MAYBE CHARGING CONSUMERS THE LOW PRICE of $599 for a whole human genome sequence is not a winning financial strategy. That’s one possible reason why closely-watched Veritas Genetics of Cambridge, Mass., will stop operations in the United States.
It was in July that Veritas announced it was cutting its already-low price to sequence a genome from under $1,000 to just $599. But last week, the genetic testing company told its customers via email it was ceasing operations in the United States. CNBC said it saw an email from the company and reported that the email stated, “Due to an unexpected adverse financing situation, we are being forced to suspend our operations in the United States for the time being.
“We are currently assessing all paths forward, including strategic options,” the email said. At the same time, the company announced that it would lay off most of its employees in the United States. The number of employees being laid off was estimated to be about 50, CNBC said, quoting an unnamed source who is familiar with the company.
Only U.S. Operations to Close
A Veritas spokesperson told CNBC, “I can clarify this temporarily affects U.S. operations only. All of the customers outside of the U.S. will continue to be served by Veritas Europe and Latin America.”
On its website, Veritas said the company got its start in the 1970s when George Church was a student at the Massachusetts Institute for Technology. “George Church. PhD’s, work set countless genetic discoveries into motion, including the Human Genome Project, the first initiative to map all genes in the human genome,” the website says.
Veritas had planned to expand to serve millions of consumers in the coming years by dropping the price of whole-genome sequencing (WGS) to just a few hundred dollars, and it raised more than $50 million in financing since it was founded in 2015, CNBC reported.
Genome for Under $1,000
It was in 2016 when the Boston-based company became the first in the world to map out a person’s DNA for less than $1,000.
CNBC also reported that investors from China may have become reluctant to invest in an American company after the Trump administration started cracking down on Chinese firms making investments in U.S. companies. For Veritas, uneasiness about having investors from China meant that new investors who were interested in the business became worried about the potential for U.S. oversight from the federal agencies, CNBC reported, again citing a source familiar with the company.
Another problem for Veritas may have been a lack of health insurance coverage for its test, as Dark Daily reported in October. Kathryn Phillips, PhD, Professor of Health Economics at University of California, San Francisco, said health insurers are uncertain that genetic sequencing will lead to improvements in clinical diagnoses.
“Insurers are looking for things where, if you get the information, there’s something you can do with it and that both the provider and the patient are willing and able to use that information to do things that improve their health,” Phillips toldCNBC. “Insurers are very interested in using genetic testing for prevention, but we need to … demonstrate that the information will be used and that it’s a good trade-off between the benefits and the costs.”
Gene Sequencing Challenges
Another expert echoed Phillips’ comments, suggesting that tying WGS into personalized medicine that leads to actionable diagnoses continues to be a challenge. Robin Bennett, PhD, a board-certified senior genetics counselor and Professor of Medicine and Medical Genetics at UW School of Medicine, told CNBC, “[Healthcare] may be moving in that direction, but the payment for testing and for services, it hasn’t moved in the preventive direction. So, unless the healthcare system changes, these tests may not be as useful because … the healthcare system hasn’t caught up to say, ‘Yes, we support payment for this.’”
The result of these problems is that Veritas has been in talks with potential acquirers in recent months, CNBC reported.
While Veritas has problems now, it was not long ago that the firm said it hoped to be competitive with Ancestry.com and 23andMe by offering more genetic-test result information for about the same price, CNBC added.
As, Dark Daily reported, Veritas was planning to attract more consumers by dropping the price for its whole-genome sequencing test. At the time, Church had said he hoped to sequence 150,000 genomes by 2021.
“By announcing an annotated whole-genome sequencing (WGS) service to consumers for just $599, Veritas Genetics is establishing a new price benchmark for medical laboratories and gene testing companies,” Dark Daily said. Before making this announcement, Veritas had priced its standard myGenome service at $999.
“There is no more comprehensive genetic test than your whole genome,” Rodrigo Martinez, Veritas’ Chief Marketing and Design Officer, told CNBC. “So, this is a clear signal that the whole genome is basically going to replace all other genetic tests. And this [price drop] gets it closer and closer and closer.”
Once Veritas dropped the price to $599, pathologists, clinical laboratory managers, and lab industry experts watched to see if this target became a standard throughout the genetic testing industry. At the time, that price included not only the sequencing, but also an expert analysis of test results that included information on more than 200 conditions, Veritas said.
“The focus in our industry is shifting from the cost of sequencing genomes to interpretation capabilities and that’s where our secret sauce is,” said Veritas CEO Mirza Cifric in a news release. “We’ve built and deployed a world class platform to deliver clinically-actionable insights at scale.” The company also says it “achieved this milestone primarily by deploying internally-developed machine learning and AI [artificial intelligence] tools as well as external tools—including Google’s DeepVariant—and by improving its in-house lab operations.”
Veritas probably had fewer customers for its $599 than it projected. Unable to raise more capital, it decided the best option was to close down U.S. operations, stay open overseas, and wait to see how the gene sequencing market develops.