown, per CNBC: For example, Veritas reported a breach that exposed a portion of consumer info just last month, which could have cooled consumer appetite.
- While Veritas boasts a unique product, it has to contend with big-name players in the genetic testing space. A person familiar with the matter told CNBC that sales of Veritas’ consumer-facing products have been on the rise since the startup trimmed the price tag — but Veritas still has to contend with market leaders offering similar — albeit less comprehensive — genetic sequencing services: 23andMe and Ancestry were responsible for testing 80% of the 26 million consumers who used genetic testing services globally at the start of 2019.
- And the startup lacked the cash runway to continue operating in the US after landing in the crosshairs of the US-China feud that’s restricting Chinese investments. Many of Veritas’ investors — which have poured upward of $51 million into the firm since 2014 — are based in China, including Simcere Pharmaceutical and Lilly Asia Ventures. According to CNBC’s contact, this supposedly made potential US investors wary of pouring funds into the startup, as affiliating with a firm that’s involved with Chinese investors could invite oversight from the Committee on Foreign Investment in the US (CFIUS) and hamper return of investment if firms have to stall business to address the committee’s qualms. For example, the Trump administration forced digital health firm PatientsLikeMe to separate from China-based iCarbonX — which laid claim to most of its stake — in April.
While Veritas’ future in the US remains uncertain, we think its niche service and value proposition could help it regain its footing as it mulls seeking out a potential buyer. Veritas brands its service as more of a medical tool than, say, 23andMe’s service: Popular genetic testing companies like 23andMe only look at a tiny sliver of the genome — meaning the genetic insights that Veritas gleans have huge potential for stoking precision medicine, which we’re seeing more and more hospitals invest in. For example, we’ve seen big names like Mayo Clinic’s Center for Individualized Medicine (CIM) team up with Veritas; and Mayo CIM director Keith Stewart said in a tweet addressing Veritas’ shutdown that the service is “still the future of health evaluation.” The mass of data that whole genome sequencing can provide is also invaluable to drug makers — which have tied up with genetic testing firms in the past — since it could steer the development of more targeted drugs that have a greater probability of making it to market fast. As such, if Veritas moves forward in seeking out shelter under another company’s roof, we could see pharmaceutical companies demonstrate interest in snapping up the startup.