The Demise of 54gene: Impact on Healthcare Tech Investment in Africa

54gene, a genomics startup, is reportedly shutting down after raising $45 million in funding over four years. Founded in 2019, the company aimed to bridge the genetic research gap in Africa, where less than 3% of genetic material used in global pharmaceutical research originates. However, it has faced internal turmoil, including CEO changes and legal issues.

The company struggled financially, leading to salary cuts and layoffs. It attempted to diversify its revenue streams by entering the COVID-19 testing market, which initially generated substantial income. Still, the sustainability of this business model was short-lived, and a subsequent venture into molecular diagnostics proved costly and unsuccessful.

Additionally, its subsidiary, 7RL, aimed at offering molecular diagnostics, reportedly hemorrhaged cash and contributed to the company’s financial woes. The shutdown may impact global investors’ perception of the sector, affecting funding for similar initiatives.

This development could have a ripple effect on the healthcare technology sector, particularly in Africa. One of the major players in African genomics facing financial challenges may impact investor sentiment in the region, potentially leading to increased caution and a more conservative approach to funding similar ventures. Investors may be more inclined to scrutinise the viability and financial stability of healthcare startups.

Moreover, the closure of 54gene highlights the complexities and capital-intensive nature of genomics research. Genomic research demands significant investments in equipment, data storage, and ongoing sequencing efforts. For example, one piece of biotech equipment could cost as much as $1 million, and sequencing itself can be expensive, with costs ranging from $500 to $700 per sequence. The need for a stable power supply further adds to operational costs, particularly in regions with unreliable electricity grids.

54gene’s inability to succeed in molecular diagnostics, despite the alarming prevalence of genetic and molecular diseases in Africa, raises questions about the challenges faced by companies in the healthcare sector. It emphasises the importance of carefully assessing market dynamics and challenges before expanding into new areas of healthcare technology.

In the context of Africa, where genetic diversity is a significant issue in research data, the closure of 54gene may hinder efforts to address this challenge. The lack of comprehensive genetic data from African populations has long been a hurdle in drug discovery and medical innovation tailored to the specific needs of African patients.

With 54gene ceasing operations, initiatives aimed at increasing genetic diversity in research data may face setbacks, potentially delaying advancements in healthcare for African populations.

Overall, the closure of 54gene serves as a cautionary tale for healthcare startups, highlighting the importance of financial sustainability, market research, and adaptability in the dynamic and challenging field of genomics and healthcare technology.