Post-Hype Reflection: Are Gene Testing Startups Ready for the Future?

Author:Shi Shang Liu

Genetic testing startups that emerged in a cluster around 2015, have you figured out your future path?

Around 2015, bolstered by capital investment, many returning overseas and domestic genetics professionals formed teams to establish a multitude of genetic testing companies. These companies engaged in a wide range of activities, from the research and development of sequencers and test kits, to drug development, as well as providing various testing services.

It can be said that every sector is bustling, even somewhat crowded.

However, as these startups gradually become operational, many have found that their professionally trained backgrounds leave them somewhat ill-equipped to address complex, real-world demands.

Companies aiming to develop gene sequencers have gradually realized that this goal is far more complex than initially anticipated. A thorough mastery of the principles underlying gene sequencing does not guarantee the ability to manufacture a functional sequencer. Scientific research and engineering manufacturing represent two distinct disciplines, each with its own systematic methodologies and standard operating procedures. A comprehensive understanding of scientific principles does not necessarily ensure their feasible implementation in engineering practice.

A friend once left a large, traditional manufacturer of medical diagnostic equipment to join the R&D team of a startup developing gene sequencers. Two years later, he ultimately chose to leave. He remarked with some resignation, “Collaborating with a group of PhDs and professors who didn’t understand how to do engineering was exhausting. In my view, critical considerations such as stability and safety were obvious, yet they regarded these issues as trivial. The vast disparity in our knowledge structures and experience turned collaboration into an unbridgeable chasm. If we couldn’t work together, it was better to part ways.”

And such cases are by no means isolated.

Although the development of sequencers is situated in the upstream segment of the industry, success promises substantial returns. However, to date, apart from BGI Genomics, no startup has managed to launch a mature, commercially viable, independently innovated sequencer product into the market. Even if R&D is successful, it merely represents the first step in a long journey; significant challenges in market adoption and promotion still lie ahead.

The author believes that the promotion of sequencers is a long-cycle, capital-intensive process. It requires strong partners to conduct scientific research and publish high-quality, reliable, and verifiable results before gradually gaining market recognition. These efforts cannot be accomplished in the short term. Even BGI faces various customer concerns during its actual promotion efforts. However, I believe that with the ongoing US-China trade war and China’s continued support for domestically produced sequencers, these instruments—backed by price advantages and policy assistance—will surely secure sufficient market space in the future. Nevertheless, this is by no means a product that can be easily developed by a small-scale team or achieve instant mass-market success.

From its inception, the company aimed to become China’s 23andMe in the consumer-grade genetic testing market. Based on publicly available data, the current market leaders are Chengdu-based 23Mofang and Shenzhen-based WeGene. For consumer-grade genetic testing, the only viable path appears to be expanding the tested population as much as possible and ultimately monetizing through big data. Consequently, 23Mofang, with its strength in operational marketing, and WeGene, which relies on word-of-mouth and the management of various knowledge forums, have gained market favor by offering competitive pricing.

However, apart from these two standout companies, the rest are either quietly raking in profits (a low-probability scenario; even if such cases exist, they are certainly few and far between) or struggling to survive. Companies founded by professionals often find themselves at a loss when facing the consumer market—they simply do not know how to play the game. In fact, while this market does not demand exceptionally high technical prowess, it places stringent requirements on market acumen and insight into human nature—areas where academically trained scholars often fall short.

For these companies, are you still hesitating whether to persevere?

Companies targeting high-end clients market whole-genome sequencing followed by health management services, primarily selling to friends and family. Their promotional materials and sales pitches most frequently cite American actress Angelina Jolie as a case in point. It is time to wake up to reality: apart from preying on one’s inner circle, how many customers have they actually acquired through genuine market operations?

Theoretically, the total number of such high-end clients is considerable, but they are scattered across China. They have many options and may have no connection with you whatsoever.

Moreover, from a technical standpoint, whole-genome sequencing results have failed to deliver value commensurate with their cost. For individuals without a personal or family history of disease, spending tens of thousands of yuan on whole-genome sequencing is often not cost-effective. However, even for users with specific health concerns, the sequencing results frequently lead to disappointment. Either no cause is identified, or, if a cause is found, the recommendations provided are neither immediately effective nor definitive—offering only vague advice such as maintaining a regular sleep schedule, adopting a healthy diet, and engaging in appropriate physical exercise.

Huh? Does it really take tens of thousands of dollars and a whole-genome sequencing to obtain these twelve words of health advice?

Does it not feel like being deceived? Therefore, products targeting high-end clients face the challenge of a small and sparse potential user base.Consumer-grade genetic testing companies are compelled to contemplate their future strategic directions at an early stage.

How Can Companies That Entered the Field of Next-Generation Sequencing for Genetic Diseases at Their Inception Achieve Growth?

Yes, there is indeed a clear demand in this field. It is a serious need, and due to the well-defined demand, solid technological support, and high industry recognition, many companies have entered the market. Conservatively estimated, there are hundreds of companies across China conducting next-generation sequencing (NGS) for genetic diseases, although some of them do not even possess the qualifications of third-party medical laboratories.

However, next-generation sequencing (NGS) for genetic disorders is a niche market. Although the total number of patients with genetic diseases in China is substantial, a certain proportion of them do not seek medical care. Even among those who do, a significant percentage decline genetic testing, particularly in remote and underdeveloped regions. Furthermore, the lack of insurance coverage limits patients’ ability to pay. Moreover, apart from guiding reproductive decisions for subsequent pregnancies, there are often no available treatment options even when pathogenic mutations are identified.

From the physicians’ perspective, they tend to be less proactive in addressing these complex and refractory conditions (except for those with research needs). Due to the risk of false-negative results and prolonged testing turnaround times, test results often become available only after patients have already been discharged or transferred to other hospitals. This has, to some extent, dampened physicians’ enthusiasm for recommending such tests to their patients.

In summary, the market size accessible to each company in genetic disease testing is limited due to various factors, including patients’ limited ability to pay, insufficiently proactive physician recommendations, limited follow-up treatment options, low incidence rates, and low patient density. Consequently, most such companies also offer research services.

However, the profit margins for scientific research services are relatively narrow. These services involve long cycles and numerous personalized requirements, reflecting a highly customized nature, while imposing significant demands on testing companies—particularly in terms of personnel coordination and R&D staffing. For such companies to achieve substantial growth and scale, they must explore alternative business directions.

Of course, this sector also features major players like Mingma Bio. Their approach goes beyond routine testing services, placing greater emphasis on the potential to monetize accumulated data effects.

Finally, we discuss cancer targeted therapy testing, which is the highlight of this article and therefore placed at the end.

As population aging continues to advance, coupled with factors such as food hygiene and environmental pollution issues, cancer incidence rates continue to rise. Therefore, molecular targeted therapy testing for cancer (or more accurately, companion diagnostics) represents a promising sector with clear demand and a rapidly expanding market capacity. Moreover, unlike genetic disease testing, cancer patients demonstrate greater willingness and ability to pay.

Numerous startups have flooded into this sector, including some companies that pivoted after attempting other aforementioned business lines. Currently, there are over a thousand companies of varying sizes in China providing cancer targeted therapy testing services, all gearing up for intense competition. Unlike NIPT (Non-Invasive Prenatal Testing), regulatory frameworks for this industry have not yet been implemented, prompting various players to leverage their unique strengths to capture market share as quickly, efficiently, and cost-effectively as possible. The sudden influx of competitors has made the sector extremely crowded, with fierce rivalry. In my view, although some relatively large players such as Burning Rock have already emerged, the overall market landscape has not yet taken shape.

Regulation will eventually arrive, and the market landscape will ultimately take shape. Although the fragmentation caused by local players will persist for some time, a significant number of competitors are inevitably bound to exit the market. For many companies, companion diagnostics may constitute their primary source of cash flow, but how sustainable is this? Before the hammer of regulation falls and the consolidation phase—where the big fish eat the small—begins, have you made adequate preparations?

The future is indeed bright, and I am confident that some of the many current contestants will surely stand out; however, for those who are complacent, lack a sense of crisis in times of stability, merely make up the numbers, are short-sighted, or suffer from poor fortune, the ultimate outcome will inevitably be their departure from the stage.

In the first half, the author analyzes the challenges faced by the business operations of certain genetic testing companies. In the second half, the author will explore potential future pathways from their own perspective.

Although the worst-case scenario is withdrawal from the competition, for teams that entered with prestige and commercial capital, leaving not only makes it difficult to account to investors but also betrays the ambitious aspirations they once held. Therefore, if you are determined not to concede defeat and wish to continue competing, here are some viable options to consider.

From my perspective, second-generation sequencers not only entail high R&D risks but also face significant challenges in later-stage commercialization. This is a grueling marathon, making it less suitable for startups to enter the field.

In this world, there is no such thing as easily acquired wealth; every penny earned comes with effort and sacrifice. Therefore, please give serious thought to your future path.

When it comes to third-party genetic testing services, achieving excellence is not something that can be accomplished merely through persuasive rhetoric or by citing a few past research papers. As previously mentioned, engineering challenges and scientific research questions are two distinct domains. Producing a high-quality test result for a single sample, regardless of cost, may pose little difficulty. However, delivering qualified results for 100 or 1,000 samples within a limited timeframe is an entirely different matter.

When products transition from scientific laboratories to the commercial marketplace, you inevitably encounter numerous challenges that you have neither experienced nor anticipated. For testing services, the volume of submitted samples is undoubtedly a core metric for evaluating the effectiveness of your product promotion. Once the long-awaited rise in sample volume finally materializes, the first challenge you are likely to face is how to manage these samples.

You suddenly realize that managing these samples in an organized manner and ensuring error-free handling requires dedicated personnel or even a team. The previous approach—personally collecting packages downstairs and shipping them to third-party sequencing providers while waiting for data to return—is no longer viable.

The second challenge is how to return results within the promised delivery timeframe once the data comes back. You find that server resources are insufficient; you may be reluctant to use public cloud services, yet have no knowledge of building your own data center. Consequently, result delivery can only be delayed.

How can we deliver reliable results moving forward? You realize that you can no longer spend hours or even days scouring the latest research findings to generate a test report for each sample, as was done previously; such an approach would allow only a handful of samples to be processed in an entire year.

The awkward truth was that no one on the team could independently take charge of this matter, forcing me to step in and handle it personally. What else could be done? We had no choice but to train staff while operating at maximum capacity, causing delivery timelines to repeatedly breach our committed deadlines. In the end, we rushed to deliver a batch of barely acceptable samples. Before we could even catch our breath, the next batch arrived, turning the situation into a never-ending nightmare.

Therefore, to remain competitive in the market, it is essential to adopt a scientific engineering mindset and effectively implement it. In my view, time remains the scarcest resource in the human world, and in the business realm, those who achieve higher time efficiency possess stronger competitiveness. For the diagnostics market, whether you are already operating within it or planning to enter, always keep three key factors in mind: quality, turnaround time, and price.

Take companies that provide services as third-party medical laboratories as an example; they serve clinical medicine, and behind each case are living individuals and families. The test results delivered, in a sense, determine the future trajectory of a patient’s life and the future well-being of their family. Therefore, quality is the most critical factor among all metrics, and sufficient resources must be allocated to ensure the quality of deliverables.

As public awareness of genetic testing deepens and physicians’ ability to assess the quality of test results improves, companies that cannot even guarantee the quality of their tests will inevitably face the risk of being eliminated from the market. If they fail to prioritize quality, their exit would be well-deserved. Another concerning issue may lie in litigation and compensation claims. Although this may sound somewhat alarmist, I dare say that the future market will surely teach these quality-negligent players a vivid and fundamental lesson.

High timeliness is also a core competitive advantage. After samples are submitted for testing, both patients and physicians eagerly await the results. In certain cases, a difference of just one day can mean the distinction between life and death. Therefore, faster turnaround times are always preferable.

How can we achieve maximum speed? It requires seamless integration across every step—from physician-patient engagement, sample delivery and receipt, laboratory configuration and scheduling, team staffing and coordination, to analytical review and report release—ensuring a safe and efficient workflow. These steps may sound mundane, but executing them well is highly challenging; I’ll leave it to industry players to elaborate on the complexity involved.

Price is a factor whose importance goes without saying. However, figuring out how to bring prices down to a reasonable level is truly a complex art. With reagents outsourced rather than produced in-house, instruments procured from external suppliers, and staff hired from the open market, how can one achieve competitive pricing?

Cost reduction is one approach, but it is not advisable to lower personnel standards or compromise on critical consumables and equipment. Instead, efforts should focus on improving efficiency. For instance, by deploying modern information management systems and automating processes as much as possible, tasks that previously required multiple staff members can be handled by a single individual or even eliminated entirely. This indirectly reduces costs, thereby enhancing market competitiveness.

A price war is inevitable; failing to participate means losing market share, while joining in leads to losses. Therefore, rather than being forced into a reactive decision, it is better to start addressing this issue today by maintaining sufficient pricing flexibility. Preparedness ensures success.

In summary, if a company can deliver reliable quality, shorter lead times than its peers, and reasonable pricing, it will undoubtedly secure a place in the future market. Achieving all three simultaneously is no easy feat, which is precisely why deep specialization is essential.

We know that the pathogenesis of the vast majority of cancers has not yet been fully elucidated, let alone cured. Pessimistically speaking, humans may never be able to cure advanced-stage cancer, because cell division and proliferation are the premise of human existence. This is an inherent attribute of our life form.

It is well established that most cancers are systemic diseases; in most cases, the issue is not confined to a specific tissue or organ but rather represents a systemic collapse of the entire body. Under such circumstances, targeted therapies alone address only the symptoms without tackling the root cause, which is why most cancer patients experience recurrence after treatment. As an aside, the current optimism surrounding immunotherapy stems from its ability to rebuild the body’s immune surveillance system, rather than merely delivering pinpoint attacks, since cancer cells tend to recur persistently.

How Should We Tackle Cancer in the Future? Early Screening and Early Detection May Be One Path. Cancers detected at an early stage have higher cure rates, lower treatment costs, and better quality of life for patients, making this a significant market. Imagine that if there is a one-in-three lifetime risk of developing cancer, yet technology exists to facilitate early detection, I would say, “Give me a dozen of such technologies.”

However, early cancer screening is not something to be taken lightly. Key factors include detection rate, false-positive rate, comparative validation through follow-up tracking, and sample size. Currently, there is no universally applicable method for early screening; therefore, it is essential to identify specific detection targets for different types of cancer. The identification and development of such detection targets require substantial long-term resource investment and cannot be accomplished simply by reading a couple of scientific papers.

The market for early cancer screening is vast, but to succeed and secure a significant position in the future landscape, substantial investment in R&D is essential. Moreover, this process should not be conducted in isolation; it is crucial to share considerable benefits with medical institutions to foster collaborative research and development.

The early screening market is already quite crowded, yet significant uncertainty persists due to its vast market size and the immaturity of current technologies. Entering the market now might involve starting with relatively less popular projects. Given China’s large population base, even such niche projects can generate substantial revenue if successfully developed. Furthermore, early screening products are likely to adopt an IVD (In Vitro Diagnostics) model in the future, involving sales of reagent kits and similar products to hospitals and health checkup institutions. This approach holds the potential for building a nationwide platform company, rather than being confined to a regional presence like independent clinical laboratories.

As competition in targeted drug testing intensifies, the competitive focus will inevitably shift upstream and downstream. Early screening is undoubtedly a high-potential area, a judgment supported by capital market reactions, indicating substantial future opportunities.

For cancer, the predominant sample type remains patient tissue, with blood also accounting for a significant proportion. For other clinical applications, such as genetic diseases, blood is the primary sample due to its relative ease of collection. For assays that currently rely on patient tissue samples, there is still considerable potential if alternative methods can be developed into test kits using specimens such as saliva, urine, sweat, other secretions, or even feces.

In fact, this challenge is far from insignificant. It is reported that the average concordance rate of test results among primary cancer tissues, metastatic lesions, and peripheral blood is less than 70%, making it difficult to improve consistency.

The R&D of sample testing technologies and the development of early screening technologies may be positively correlated; that is, once successfully developed, these technologies could potentially be applied to early screening, thereby enabling entry into the early screening market.

Collaborating with pharmaceutical companies on drug development should certainly be considered a key investment highlight outlined in the initial business plan. However, for companies of very small scale, it remains uncertain whether any pharmaceutical manufacturers would be willing to partner. Nevertheless, I personally believe that as long as you remain persistent and have the necessary talent in place, you can take the lead in such initiatives independently. One viable approach could be to conduct diagnostic testing services while simultaneously collaborating with hospitals on drug development. Even if drug R&D encounters setbacks, this strategy can still help achieve a higher company valuation.

When it comes to pharmaceuticals, I believe we should not limit our focus solely to treatment. Currently, there are very few cancer vaccines that qualify as such in the true sense. If even one vaccine targeting a specific type of cancer could be successfully developed, the returns would be highly attractive.

As mentioned in the first half, although genetic testing for hereditary diseases represents a clear market demand, it is difficult to achieve significant scale and strength by relying solely on this single business line. Therefore, while conducting hereditary disease testing services, it is essential to carry out research on early screening. Ideally, one could develop products at the level of Non-Invasive Prenatal Testing (NIPT). However, for greater reliability, it is advisable to develop multiple early-screening technologies with regional characteristics, such as thalassemia screening tailored for the Guangdong and Guangxi regions.

For an individual, the most difficult task is self-awareness; for a company, this holds equally true. To achieve success in the business world, one must clearly understand their strengths and weaknesses, build upon those strengths, amplify them, and leverage them to their fullest potential. Meanwhile, always keep in mind that startups have limited resources; you cannot pursue every business opportunity, as doing so will only result in achieving nothing.

Therefore, focus your energy on one direction and strive for excellence; you may then emerge victorious.

The above views are all personal opinions. Criticism and corrections are welcome. Any similarities are purely coincidental.