23andMe launched 16 years ago offering at-home genetic testing kits for ancestry and for health.
The company, which went public a year ago, has since amassed a huge database of genetic data based on its 13 million users. 23andMe has pivoted its strategy to leverage its trove of data for research and to make and sell its own therapies. The company also is expanding its core consumer genetic testing into a new business line called its genomic health service.
Last October, the company announced plans to buy Lemonaid Health, a virtual care and pharmacy provider, to integrate its personalized genetics service more deeply into primary care. The strategy is to use that acquisition as a foundation for 23andMe's genomic health service, where customers can access their genetic information for preventive and personalized care, executives said a year ago.
The key is to leverage Lemonaid Health's virtual care and online pharmacy capabilities to build out genetically driven telehealth and pharmacogenomic services.
"You have no chance of really disrupting healthcare until you have scale. So, I think it's one thing, like even you look at the partnership between Amazon and JPMorgan, like all these things are really hard to significantly disrupt until you have scale," said Anne Wojcicki, CEO and co-founder of 23andMe, during CNBC's virtual Disruptor 50 summit last week.
"The No. 1 priority for 23andMe was like, 'How am I going to get enough size and scale that people actually have to look at us as like a real force and a real player in healthcare?' Now, we have over 13 million people who all have their genetic information. I know, for instance, that these people are all taking their information to their clinicians. I now am forcing the conversation about how is genetics going to be used in a care setting," Wojcicki said.
She continued, "So the next phase of the company is, 'How am I going to help millions and millions of people get access to their genetic information and now benefit from that?' And that was precisely why we bought the company Lemonaid. We now have a clinical team and a pharmacy team, and I'm going to pioneer really how we're going to be able to connect the 23andMe ecosystem with the traditional healthcare world."
During the company's fiscal year 2023 first-quarter earnings call in August, 23andMe CFO Steve Schoch said developing the genomic health service remains a "high priority" for the company's consumer business. And the genomic health platform and the therapeutics business represent "key future growth opportunities."
Back in May, the company began beta testing a genetic report consultation service with Lemonaid Health clinicians. This first phase of the integration focused on a subset of 23andMe’s genetic health risk reports related to hereditary breast and ovarian cancer syndrome caused by variants in the BRCA genes, MUTYH-associated polyposis (a hereditary colorectal cancer syndrome) and familial hypercholesterolemia, which can cause high cholesterol and early heart attacks.
23andMe+ members also have the opportunity to share information related to select pharmacogenetics reports.
It marked the first step in 23andMe’s plans to integrate genetics into primary care. The company plans to roll out the genomic health service more widely in 2023.
Wojcicki told analysts on the call that the company should have more details on the genomic health service at the end of the year.
"I think one of the things that we've really identified is that there are lots of players in telehealth and primary care, but we're the only ones really owning a complete genomic health experience. And, now, we're making sure that we get it right in terms of how we're going to price it and what it's going to look like, making sure that the healthcare providers we have are trained appropriately and putting together the protocols," Wojcicki told analysts during the first-quarter earnings call. "We're sort of in the thick of it in terms of what we're building and how we're going to roll it out."
The company also recently made two key hires to strengthen its genomics leadership team. Noura Abul-Husn was named VP of genomic health. She previously was the founding chief of genomic medicine and clinical director of the Institute for Genomic Health at the Icahn School of Medicine at Mount Sinai.
The company tapped Amy Sturm to serve as director of population health genomics. Sturm previously ran the MyCode genomic screening and counseling program at Geisinger Health System.
"I think 23andMe has recognized over the last 16 years that people get their genetic information and then they take it to the medical world, and the medical world was not trained about how to use genetic information. Exactly what are the right protocols and what to do with it? Ultimately, we realized if we want to help our customers really benefit from the human genome, we need to have our own care team," Wojcicki said during the CNBC event.
She noted that one enduring legacy of the COVID-19 pandemic is that "it made telemedicine normal."
"I think people saw that opportunity and they are not going back. That normalization of telemedicine I think is an absolute game changer for the entire healthcare industry. I hope that the entire industry really adopts that kind of ease, convenience and affordability for people," she said.
The company also is banking on the future of its therapeutics and research business.
In January, 23andMe announced it started clinical trials of its first drug developed entirely in-house, a cancer immunotherapy aimed at treating solid tumors. It's the second cancer drug the company has advanced into human trials, following an immuno-oncology therapy developed through a partnership with pharmaceutical giant GSK.
GSK also exercised its option to extend a partnership with 23andMe. The company will receive a one-time $50 million payment as part of that agreement.
23andMe now has a pipeline of more than 50 therapeutic programs, including two in phase 1 clinical trials, Wojcicki said during the first-quarter earnings call.
Time will tell whetjer this pivot to drug development and genomic health services will supercharge the company's revenue growth. 23andMe still has massive losses, and investors have been disappointed with its weak revenue growth.
23andMe reported a $217 million net loss during its fiscal year 2022, which ended March 31, compared with $184 million during the prior year. The company brought in $272 million in revenue last year, up 11%.
Schoch referred to 2022 as a "transitional year for 23andMe" during the company's full-year earnings call in May.
In the most recent quarter, 23andMe's revenue grew 9% to $64 million. Consumer revenue was up 17% year over year due to the addition of telehealth revenue, the company reported.
Net loss during the quarter expanded to $90 million compared to a net loss of $42 million the same period a year ago, driven mainly by high operating expenses.
The company is projecting full-year revenue for fiscal year 2023 to be between $260 million and $280 million, and the full-year GAAP net loss to be in the range of $350 million to $370 million.
23andMe's stock also has plunged 60% this year.
During the most recent earnings call, analysts asked about 23andMe's path to profitability.
Schoch noted that the company has $479 million in cash. "We also then reaffirmed our guidance on our adjusted EBITDA, which is our proxy for operating cash flow. And so when you look at those two figures, the range on adjusted EBITDA is $195 million to $215 million," he said. "If you kind of take the average of that and look at that cash balance, you can get a sense of what the runway is, and it's a reasonably good period of time; it will give us the ability to execute a lot of things that Anne [Wojcicki] has talked about on the consumer side and that Kenneth [Hillan, 23andMe’s head of therapeutics] is working on with our portfolio of therapeutics."