NOTfor all 23 and me (NASDAQ: ME) offers investors a unique opportunity in the personalized healthcare industry. Having caught the attention of Virgin group acquisition company (NYSE: VGAC), 23andMe went public through a Special Purpose Acquisition Company (SPAC) and raised around $ 600 million in cash, giving the company a valuation of $ 3.5 billion. Although he is well known for his ancestry services, 23andMe has his vision far beyond this popular DNA test. Engage in partnership with GlaxoSmithKline (NYSE: GSK) in 2018, the companies agreed to a 50-50 split on the benefits and costs associated with a therapeutic program launched by the duo. In exchange for this, GlaxoSmithKline agreed to a stock payment of $ 300 million and an additional $ 100 million in cash to be paid to 23andMe over four years.
After this agreement and its Initial Public Offering, 23andMe has $ 770 million in cash to fuel its multiple growth options. As the company seeks to grow its 11.6 million genotyped customers, 23andMe offers an intriguing growth option through its ancestry services, personalized healthcare offerings, and therapy programs.
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Seeking to expand its consumer and search services segment, the company launched 23andMe + in early 2021, which CEO Anne Wojcicki calls a “premium content subscription service.” By launching this service, the company aims to generate recurring revenue while providing insightful reports to its subscribers. From a business perspective, this helps the company move away from one-off purchases from its one-off DNA tests and generates a constant flow of sales. For its consumers, 23andMe + offers streaming personal health information, ranging from drug information to wellness reports and even various health prediction reports.
Although still in the launch phase, 23andMe + already had 125,000 subscribers as of March 31, 2021, underlining the initial interest in the offer. As the company continues to develop new reports based on its customers’ genetic data, it may begin to expand into genetic-based primary care or even personalized e-prescribing.
Overall, 23andMe is still in its early stages of delivering personalized healthcare, but the future looks incredibly bright as it continues to roll out its new subscription service. However, despite this promising consumer segment, 23andMe’s greatest growth option potential actually lies in its therapeutic segment.
After reaching a deal with GlaxoSmithKline in 2018, the two companies entered a four-year collaboration, with an option period coming in 2023. Using genetic data from 23andMe’s consumer and research services segment, the two companies aim for a wide range of programs, all personalized according to the DNA of each participant.
So far, two immuno-oncology programs, CD96 and P006 are approaching potential phase one trials, with P006 in clinical development by March 2022. This helps to highlight the state of long-term mindset that investors will need to embrace when reviewing the company. but also shows early promise. As promising as these two programs are, Chief Therapeutics Kenneth Hillan explained on the company’s first quarterly earnings conference call:
“In addition to these two more advanced programs, we have a strong portfolio of early stage programs, including programs in immuno-oncology, cardio-metabolic diseases, immunology, neurology and other disease areas. We continue to identify new drug targets from our databases and the number of people validated both genetically and biologically has increased from five in March 2019 to 18 at the end of 2020. “
What adds to the excitement of this pipeline is that it is still in the very early stages of its development. As the company continues to develop its database from its genotyped customers, it will see a flywheel effect when it comes to its genome-wide association studies (GWAS). Simply put, the company uses these GWAS to identify specific genetic data that can lead to a higher incidence of certain diseases. As more data is added to these GWASs, 23andMe should theoretically continue to see its pipeline expand, creating a continuous cycle.
While these programs are yet to come, it would only take one or two hits to see 23andMe’s market cap of $ 3.4 billion multiply.
The next move of an investor
Overall, 23andMe’s current market capitalization does not appear to fully assess the potential set of long-term outcomes related to its treatment programs. This, together with the company’s goals of delivering personalized health care, gives investors a great option for growth, in addition to its already successful DNA testing services. As we move forward, I will be monitoring the updated subscriber count on the consumer side of the business as this will ultimately fuel the therapeutic segment pipeline.
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