How 23andMe Went From 6B Valuation to Penny Stock WSJ What Went Wrong

In 2006, Anne Wojcicki co-founded 23andMe on the idea that you could revolutionize healthcare with spit. Spit. Spitting. There's a whole lot of spit. We had this big spit party. Wojcicki has promised that 23andMe's accessible and affordable home DNA test would show people their genetic lineage, help them take control of their health, and one day, take drugs developed from the company's genetic research. And for a moment, that promise paid off, gaining 23andMe a $6 billion valuation in 2021 and making Wojcicki a self-made billionaire. But now, the one-time invention of the year company has become a penny stock and could lose its spot on the Nasdaq. So, what went wrong? We felt that fundamentally, we're not making progress fast enough in the research world. Anne's mission is she wants to use genetic information to change the way we deliver healthcare in America. In the process, she would also love to build a great big business that solidifies her as one of the great founders in Silicon Valley. When Wojcicki founded 23andMe with genetics expert Linda Avey, she was dating Google co-founder Sergey Brin, who provided some of the initial funding. Wojcicki continued to build up high-profile backers, hosting spit parties for celebrities and investors. Between 2006 and 2012, 23andMe raised enough money to drop the price of its kit from $999 to $99. And by 2015, it gained FDA approval to provide health information to customers based on their DNA. Sales boomed. In the years following its FDA approval, the number of customers that had been tested grew to almost 8 million. Americans love learning about their ancestry. You always wonder, you know, who does make you who you are? It just kind of went viral and it became a great gift. Oh, this is a fun thing to give mom and dad on Christmas. And 23andMe started investing in one of Wojcicki's long-term goals, using the test results to develop drugs. We actually are looking at all the data that we have, that we've essentially crowdsourced, and can we actually make medications? 23andMe's popularity grew with celebrity endorsements. I believe my DNA plays a big role in my musical style and influence. Big ad campaigns and even a guest stint for Wojcicki on Shark Tank. I don't think it's world-changing for me, so for that reason, I'm out. But at the same time, she was pushing back on a constant concern from consumers — data privacy. What we really want to do is allow you to have choice about how your data is being used. The Golden State Killer was caught in 2018 using DNA information from a database. And by 2019, 23andMe's sales had slowed. My hypothesis is that you have some of the effect from, you know, Facebook, people concerned about privacy, you had Golden State Killer, and so people, you know, people pause. But there was also a bigger issue at play with 23andMe's business model. When you're running a business, you typically want to have a product that consumers have to buy again and again. But with 23andMe, the key problem with their business is that you only really need to take the test one time. Wojcicki's solution was to launch 23andMe Plus, a subscription platform that offers health advice based on DNA results. Then in 2021, the company went public through a SPAC, partnering with Richard Branson's Virgin Group, briefly hitting that $6 billion valuation. We're really at a point in time where I'm ready to, you know, explode. Like, there's huge opportunities on therapeutics and huge opportunities for our consumer business. Using funding from that deal, 23andMe dialed up investments with its pharmaceutical partner, GSK, and acquired telehealth company Lemonade Health. Moves that increased 23andMe's operating costs. Developing drugs, getting things to clinical trials, and then running clinical trials. This is the kind of thing that costs a lot, a lot of money. With that and falling sales, the company posted a loss of $312 million by the end of its 2023 fiscal year. At the same time, interest rates had been rising and funding was drying up. That took a lot of the air out of 23andMe's sales. That's left them struggling for where are they going to find that next slug of cash that's going to help them deliver on this real desire to develop drugs with that database that they have. Wojcicki cut half of the development team by mid-2023. A smaller, more focused therapeutics organization allows us to reduce our cash burn and provides the overall business with a longer cash runway. As 23andMe's stock price was sliding, privacy concerns were also catching up. Hackers claiming to be selling millions of stolen data from the genetics website 23andMe. We've always said there's a theoretical possibility of risks, but we do everything we can to make sure that we're ensuring the privacy and the protection of people's data. The company's share price pushed below a dollar. In November, Nasdaq gave the company roughly five months to get its stock back up or risk being delisted from the exchange. In 23andMe's Q3 earnings call, sales continued to slide and the company said it's considering splitting off its consumer and drug development businesses. One additional piece of news that's going to come later this year is data on whether one of the drugs that they're developing is effective. And if you can get on that pathway, well then you can start to raise money against that. So there's a potential that maybe they can regain some of the momentum they've lost.