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23andMe Gives Up on its Drug Development Dream

A treasure trove of genetic data may hold the key to a revolution in drug development, but it offers no clues for building a business.

Photo of a 23andme test kit
Photo by Mike Mozart via CC BY 2.0

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A treasure trove of genetic data may hold the key to a revolution in drug development, but it offers no clues for building a consumer business. 

On Tuesday, direct-to-consumer genetic testing firm 23andMe announced it would be shuttering its much-hyped drug development division — touted as not just the future of the company but of drug development — as well as cutting some 40% of its staff. There must have been markers of corporate health risk somewhere in the company’s makeup.

Data Dump

23andMe may well be the quintessential 2010s-era tech-adjacent startup. Its core business — using saliva-collection kits to help consumers discover more about their DNA and connect with genetic relatives — is fun, novel, and completely unprofitable in part because it is immune to repeat business. To scale, 23andMe turned to two textbook remedies for struggling DTC businesses: evolving into a subscription model and attempting to monetize the massive dataset it had acquired.

The subscription model never took off. In March, it reported just 562,000 subscribers, down from 640,000 a year prior and way off from a projection of 2.9 million subscribers by 2024 floated when it went public via a SPAC merger in 2021. The company rocketed to a $5.8 billion valuation shortly after the public listing, but that has since fallen to just $150 million. In October, 23andMe engineered a reverse-stock split to keep its share price above $1.

Meanwhile, drug development is as painstakingly long as it is costly, even with a massive DNA dataset, and 23andMe has run out of runway:

  • After reporting a net loss of $59 million on just $44 million in revenue, the company said it ended its most recent quarter with $127 million in cash, down from $256 million a year prior and way down from the big cash reserves it had once built up to fuel its drug development business.
  • After once claiming it had identified 50 drug candidates, 23andMe had begun trials for just two candidates as of Tuesday, and said that it now would try to sell those assets.

Substantial Doubt: Tuesday marked the fifth round of layoffs since the start of 2023, when it had about 800 employees, and brings its total headcount to about 300. CEO Anne Wojcicki, who holds roughly half of the voting power, is attempting to take the company private. In September, seven board members resigned after Wojcicki presented a take-private plan that was not fully financed. In its latest filings, the company noted “substantial doubt about the company’s ability to continue as a going concern.” In the meantime, it continues to pay out a $30 million settlement to customers affected by a data breach.