What Happened To 23andMe?

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23andMe is on the verge of being delisted from the Nasdaq. Drama has been unfolding this week, and it’s only set to ramp up. 23andMe built a multi-billion dollar brand off collecting people’s spit. The idea was that people could take control of their health by learning about their genetics, and it took off. But just two years after going public, the company went from being valued at $6 billion to trading below $1. Now, 23andMe is rapidly approaching a November deadline to propose an action plan or be delisted from the Nasdaq.

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So how did one of the most disruptive startups of the 2000s go from Silicon Valley stardom to a penny stock? And can its CEO save the company from collapse?

23andMe was founded in 2006 by Anne Wojcicki, Linda Avey, and Paul Cusenza. The mission of the company was pretty straightforward. They set out to give consumers an easy and inexpensive way to access their genetic information. So they did this by developing a DNA test that you can really kind of take from anywhere. It’s an online test. You go online, you order it, we send you a little tube, you spit in the tube, you send it back to us, we extract the DNA out of that, and then we look at a million data points in your DNA. And from that, we can tell you a ton of information about your health and also about your ancestry.

Today, this isn’t all that different from competitors like Ancestry and Family Tree DNA, but 23andMe was one of the first to bring genetic testing directly to consumers at an affordable price. By 2012, the company was able to lower the cost of its kit from $999 to $299. This was thanks to capital from high-profile backers. One of them was Wojcicki’s then-partner, Google co-founder Sergey Brin. Anne is a really connected person in Silicon Valley, and she understood how to leverage star power in a way that would also help to build 23andMe’s brand.

So in 2008, for instance, the company famously held what they called a “spit party.” So during New York Fashion Week, a bunch of celebrities and high-profile guests came and gave a saliva sample, generating a ton of buzz and attention around the company. Sales started booming. The company announced it had genotyped 1 million customers, and in 2015, the company gained FDA approval to provide more in-depth health information to customers. And in 2016, it finally lowered the price of its kits to $99.

I think that every technology takes a while for adoption. Now it’s suddenly become relatively normal. People share their stories online, "I just took a DNA test." Celebrity endorsements kept pouring in, and the company was named one of CNBC’s top disruptors of 2018. During this period, 23andMe was quietly building a massive database of genetic information. You may wonder what happens to all that genetic data that people send in to the company. Well, the Silicon Valley giant now has the world’s largest database for genetic research. Four million customers have given them permission to use their DNA to study genetic diseases.

The company partnered with several pharmaceutical companies and universities to study genetic links in diseases like depression. But customers began to raise concerns around privacy. In 2018, a serial killer cold case was solved using DNA from 23andMe. The company had also started to face problems with recurring revenue. There hasn’t been a sustainable business model. It’s the kind of test that you take once. Sales of 23andMe test kits declined 46% in 2019 compared to a year earlier. The company laid off 100 employees in an effort to cut costs, but Wojcicki still hoped to move the company beyond selling DNA tests.

And so now we’re really at a point in time where I’m ready to, you know, explode. There are huge opportunities in therapeutics and huge opportunities for our consumer business. So 23andMe wanted to leverage this genetic database that it had accumulated because millions of people are taking this test. They have a lot of valuable data. But the fact of the matter is that therapeutics, drug development, drug discovery, is just really hard and extremely expensive. One recent study estimates that drug development in the US can range anywhere from $314 million to $4.46 billion and can take years to reach patients.

Wojcicki's solution was to take a bet on the public market. 23andMe went public today through a merger with Richard Branson’s SPAC, VG Acquisition Corp. In 2021, 23andMe went public on the Nasdaq and was valued around $3.5 billion. At the time, there was a boom in SPACs, or special purpose acquisition companies. When 23andMe went public in 2021, the coronavirus pandemic was in full swing, and the market was booming. So healthcare companies, tech companies, they were raising money really quickly at really high valuations. A lot of founders who I talked to at this time liked to joke that it’s like money is free during this period.

Going public helped fuel research and development efforts despite falling sales. I have this incredible drug discovery team and platform. I have over 40 programs underway, and I want to scale all of it. So I imagine us in the future, ten years from now, having a very robust consumer business and a very robust therapeutic side. So we absolutely aspire to be a full-fledged therapeutic development company that is going to bring those programs to our customers.

But by 2022, interest rates had begun to rise, and the company was struggling to raise enough money to fund its research and development. The company ended the fiscal 2023 year at a $312 million loss. All of those ambitions were there. She was trying to create some recurring revenue by a subscription model where users could tap into more data that they got, and that data is really powerful. But there was always this problem: she couldn’t really sell it. And it turns out, surprise, surprise, that healthcare, that drug development is really hard to do.

In September of 2023, the share price slid below $1, and the company received a deficiency letter from the Nasdaq. Then the privacy concerns returned. Genetic testing company 23andMe says hackers accessed the data of nearly 7 million people during an attack in October. That total is far more than previously acknowledged, accessing user data, including genetic profiles.

By 2024, the company announced it was shuttering its drug development team and instead focusing on money-making obesity drugs via telehealth. Its most recent earnings report shows a net loss of $667 million. In March, 23andMe established a special committee of independent directors to help Wojcicki figure out a path forward for the company to boost its share price. It’s important to note here that Anne is on the board of 23andMe, but she was not involved with this special committee. In April, Anne signaled to the special committee that she was going to submit a proposal to try to take the company private. Unfortunately for her, the very next day, the special committee rejected this proposal.

The committee gave Wojcicki until September to offer a revised proposal, but they never received one. Wojcicki wants to take back control of her company three years after going public via SPAC, and she’s rejecting outside consultants. Now, she’s abandoned by her board. By mid-September, all seven board members resigned, citing frustration with Wojcicki’s strategic differences and concentrated voting power. Then the company received yet another warning letter from the Nasdaq, saying that Wojcicki needs to come up with an action plan before November 4.

It certainly is a big question mark as to exactly what will happen next, but a lot of it feels really up to Anne at this point. She, in a memo to employees in September, said she’s going to immediately start looking for new independent directors to join the board. Wojcicki has said in a memo to the SEC that she intends to take the company private and is not interested in third-party bids. In October, the company also announced a reverse stock split in an effort to boost its share price. As for what will happen to the customer genetic data if the company is sold?