23andMe - Once a Silicon Valley Darling, Now Crashing and Burning
23andMe provides customers with one of the most detailed and accurate ancestry breakdowns on the market. Genetics plays a role in 9 of the 10 leading causes of death in the US, and since 2006, 23andMe has sold 12MM+ DNA kits.
Once a Silicon Valley darling and valued at over $6 billion, 23andMe now has a market capitalization below $400 million, and its stock has been down close to 70% in the last year.
Let’s see how 23andMe has been performing based on its recent quarterly filing:
- Revenue down 33% YoY to $44.7MM for the last 3 months ended Dec. 31, 2023
- Loss from operations at $281.2MM for the last 3 months ended Dec. 31, 2023, up from $97.1MM from the previous period ended Dec. 31, 2022
- Quarterly membership revenue passed $4MM for the last 3 months ended Dec. 31, 2023, continuing to steadily grow since launching in 2020
What’s been causing the fuss, you ask?
Privacy Concerns
23andMe has been hit with several class action lawsuits in the past year after a story broke about customer data being posted on a hacker forum - the data of nearly 1 million Ashkenazi Jews who used 23andMe services to find their ancestry info, genetic predispositions, and more. The data set included information on 23andMe users' account IDs, full names, sexes, dates of birth, DNA profiles, locations, and region details.
While 23andMe has been in full-fledged damage control, this recent attack may be a permanent black eye for a data company that didn’t have adequate security measures in place to hinder or stop the intrusion sooner.
Business Model Challenges
On top of the privacy concerns, which seem like a challenge every company faces today, 23andMe had a fundamental issue with their business model in that they sold a product that was a one-time fee. How do we get more sustainable revenue? Simple, a subscription product. Customers will love that!
Getting customers to see the value of the 23andMe product offering as a recurring subscription-based fee is likely a major hurdle the company is going to have to overcome in order to achieve profitability. Additionally, on top of the consumer-facing business segment, 23andMe is using customer data to create meaningful therapeutics for diseases with high unmet needs in Oncology and Immunology. Developing therapeutic drugs is not cheap, requiring significant costs and investments in order to maintain these programs. As of March 31, 2023, 23andMe had over 50 programs in its pipeline in various stages of research and development, including two product candidates in clinical development and multiple discovery stage programs.
23andMe faces an uphill battle in convincing the market that its long-term vision is one to back. We’ll have to see if 23andMe can turn it around, or maybe the $6Bn valuation was always a fleeting dream.
