23andMe is low on cash and its stock is worth pennies. The CEO wants another chance

New York –

Just three years in the past, DNA testing firm 23andMe was the golden little one of Wall Street and Silicon Valley. Today, the agency is prone to being delisted from the Nasdaq.

But 23andMe’s CEO, Anne Wojcicki, tells CNN that Wall Street shouldn’t depend her out but.

Despite the agency’s preliminary recognition, the previous tech unicorn’s funds have dried up and its worth has dropped a surprising 96 per cent since its peak share worth of US$17.65 in February 2021.

Shares of 23andMe are actually priced at about US$0.70, and in November the corporate was knowledgeable that it was in violation of Nasdaq guidelines that require an organization to take care of a inventory worth above US$1. That means it has about three months to carry the value up or threat being delisted.

“We’re very aware of this,” Wojcicki informed CNN on Thursday night. “We’re making the necessary changes to make the business sustainable, and then it’s going to be about growing it again.”

Deep roots in Silicon Valley

23andMe broke limitations when it first launched in 2006. At the time, scientists estimated that it might value about US$14 million to sequence a human genome.

Wojcicki has Silicon Valley in her DNA. She grew up on the campus of Stanford the place her father taught physics. Her mom is named the “Godmother of Silicon Valley” for instructing the youngsters of tech titans at Palo Alto High School for many years and publishing How to Raise Successful People, based mostly on her personal daughters. Susan Wojcicki, Anne’s sister, is the previous CEO of YouTube. Her ex-husband, Sergey Brin, co-founded Google.

When she noticed a possibility to vary the business of genetics, she took it. Wojcicki and her co-founders guess that they might present customers with well being and ancestry knowledge by sequencing simply a few of their genome for below US$1,000 (they ultimately introduced the value all the way down to below US$100).

Their guess paid off. The firm’s retail DNA check was named “Invention of the Year” by Time Magazine in 2008, and their DNA database blew up with greater than 100,000 clients by 2011.

They went public in 2021, and their market capitalization quickly soared to US$6 billion.

After hovering early, a pointy and painful descent

But 23andMe’s fortunes have shifted.

The firm just lately got here below fireplace for safety breaches that impacted 6.9 million customers and has struggled to discover a method to maintain clients engaged with its merchandise after they’ve used the one-time DNA package. Wojcicki says she and 23andMe are actually closely centered on drug growth, however that’s an costly and dangerous endeavor that might take many years to repay.

Of extra rapid concern: The firm has but to show a revenue, and 23andMe may run out of cash as early as subsequent yr.

Wojcicki says the issue has extra to do with a downturn within the biotech sector than inner points.

“We did layoffs last year,” stated Wojcicki, referring to the three rounds of cuts and the sale of a subsidiary that decreased her employees by a few quarter. “But we’re not alone in this biotech downturn. And so what you have to do is you have to cut back and you have to prioritize on the programs that you think are the most important.”

“We’ve been caught in the downturn along with the entire industry,” stated Wojcicki. “We’re absolutely exploring what our options are to prioritize our best assets…we can’t do everything we’ve done. That’s what happens in this kind of market.”

But the corporate’s drop isn’t monitoring with the sector. The SPDR S&P Biotech ETF, which tracks the biotech sector, has fallen by about 5.2 per cent over the previous yr. Shares of 23andMe are down 75.4 per cent over the identical interval.

However, Steven Mah, a managing director at TD Cowen who tracks 23andMe, says that he nonetheless charges the inventory a “buy.” He believes that adverse headlines and poor sentiment have led the corporate to commerce nicely beneath its honest worth.

There’s nonetheless untapped worth in its pharmaceutical discovery arm, he informed CNN, and good news in that sector may shortly catalyze the inventory upward.

A future in drug discovery

Wojcicki says that the way forward for 23andMe is in harnessing their DNA database to seek out cures or remedies for most cancers and autoimmune ailments like rheumatoid arthritis, lupus and Crohn’s illness.

In 2018, 23andMe agreed to a five-year unique drug growth partnership with GSK (previously GlaxoSmithKline). The London-based pharmaceutical and biotechnology firm additionally invested US$300 million within the firm. In 2022, GSK exercised an choice to pay US$50 million and prolong the unique contract for one more yr. Last October, GSK paid the corporate one other US$20 million for a non-exclusive knowledge license.

Most of the information 23andMe has collected isn’t accessible to the general public. That makes it onerous to research the corporate’s worth, stated Mah. But these offers give necessary hints in regards to the firm’s viability as a DNA knowledge supplier.

“GSK can see [the data] but I can’t see it, and investors can’t see it,” he stated. “But the fact that GSK is doubling down and extending their partnership suggests that they’re getting a value add from the platform.”

So far, the partnership between GSK and 23andMe has produced greater than 50 new drug targets. Two have already made their method to early-stage trials. Only about one in each thousand potential medication makes it to human trials within the United States.

The payoff for a profitable drug may very well be big, however profitable growth can take many years and prices a whole bunch of hundreds of thousands of {dollars}.

But lots of what the corporate has achieved has been missed, stated Wojcicki.

“Because we cannot [contractually] speak much about what has come from [our partnership with] GSK, people just give it zero value,” she stated. “There’s a lot of really exciting things that came out of it.”

Six years of ongoing partnership between the 2 corporations ought to point out that “there was incredible value,” she stated. “It’s really transformed [GSK’s] entire drug discovery process.”

Still, the deal between the 2 corporations is now not unique, and 23andMe has but to announce partnerships with some other pharmaceutical corporations. Mah sees that as a regarding signal that’s contributing to weak spot within the inventory, however he stays hopeful.

“It’s something 23andMe is focused on. They said they are in discussions with Big Pharma and it’s just taking some time…I do believe that they can sign up new partners,” he stated.

GSK didn’t instantly reply to requests for remark.

‘Don’t depend us out’

23andMe is on the appropriate path, stated Wojcicki. “The vision and where we’re going is solid, but the path to get there is more turbulent.”

Wojcicki is for certain that genetic sequencing will remodel healthcare and drug discovery, and that 23andMe is able to take full benefit of that when it occurs.

But drug discovery is a really lengthy course of and it may be wherever from 10 to fifteen years on common from goal discovery to an FDA-approved drug.

The query is whether or not buyers are prepared to attend that lengthy.