Layoffs of 40%, the gene sequencing giant falls
Jinsong Guo (Founder of DrugTimes)
Founder of DrugTimes（药时代）, Co-President and Secretary General of China Alliance of New Drug Development for Liver Diseases
Gene testing giant 23andMe , ultimately, could not withstand the pressure.
On November 11, 2024, 23andMe announced a business reorganization, streamlining operations, and closing its therapeutics division. Specifically, this means layoffs and pipeline suspensions.
The layoff scope accounts for approximately 40% of the company’s total workforce, affecting over 200 people. 23andMe stated that it would save around $35 million annually, with the layoff costs estimated at $12 million.
As for the pipeline suspension, 23andMe will terminate all drug development projects, including the two candidate drugs that the company has currently entered into clinical trials. After all, even the research and development department is gone.
So, how far can 23andMe go without new drug development?
Table of Contents
Former unicorn
In 2006, Anne Wojcicki co-founded 23andMe. The company’s business was to provide direct-to-consumer genetic testing kits, claiming that 5 milliliters of saliva could reveal one’s ancestry and health risks.
As the first consumer-facing genetic testing company, 23andMe attracted investments from major companies such as Google and Genentech at its inception, and later received support from renowned venture capital firm Sequoia Capital.
In 2017, 23andMe’s 10 health risk genetic testing products were approved by the FDA, making it the world’s first company to offer health analysis reports through consumer genetic testing products.
In 2018, the company reached a collaboration with GSK to develop new drugs. In 2021, 23andMe went public through a SPAC merger and became a listed company on NASDAQ. Up until then, 23andMe had been growing rapidly.
It is worth mentioning that the rapid rise of 23andMe is greatly associated with its co-founder, Anne Wojcicki. Wojcicki is the ex-wife of Google co-founder Sergey Brin, and her sister is Susan Wojcicki, the former CEO of YouTube.
So, how did this former Silicon Valley unicorn fall from grace?
Internal strife and external troubles
The decline of 23andMe is essentially a problem with its business model and operational logic.
As mentioned earlier, 23andMe offers direct-to-consumer genetic sequencing. Consumers purchase a kit, provide a saliva sample, send it back, and wait for 23andMe to produce an analysis report, at which point the transaction is considered complete.
23andMe sequences DNA from normal cells, whereas clinically common genetic sequencing is targeted at tumor cells to determine the use of targeted drugs. The specific sequencing information from the latter is more easily monetized.
In contrast, 23andMe finds it more difficult to monetize information and also bears risks. In October of last year, 23andMe experienced a data breach, with user information from its DNA relative feature being compromised due to a hacker attack.
In January of this year, these users filed a class-action lawsuit against 23andMe in a San Francisco court; in September, 23andMe announced a settlement of 30 million dollars with the users.
23andMe is not without ideas on how to fully utilize the vast amount of genomic information. In 2015, 23andMe established a therapeutics research and development team, aiming to use its own genomic database to identify new targets, generate lead compounds for these targets, and conduct preclinical research for subsequent development.
It is reported that 23andMe has a reserve of over 10 million DNA samples, and the providers of these samples have consented to their use for research and drug development.
However, in the face of the increasing time, cost, and difficulty of drug development in defiance of Moore’s Law, 23andMe cannot afford the burn.
Tipping point
The financial report of 23andMe for the fourth quarter of 2023 was a “tipping point.” The difference between the company’s revenue and Wall Street’s forecast reached $12 million, marking the largest discrepancy in the company’s history.
In March 2024, the board of directors announced the establishment of a special committee composed of independent directors to review the company’s strategy. Two weeks later, Wojcicki proposed the privatization of the company and, in July, proposed to acquire all outstanding 23andMe shares not held by her or her affiliated companies at a price of $0.40 per share, which was rejected by the board.
The special committee did not agree with the $0.40 offer and believed it was not in the interest of shareholders. Secondly, there was no complete financial arrangement and a lack of credible funding sources.
It should be noted that the seven independent directors on the special committee are not ordinary. They include:
Neal Mohan, CEO of YouTube; Roelof Botha, partner at Sequoia Capital; Patrick Chung, partner at Xfund; Peter Taylor, former chairman of ECMC Fund; Valerie Montgomery Rice, president of Morehouse School of Medicine; CEO Sandra Hernández, California Healthcare Foundation; Richard Scheller, former CSO of 23andMe.
In August, 23andMe announced the dissolution of its internal research team and entered the field of prescription weight loss drugs, attempting to turn around the current situation. On September 9th, Wojcicki “backed down,” announcing that she was abandoning her position of “only accepting her own privatization” and was willing to accept third-party acquisitions.
On September 17th, all seven independent directors resigned collectively. In an open letter, they stated that they disagreed with Wojcicki.
With declining performance and internal turmoil, prior to this layoff, 23andMe had just laid off the entire Therapeutic Discovery team on August 1st, including team leader Bill Richards.
Summary
Now, 23andMe’s stock has become a penny stock. At the end of 2023, the company’s stock price fell below $1, and Wojcicki once considered splitting 23andMe’s consumer business from its therapeutic business to avoid delisting. (Now, Wojcicki no longer needs to worry about it.)
On September 30, 2024, Wojcicki “changed her tune,” stating that she would no longer accept third-party acquisition proposals; in October, 23andMe carried out a 1:20 reverse stock split to boost the stock price and maintain its listing on NASDAQ.
Of course, this is just a temporary solution, and the essence of the company’s financial difficulties is clearly not resolved. For Wojcicki, 23andMe now only has “Me” left.
【Editor’s note】The above content (~5500 words) is a quick translation of a Chinese article (posted on 2024-11-14) by DrugTimes team. To read the original article, please click here . All comments are warmly welcome. Many thanks!