[Entangled Genetic Industry] ① "Disposing of 700 Million DNA Equipment"... What’s Happening in the Promising Sector?

Crisis in the DTC Genetic Testing Industry
Market Uncertainty Due to Domestic Regulations
"Testable Items Still Excessively Limited"
Falling Behind Foreign Companies with Lower Regulations

A gene analysis company listed on KOSDAQ recently put up for sale two out of three next-generation sequencing (NGS) machines, each worth 700 million KRW. These NGS machines were imported from Illumina, the world's largest genome analysis equipment manufacturer. However, due to various domestic regulations, the number of direct-to-consumer (DTC) genetic tests has been steadily decreasing, leading the company to decide that disposing of the equipment would be more beneficial. The CEO of Company A lamented, "The market potential is declining, and currently, we are unable to properly operate even one set of analysis equipment," adding, "We had no choice but to lay off four employees this year."

While DTC genetic testing is gaining global attention, it is facing a crisis in South Korea. DTC genetic testing allows consumers to send saliva or other samples to genetic testing institutions using kits without going through medical institutions, enabling them to learn their genetic information. In South Korea, DTC testing has been implemented since 2016 and currently allows testing for up to 101 items limited to wellness (well-being, happiness, health), such as hair loss, skin aging, and exercise. DTC testing for specific diseases like diabetes, cancer, and dementia is prohibited. Currently, companies conduct DTC tests on anywhere from about 40 to 80 wellness items.

DNA

"The number of testable items is ridiculously small"

The gene analysis industry unanimously agrees that "the number of testable items is ridiculously small compared to the testing capabilities." Company B, a gene analysis firm, can read about 2,000 wellness-related genetic information items from a single genome. Despite the abundance of genetic information that could help improve consumer health, only about 5% is usable. A representative from Company B stated, "Extracting only the items allowed by law and discarding the rest of the genetic information is a burden." This situation arises due to the positive regulation applied to DTC testing, which lists allowed items one by one.

The global DTC genetic testing market is expected to grow more than twice, from $1.4 billion (1.85 trillion KRW) in 2021 to $4.2 billion (5.56 trillion KRW) by 2028. According to estimates by Asia Economy through the Korea Bio Association, the domestic DTC testing market size was around 30 billion KRW last year. There are concerns that the market size may shrink as fundamental regulatory improvements for domestic DTC testing have not been made and various regulatory exceptions are ending.

The government has not been idle. In July last year, the Ministry of Health and Welfare launched a DTC certification system to expand the range of testable items. After evaluation of testing capabilities, companies that obtain certification from the Ministry can conduct DTC tests on additional wellness items following further verification. This allowed new testable items such as olfactory sensitivity (Macrogen), curly hair (XenoPlan Korea), and photic sneeze reflex (Theragen Health) to be recently added.

Falling behind foreign companies due to regulations

However, the approval process for testable items is complicated and time-consuming, making it difficult to compete with overseas gene analysis companies. Major foreign gene analysis companies provide information on 300 to 400 genetic items, which are selected based on marketability. A bio industry insider said, "In Korea, to get approval for additional items, companies must undergo multiple verification procedures throughout the year," adding, "They must pass tests equivalent to those used by medical institutions for patient diagnosis, which is nearly impossible without specialized genetic personnel."

Another complaint is that testing is virtually impossible for adolescents. Additional items beyond the initially approved 12 are only available to adults. If companies want to include adolescents as test subjects for additional items, they must submit related research papers conducted on adolescents to the National Bioethics Policy Institute. However, there are almost no clinical studies originally designed with adolescents in mind. A bio industry representative said, "I don't understand why adolescents in their growth phase are prevented from using their health information to find improvements and prevent potential diseases."

Due to various regulations hindering the activation of DTC testing, most of the industry maintains its business through B2B (business-to-business) transactions. They recommend related products based on consumers' genetic health information. However, many contracts with companies have recently ended or been canceled. Since secondary use of DTC genetic testing data is prohibited, explanations must be given indirectly within limited scopes, reducing the promotional effect of health-related products. The health functional food recommendation and sales service approved through the 2020 regulatory sandbox was terminated after a two-year pilot project.

The CEO of a bio company in Pangyo, Gyeonggi Province, said, "Health-related companies signed contracts to maximize sales of their products using DTC test information, but since most of it is impossible, they judged the merit to be low," adding, "Recently, many contracts have not been renewed and have ended, delivering a direct blow to us."

Even consumers interested in DTC testing are circumventing regulations by using overseas genetic testing. Major countries like the United States and Japan have no regulations on wellness items and even allow predictions for specific diseases. Given the considerable cost of over 200,000 KRW per test, consumers prefer foreign companies that can provide as much genetic information as possible.

Major gene analysis companies are seeking new avenues amid the crisis in the DTC testing industry. Macrogen and Clinomics are conducting animal DTC testing businesses under the names MyPetGene and Dognomics, respectively. Animal DTC testing, which is unregulated, can provide information on genetic diseases. LabGenomics and Medigen Humancare are knocking on the doors of overseas markets with lower regulatory barriers to offer genetic testing services.

A bio industry insider said, "The rapidly growing global DTC genetic testing industry is losing ground in South Korea due to killer regulations and the cautious stance of the medical community."