23andMe– Harnessing Genetic Data to Shake up the Pharma Industry

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Good morning! It's Thursday, July 6th - Hope you all had a good 4th of July! Today we’re breaking down 23andMe’s path to success and the company’s current plans to wade into drug development. Let’s dive in!

THE FEATURE

23andMe— Harnessing Genetic Data to Shake up the Pharma Industry

Anne Wojcicki founded 23andMe in 2006 with a vision of a direct-to-consumer drug company that harnessed the value of genetic data.

Wojcicki has nearly fulfilled her vision– 23andMe currently has an enterprise value of 780M and is expected to grow rapidly as it ventures beyond genetic testing and into drug development.

What’s the Business?

Wojcicki worked as a Wall Street analyst for over a decade with a focus on biotech. During her career, she realized that most drug and healthcare service providers focused on treatment rather than prevention.

This realization emboldened her to start 23andMe, a company that gives consumers access to their genetic data so they can treat genetic predispositions early on.

23andMe was the first company to acquire FDA approval on direct-to-consumer genetic tests that could screen people for cancer risk, lactose intolerance, or even their dislike of certain foods like cilantro.

The initial costs of 23andMe test kits were $999, which isn’t a surprise considering they were the first company to take genetics from the world of high-end labs and turn it into a mainstream health product. However, over the course of a decade, 23andMe now has mass market appeal with test kit pricing ranging from $99-199.

While mailing out genetic tests is currently 23andMe’s primary revenue stream, the company makes a substantial amount from selling their consumers’ genetic data. Despite being a controversial practice, there are no federal laws prohibiting companies outside of a healthcare setting from providing individuals’ genetic information to third parties.

A recent press release from 23andMe showed that the company derived 17% of its $300M annual revenue from “research services”, or in other words, selling genetic data to drug companies like GSK.

How They Win

Establishing industry credibility

Rather than spending money on marketing, 23andMe invested heavily in research and publishing scientific papers in its first five years to establish itself as a credible authority.

The company now has over 200 scientific publications and has gained widespread trust in the pharmaceutical industry and among consumers.

Invaluable Asset Class

Ever since the human genome was discovered, scientists have believed that a greater understanding of DNA will provide insight into how to cure diseases.

By collecting the genetic data of over 12M customers, 23andMe has an unparalleled database to perform its own research. Wojcicki’s end goal was always to turn 23andMe into a drug developer and distributor that harnessed that power of genetics, and today she’s close to accomplishing her goal.

23andMe has already made tactical acquisitions of companies like Lemonaid Health to cement their drug delivery network. It won’t be long until Lemonaid Health can distribute 23andMe’s drugs that are developed fully in-house. Promising trial tests have already come back on the company’s new monoclonal antibody that can fight tumors.

The Playbook

23andMe got its start in 2006, but has persistently stuck to its original playbook to shake up the pharmaceutical industry:

1. Acquire FDA approval on a direct-to-consumer genetic test

2. Drive down costs to create mass-market appeal

3. Maintain a genetic database

4. Leverage consumer genetic data to sell to third parties

5. Utilize cash flow and genetic database to perform in-house drug research and development

6. Acquire online distribution companies like Lemonaid Health to sell 23andMe drugs direct to consumers