The glamorous life of Web 2.0 genetics

Linda Avey, co-founder of 23andme, is starting a new Alzheimer's foundation

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NEW YORK (Fortune) -- In the autumn of 2007, Linda Avey and Anne Wojcicki launched the era of pop genetics by going live with 23andme, their DNA testing startup.

Now the 49-year-old Avey is stepping down from co-managing the Mountain View, Calif., company to launch a new venture that she says will connect the DNA-analysis platform developed by 23andme with the disease her father-in-law died from last year: Alzheimer's.

Avey's departure as one of the principal architects of direct-to-consumer genetic testing offers a moment to assess the impact of this fledgling industry, which has been accorded a near rock-star status despite modest accomplishments so far -- though the field has great potential.

"We can't yet take it seriously as a business," says biotech analyst Michael King, a managing director of Merriman Curhan Ford. "There are too many unknowns about the science and the market. It's like trying to nail Jell-O to the wall."

A fusion of the techno-savvy world of Web 2.0 with the more staid field of genomics, 23andme was not the first company to offer DNA testing online, but it has attracted by far the most attention -- and controversy.

The buzz began even before the site went live with rumors that the venture was financially backed by Google (GOOG, Fortune 500) -- a relationship consummated by the marriage of Wojcicki and Google co-founder Sergey Brin -- and that 23andme was setting out to do for DNA what Google Earth did for geography: Make it fun.

The idea for 23andme -- which refers to the 23 paired chromosomes in a human -- was vintage Silicon Valley: to create a new market for existing information that could be digitally organized and powered up by designing user-friendly software that delivers the data directly to you, for a fee.

In this case, the company would mine the thousands of genetic traits discovered by scientists and available on public-access databases -- DNA markers for everything from lung cancer and diabetes to lactose intolerance and a propensity to freckle -- and find those they considered most useful, compelling, and, in some cases, cool.

In 2006, Google's Brin reportedly loaned the newly formed company seed money of $2.6 million, which was paid back when Google itself became a Series A investor along with Genentech and New Enterprise Associates. 23andme has raised $23 million total since it was founded in 2006 and now employs 60 people.

Soon after launching, the Avey-Wojcicki team became the first outsized biotech celebrities since Craig Venter became famous for mapping the human genome. The two women popped up on magazine covers and appeared on everything from Charlie Rose to the Oprah Winfrey Show. Time named 23andme the 2008 Invention of the Year.

At $1000, the original price for the company's service was very steep, but it has since been reduced to the merely expensive $399 for information on 86 diseases (and counting), plus traits such as eye color and ancestry.

Two years ago, the commercialization of DNA by 23andme and others seemed to stun geneticists and the medical research community, despite years of scientists downloading genetic discoveries on public databases.

Leading geneticists called the information too preliminary to be relevant to individuals, while some worried that it might frighten patients who tested positive for a given disease and didn't understand that these tests provided risk factors, not a definitive yes or no. Ethicists and the American Civil Liberties Union fretted about the privacy questions inherent in companies holding this data.

"This information by itself gives a very incomplete picture about a person's health," says geneticist Steven Brenner of the University of California at Berkeley. "I believe that it will be useful, but there is a danger that people might misinterpret it or take it more seriously than they should at this stage of the science."

In Washington, hearings were held by the Department of Health and Human Services to assess whether the federal government should impose regulations on the emerging field. In California, the Department of Public Health issued a cease-and-desist order to 23andme and other direct-to-consumer companies, claiming they were in violation of statutes governing medical tests.

Those companies countered that their products were not medical information and therefore not covered by the regulations. This position remains contentious, though the businesses were able to satisfy California officials that they complied with the state's laws.

Avey dismisses the criticism as the price one pays for starting something new. "This is a revolutionary idea," she says. "Some scientists feel threatened, because we haven't followed tradition, and we commercialized something that had been done mostly in research labs."

Other major consumer genetics sites include deCODEme of Iceland; Navigenics of Foster City, Calif.; and newcomer Pathway Genomics in San Diego.

All offer variations on what genetic information they provide customers. For instance, Navigenics offers just medical markers, and deCODEme provides several markers discovered by their own scientists working at parent company deCODE Genetics (DCGN). None, however, offer as many DNA markers as 23andme does that are considered preliminary, such as those for intelligence and longevity -- though the company does rate its markers according to their scientific usefulness.

It's unclear how many customers have signed up for 23andme and the other privately held sites. None release customer numbers, which makes it difficult to tell if selling DNA information online, as one might proffer pajamas or airline tickets, is or will be profitable. Most observers believe the market so far is small, though this may change if the price drops further and the science improves.

Arguably, the direct-to-consumer genetics experiment has contributed to several positive developments. For one, the controversy over the usefulness of some genetic information offered by the companies has spurred scientists to further test and validate these DNA markers, though more such research is needed. And last year, a bill in Congress to ban some genetic discrimination was hastily passed after languishing for over a decade.

The media's mini-frenzy over 23andme and genetic testing has accelerated funding and efforts to educate consumers, physicians, politicians, and scientists about genetics, and encouraged recommendations from policy groups and government agencies for common-sense regulations.

U.C. Berkeley's Brenner suspects that there will be a division of genetic testing in the future between DNA that is, in his view, medical and the more recreational uses, like genetic information about ancestry. "My sense is that people will want information about disease in a medical setting," he says.

One example of where direct-to-consumer genetics may be headed is Avey's new Alzheimer's venture. In perhaps a tacit acknowledgement that it's tough to make money selling DNA analysis online, it will not be a commercial venture but rather a nonprofit that sounds like a traditional medical foundation, with a Web 2.0 flair.

"We want to leverage the research platform we built at 23andme to study families with a history of Alzheimer's," Avey says. "We want to use the web to create a research community."

She expects that her foundation -- which is in the idea phase -- will work closely with Alzheimer's experts and will be funded in part by well-known supporters she cannot yet name.

As for living inside the 23andme media bubble over the last three years: "It was fascinating," Avey says, "but I felt like an outsider looking in. I'm a minister's daughter from South Dakota, and I'll be happy to step aside and work more quietly."

David Ewing Duncan is the author of "Experimental Man: What one man's body reveals about his future, your health, and our toxic world;" his website is davidewingduncan.com.