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Even before its birth as a public company, 23andMe never really had a chance. The DNA testing company’s shares fell, revenues were disappointing and profits were not achieved. Co-founder Anne Wojcicki now wants to take 23andMe private, for a small price. This adversity is the result of nature and nurture.
As business models evolved, 23andMe was stunted from the start. Customers pay to spit into a tube, mail it back and find out what is written in their genes. Findings can range from discovering genes associated with serious medical conditions to more trivial discoveries, such as a genetic tendency to dislike the sounds of others while eating.
The problem is that after such a big reveal, there’s not much room for repeat business. When 23andMe’s backers took advantage of sketchy market conditions to merge with a special purpose acquisition company, the company projected revenues of $400 million by 2024, fueled by activities such as drug development. It only made $220 million.
Wojcicki is to blame, although the broader decline in valuations for experimental drug companies hasn’t helped. The godfathers share some responsibility: Citigroup and the late Credit Suisse bank took 23andMe to market in 2021. A Citi analyst declared a $10 stock worth $14, only to have the stock price halve in just over six months.
Even Richard Branson’s DNA injection didn’t help. The Virgin tycoon created a special purpose acquisition company that took over 23andMe and took it public. His involvement in other blank check companies also failed. Investment in environmental disinfectant maker Grove Collaborative has shrunk by 97 percent. Of the two space companies that Branson sold to Spacs, Virgin Galactic’s commercial operations were suspended and Virgin Orbit went bankrupt.
23andMe’s best hope is a takeover by Wojcicki, which proposed buying the part of the company it doesn’t own for 40 cents a share in July. This was rejected by the independent directors, who subsequently resigned. With the stock trading at 27 cents, it doesn’t look so bad anymore.
However, it’s not clear what Wojcicki will get. At least 13 US states — covering a third of the population — have passed laws forcing companies to obtain consent from providers of genetic data before transferring it to a new owner, privacy advocates at the Electronic Frontier Foundation say. If many say no, the value of 23andMe’s main asset could vanish before the ink on the deal dries.
This is all the more reason for investors to take what they can get and learn from their mistakes – piling on a fragile, unproven business model in a thriving market. Genetic testing makes it possible to anticipate future challenges from the beginning. 23andMe backers did no such thing.
john.foley@ft.com
