23andMe: DNA testing kit company needs drug discovery

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Genetic testing company 23andMe has grand ambitions for personalised healthcare. By collecting data from home-testing kits, the San Francisco company has created a genetic database of more than 13mn people. It uses this to calculate predispositions for ill health while feeding information into a research programme for drug development. So far, however, this vast database has produced little of value.

Founded in 2006 by Anne Wojcicki, ex-wife of Google co-founder Sergey Brin, 23andMe’s high-minded ideas were quickly overshadowed by user interest in tracing their ancestors. Spitting into a tube and sending it off by post for £99 produces a report showing DNA composition by area. Rivals include Ancestry and CRI Genetics.

Such services are fun but they are also easy to forgo. In the years since its creation, privacy-aware consumers have grown more wary about sharing personal information with tech companies. Annual sales were already shrinking at 23andMe when the lossmaking company went public via a merger with one of Richard Branson’s special purpose acquisition companies at the height of the 2021 Spac boom.

Spacs are typically priced at $10 per share. 23andMe’s share price has crashed to $1.14. Consumer services, which includes the home kits and a telehealth platform, account for almost 80 per cent of the company’s total revenues. This core business is not growing. Efforts to cut costs by reducing marketing led to a 6 per cent drop in revenue in the last quarter. Cash flow could soon become a problem. The company expects a net loss of up to $345mn in the current fiscal year. This exceeds the $314mn cash it has on hand. 

Salvation may come in the form of drug development. Five years ago 23andMe partnered with GSK. It has some 50 programmes under way. If it can monetise just one it would transform the entire business. But funding the R&D necessary to make this a reality means the company is going to need to raise more money first.