The Rise and Fall of 23andMe

23andMe has become a household name over the past decade, providing genetic insights for millions of individuals. Since their launch in 2006, 23andMe has transformed from a company providing simple ancestry information into a company actively using genetic information for drug innovation and discovery.

Despite their apparent viral success, 23andMe is struggling financially.

In this article, I’ll highlight the rise and current fall of 23andMe, and offer my own clinical insights into why there’s still hope for the company.

The Rise

23andMe was co-founded in 2006 by Linda Avey and Anne Wojcicki, with the goal to democratize genetic testing and empower individuals to take steps toward disease prevention with knowledge about their disease risk.

The company quickly gained popularity for its spit test—novel at the time—which gave consumers insight into their ancestry origins and genetic makeup. Originally, the product was cost prohibitive, around $1,000 per testing kit. However, through funding rounds and technological advancement, 23andMe brought the price down to just $99 per kit today, making it more accessible.

The company faced its first major hurdle in 2013 when the FDA told 23andMe to stop what it was doing until their DNA tests could be validated. Again, during this time, D2C genetic testing was nascent—unchartered territory. The company could continue, though, with ancestry reporting. Over the next couple of years, 23andMe made moves to validate its genetic tests, which received pivotal FDA authorizations for the below areas:

  1. Genetic tests to report carrier status.

  2. Genetic tests to produce health-risk reports (risk of Alzheimer’s, Parkinson’s, BRCA1/BRCA2).

  3. Pharmacogenetics tests to report how one’s genes may influence drug metabolism (e.g. fast vs slow metabolizers)

23andMe was the first D2C genetic testing company to receive such FDA authorizations.

As competitors entered the field, the novelty and excitement around genetic testing waned, forcing 23andMe to pivot to other genetic-related areas.

In 2018, 23andMe formed an exclusive multi-year partnership with drug manufacturer GSK for drug target discovery programs. GSK would have access to 23andMe’s database of genetic information from 10 million people to aid in drug discovery. The drugmaker also invested $300 million in 23andMe. While the exclusive partnership ended in 2023, the collaboration led to the discovery of 50 drug targets, which surpassed expectations. 23andMe is particularly interested in immunologics and has some drugs in early clinical trials.

In 2020, 23andMe launched its subscription service, 23andMe+ Premium, which gives users access to exclusive reports ranging from pharmacogenetics reports to heart health reports. The pivot to a subscription model seemed reasonable at the time for a source of recurring revenue, since genetic testing is one and done—once you get your genetic report, it’s not like you need to do more genetic testing since your genes don’t change (save epigenetics, but that’s a different topic).

In 2021, 23andMe made its biggest move yet by going public via SPAC at a $3.5 billion valuation. Later in the year, it then acquired telehealth company Lemonaid Health for $400 million to eventually streamline the flow from genetic testing results to primary care services. 23andMe spun its acquisition of Lemonaid Health into a $99-per-month service now called Total Health in November 2023.

With 14 million customers worldwide, subscription models, and drug discovery pipeline, how is 23andMe doing financially?

The Fall

Leading up to it’s IPO, 23andMe was struggling to keep its momentum with revenue and customer growth. The company’s stock plummeted after going public in February 2021 from $16 per share to around $0.75 today, and now runs the risk of becoming delisted from the NASDAQ. In the most recent earnings call, 23andMe announced a net loss for FY24 Q3 of $278 million, compared to a net loss of $92 million for the same period in the prior year.

There are three main reasons for 23andMe’s downfall:

  • Customer trust: the company is in the process of rebuilding trust after a data breach in October 2023. They currently face dozens of lawsuits.

  • Investor trust: interest rates are rising and funding is just drying up. 23andMe has yet to turn a profit (which is, of course, common), revenue continues to decline and costs continue to rise. The company has already gone through rounds of layoffs. Operational expenses will remain high as the Total Health service gains traction and (expensive) clinical trials continue. It seems unlikely the company will turn a profit anytime soon.

  • Business model: the company has several business models, including D2C genetic testing, research services, and drug discovery. First, convincing customers to pay a monthly subscription for a one-time genetic test is challenging and will need a lot of convincing/good marketing. Second, drug discovery is expensive, especially clinical trials (see why CVS shut down their clinical trial services here). The company is essentially just burning cash.

Dashevsky’s Dissection

Despite their financial struggles, I remain cautiously optimistic about 23andMe’s future.

First, 23andMe’s model enhances consumerism in healthcare by putting consumers (patients) in the drivers seat of their health. By democratizing genetic testing, consumers can find out which pathologies they’re at risk for. Now, with Total Health, consumers can have continuity of care by having streamlined access to further testing and clinical services. This is a plus for consumer health and is only a value-add for consumers and 23andMe.

From the clinical perspective incorporating 23andMe genetic testing can significantly boost patient involvement in their health management by providing them with personalized genetic insights, making them more proactive and interested in discussing their health. This can lead to richer, more informed conversations between clinicians and patients, with patients more likely to follow through on health recommendations due to a better understanding of their genetic predispositions.

Secondly, the genetic information obtained from 23andMe can be instrumental in crafting individualized preventive health strategies. By identifying genetic susceptibilities to certain conditions, clinicians can guide patients in adopting lifestyle changes, undergo regular health screenings, and take preemptive measures to reduce the risk of developing these diseases. The genetic data can also serve as an educational tool, helping patients understand the interplay between genetics and health, thus empowering them to make informed health care decisions.

From a business perspective, 23andMe is in an evidently tough position. I’d imagine selling these subscriptions are tough unless enough “fear” is marketed that customers must subscribe to truly understand their full genetic profile. The one-and-done genetic testing is poorly compatible with recurring subscription model. However, the new integration with Total Health may provide a more streamlined funnel from the DNA kits to the results and then to continued care.

Lastly, the drug discovery area is notoriously expensive, but 23andMe is uniquely positioned based on the troves of genetic data they have. They’re now running clinical trials, which are also notoriously expensive. However, the payout could be large if favorable clinical trial results are realized for these drugs they identified based on their genetic data sets.

In summary, 23andMe is “falling,” but there’s still hope that they may catch themselves and turn things around. I’m cautiously optimistic. 23andMe's contributions to democratizing genetic information and its potential in personalized healthcare remain undeniable. With its vast genetic data repository and ongoing clinical trials, 23andMe stands at a critical juncture, with the possibility to revitalize its business model and continue impacting healthcare consumerism and personalized medicine.

How do you view the future of genetic testing companies like 23andMe in healthcare?

Login or Subscribe to participate in polls.

Join the conversation

or to participate.