Just three years ago, DNA testing company 23andMe was the golden child of Wall Street and Silicon Valley. Today, the firm is at risk of being delisted from the Nasdaq.
But 23andMe’s CEO, Anne Wojcicki, tells CNN that Wall Street shouldn’t count her out yet.
Despite the firm’s initial popularity, the former tech unicorn’s funds have dried up and its value has dropped a stunning 96% since its peak share price of $17.65 in February 2021.
Shares of 23andMe are now priced at about $0.70, and in November the company was informed that it was in violation of Nasdaq rules that require a company to maintain a stock price above $1. That means it has about three months to bring the price up or risk being delisted.
“We’re very aware of this,” Wojcicki told CNN on Thursday evening. “We’re making the necessary changes to make the business sustainable, and then it’s going to be about growing it again.”
23andMe broke barriers when it first launched in 2006. At the time, scientists estimated that it would cost about $14 million to sequence a human genome.
Wojcicki has Silicon Valley in her DNA. She grew up on the campus of Stanford where her father taught physics. Her mother is known as the “Godmother of Silicon Valley” for teaching the children of tech titans at Palo Alto High School for decades and publishing How to Raise Successful People, based on her own daughters. Susan Wojcicki, Anne’s sister, is the former CEO of YouTube. Her ex-husband, Sergey Brin, co-founded Google.
When she saw an opportunity to change the business of genetics, she took it. Wojcicki and her co-founders bet that they could provide consumers with health and ancestry data by sequencing just some of their genome for under $1000 (they eventually brought the price down to under $100).
Their bet paid off. The company’s retail DNA test was named “Invention of the Year” by Time Magazine in 2008, and their DNA database blew up with more than 100,000 customers by 2011.
They went public in 2021, and their market capitalization soon soared to $6 billion.
But 23andMe’s fortunes have shifted.
The company recently came under fire for security breaches that impacted 6.9 million users and has struggled to find a way to keep customers engaged with its products after they’ve used the one-time DNA kit. Wojcicki says she and 23andMe are now heavily focused on drug development, but that’s an expensive and risky endeavor that could take decades to pay off.
Of more immediate concern: The company has yet to turn a profit, and 23andMe could run out of money as early as next year.
Wojcicki says the problem has more to do with a downturn in the biotech sector than internal issues.
“We did layoffs last year,” said Wojcicki, referring to the three rounds of cuts and the sale of a subsidiary that reduced her staff by about a quarter. “But we’re not alone in this biotech downturn. And so what you have to do is you have to cut back and you have to prioritize on the programs that you think are the most important.”
“We’ve been caught in the downturn along with the entire industry,” said Wojcicki. “We’re absolutely exploring what our options are to prioritize our best assets…we can’t do everything we’ve done. That’s what happens in this kind of market.”
But the company’s drop isn’t tracking with the sector. The SPDR S&P Biotech ETF, which tracks the biotech sector, has fallen by about 5.2% over the past year. Shares of 23andMe are down 75.4% over the same period.
However, Steven Mah, a managing director at TD Cowen who tracks 23andMe, says that he still rates the stock a “buy.” He believes that negative headlines and poor sentiment have led the company to trade well below its fair value.
There’s still untapped value in its pharmaceutical discovery arm, he told CNN, and good news in that sector could quickly catalyze the stock upward.
Wojcicki says that the future of 23andMe is in harnessing their DNA database to find cures or treatments for cancer and autoimmune diseases like rheumatoid arthritis, lupus and Crohn’s disease.
In 2018, 23andMe agreed to a five-year exclusive drug development partnership with GSK (formerly GlaxoSmithKline). The London-based pharmaceutical and biotechnology company also invested $300 million in the company. In 2022, GSK exercised an option to pay $50 million and extend the exclusive contract for another year. Last October, GSK paid the company another $20 million for a nonexclusive data license.
Most of the data 23andMe has collected isn’t available to the public. That makes it hard to analyze the company’s value, said Mah. But these deals give important hints about the company’s viability as a DNA data provider.
“GSK can see [the data] but I can’t see it, and investors can’t see it,” he said. “But the fact that GSK is doubling down and extending their partnership suggests that they’re getting a value add from the platform.”
So far, the partnership between GSK and 23andMe has produced more than 50 new drug targets. Two have already made their way to early-stage trials. Only about one in every thousand potential drugs makes it to human trials in the United States.
The payoff for a successful drug could be huge, but successful development can take decades and costs hundreds of millions of dollars.
But a lot of what the company has achieved has been overlooked, said Wojcicki.
“Because we cannot [contractually] speak much about what has come from [our partnership with] GSK, people just give it zero value,” she said. “There’s a lot of really exciting things that came out of it.”
Six years of ongoing partnership between the two companies should indicate that “there was incredible value,” she said. “It’s really transformed [GSK’s] entire drug discovery process.”
Still, the deal between the two companies is no longer exclusive, and 23andMe has yet to announce partnerships with any other pharmaceutical companies. Mah sees that as a concerning sign that’s contributing to weakness in the stock, but he remains hopeful.
“It’s something 23andMe is focused on. They said they are in discussions with Big Pharma and it’s just taking some time…I do believe that they can sign up new partners,” he said.
GSK did not immediately respond to requests for comment.
23andMe is on the right path, said Wojcicki. “The vision and where we’re going is solid, but the path to get there is more turbulent.”
Wojcicki is certain that genetic sequencing will transform healthcare and drug discovery, and that 23andMe is in a position to take full advantage of that when it happens.
But drug discovery is a very long process and it can be anywhere from 10 to 15 years on average from target discovery to an FDA-approved drug.
The question is whether investors are willing to wait that long.
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