Home DNA-testing company 23andMe is laying off about 100 people, or 14% of its staff, on Thursday, in the wake of declining sales.
The layoffs include the operations teams, which were focused on the company's growth and scaling efforts, as well as other teams. In the coming months, the company plans to tighten its focus on the direct-to-consumer business and its therapeutics arm while scaling back its clinical studies arm.
CEO Anne Wojcicki told CNBC she's been "surprised" to see the market starting to turn.
Wojcicki has theories, but she doesn't have clear proof for why consumers are shying away from getting tests that reveal their percentage of Irish heritage, propensity for a favorite ice cream flavor, or whether they have a limited set of variants that are associated with breast cancer. Either way, she notes, she's downsizing because it's "what the market is ready for."
"This has been slow and painful for us," she said.
Wojcicki notes that privacy could be a factor. Fears about people's DNA ending up in the wrong hands might have been heightened in the aftermath of the Golden State Killer case. Criminal investigations honed in on a suspect involved in a decades-old rapes and murders by running DNA found at the scene through a free online database where anyone who got their DNA tested through a company like 23andMe could upload it. A suspect was found because a distant relative had shared their genetic information -- showing how DNA data, unlike other kinds of data, is unique because it's linked to and potentially exposes information about family members.
She acknowledges that "privacy is top of mind" both for consumers and her executive team. She said the company hired a new chief security officer, who previously ran security at Okta, earlier this week.
"I think the tech world needs to own this better communicate privacy standards to build trust," she said. "I want to jump in and really own it."
Wojcicki said another factor could be that people fear an economic downturn, and they don't want to spend a few hundred dollars on a genetic test. That might make it expensive for 23andMe to acquire customers via social media platforms like Facebook, if the early adopters have already bought tests and the next potential batch of users are reluctant to spend.
23andMe has seen its ups and downs over the years.
The company raised ample venture capital -- $786 million, according to Crunchbase -- and Wojcicki used that to fuel growth, including by hiring a team to acquire new customers for its tests, and to strike deals with both pharmaceutical companies like GlaxoSmithKline and academic research groups. But the FDA conducted a regulatory probe in 2013 after 23andMe marketed a health test directly to consumers. The company repaired its relationship with the FDA and resumed sales of both its ancestry and health tests in 2015.
What followed was a period of hyper-growth, which involved the company ballooning to 700 people. And it seemed to be working. Sales of DNA tests were growing -- until they weren't, which started sometime in 2019.
The first clear signs of a slowdown in the space came last summer when Francis deSouza, chief executive of Illumina, maker of DNA sequencing machines, noted in its earnings call that the entire segment was down. DeSouza didn't share an explanation, but said his company is taking a "cautious view" of the market for ancestry and health tests. Illumina's customers include Ancestry and 23andMe.
Other companies in the sector have also pivoted or struggled, including Veritas Genetics, which shuttered its U.S. operations late last year.
Meanwhile, Color Genomics raised capital in recent months after focusing on the enterprise market, which involves selling to companies, and not just consumers. Its has relationships with Jefferson Health, a major hospital chain, and Apple, among others.
Correction: The layoffs affect 23andMe's operations team, as well as other groups.