23andMe, Inc. is the leading personal genetics company with a mission to help people access, understand and benefit from the human genome. They have sequenced over one million genomes, collected 320 million phenotypic data points (observable characteristics), published 45 peer reviewed studies in scientific journals and gained consent from 80%+ of users to participate in research .
From a business model perspective, the company is in the information business – providing genetic information both to consumers and companies. They use a B2C model to charge users a fixed price ($199) to complete genetic sequencing of their genome and then provide reports related to ancestry and/or health. The company also implemented a B2B model where they allow pharmaceutical companies or scientific partners to purchase access to their database of user genomes and phenotypes. They have currently partnered with 13+ companies . Most recently, 23andMe declared they would also enter the drug development business.
From an operating model perspective, consumers purchase the kit online (or now at partners such as Walgreens and Target). They spit into a tube and mail it back to the 23andMe laboratories where 650,000 genome locations are sequenced. The user is then provided online access to their DNA and associated reports describing health and ancestry attributes. The online site also provides a means to connect and share information with family or friends, find unknown relatives, participate in research studies or access scientific content. For companies and scientific partners, they sell access to their data. Genentech paid $10 million to have access to Parkinson’s-related genetic data .
The opportunities for this business are tremendous. The company removed the friction of scheduling and going to a doctor by sending a kit directly to the consumer’s home and providing results online. The company offers the test at reasonable costs due to economies of scale. The social platform has allowed connection of relatives and even helped identify malpracticing fertility doctors .
For the scientific community, the company has built an invaluable dataset that can speed the discovery of new therapeutic targets, identify unknown genetic mutations, etc… Recently, Regeneron identified 250 genes to target with drug therapies using a DNA database . The process of target identification could take years, but now is being done in a matter of weeks. Additionally, the bioinformatics industry is expected to grow to $16.18 Billion by 2021 .
Of course, bringing genetics online and to the consumer is not without its challenges. 23andMe was at the forefront of personal genetics testing and providing health information direct to consumer. In fact, they are the only one of their kind. Previously, companies would work through the patient’s physician to deliver health information – 23andMe challenged this. Unfortunately, this was an area that was not yet well-defined in terms of regulation, and 23andMe was ultimately subjected to FDA scrutiny. Their product was classified as a medical device, and they were forced to remove aspects of their product from market after a Warning Letter in 2013 . The warning letter was particularly harsh, and it took until 2015 for 23andMe to return some of the health reports back to their product offering.
Additionally, competition has been growing in the genetics database business. FDA, EBI, NIH, the Broad Institute, Regeneron etc… have all started accumulating their own databases. Many government databases are free to access, which may dilute the value of the 23andMe database (which is still the largest in the world). There are also concerns with information privacy.
Because of the challenges listed above, it is not surprising 23andMe is trying to enter the lucrative (and risky!) drug development space. However, this is not a good move. Their operating and business models are currently established around collecting and sharing genetic information digitally, not drug development. This move would require a change in operating/business models, new workforce talent and capital. If they do find and gain approval for a drug, then they are also looking at adding supply chain infrastructure and manufacturing/commercial capabilities. There are other next steps more aligned with their current model:
- Add additional DTC health information, for example:
- Cancer screenings
- Standard Blood Tests
- Fertility Testing
- Work to create partnerships with Electronic Medical Record companies to bring genetic data into medical care decision-making
Many people are curious about their health, and 23andMe has built a platform that allows a consumer to get information without the frustration of scheduling an appointment, without the embarrassment of having to ask for a test, and without the ambiguity of cost. They should keep this model, but add more value through information and creating partnerships to help patients. Additionally, the aggregation of all this medical data (genetic and phenotypic) could unlock the cures and early diagnosis for many diseases. They have the potential to save thousands of lives a year.
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