23andMe Pivoting To Clinical Research: Could That Lead To A Turnaround For The Stock?

Genetic testing company 23andMe Holding Co. ME took the unconventional route of a SPAC deal to go public, and the stock hasn't gained much traction since it began trading on June 17, 2021.

The new year saw the company announcing its diversification into drug development. Will this pivot help a reversal in fortunes?

23andMe – The Beginnings: Sunnyvale, California-based 23andMe was co-founded by Anne Wojcicki, a former Wall Street analyst who focused on the biotech sector, in 2006. She has been serving as its CEO since 2010. The company has an Alphabet, Inc. GOOGL GOOG connection as well. Wojcicki was previously married to Google founder Sergey Brin, and the tech giant had initially invested in 23andMe.

The company sees itself as a disruptor in the healthcare space which is "building a personalized health and wellness experience by catering uniquely to individuals by leveraging on the power of their DNA."

23andMe pioneered the concept of "digital direct-to-consumer" healthcare. Its "Retail DNA test" provides customers with key actionable insights that can help in diagnosing, prevention and treatment of many human diseases.

The company's personalized genome service provides customers with a full suite of genetic reports, including information on customers' genetic ancestral origins, personal genetic health risks, and chances of passing on certain rare carrier conditions to their children, as well as reports on how genetics can affect responses to medications.

In April 2017, the Food and Drug Administration granted 23andMe authorization to market late-onset Alzheimer's disease, Parkinson's disease and hereditary thrombophilia genetic health risk reports along with other reports. A year later, it received the first-ever FDA authorization for a direct-to-consumer genetic test for cancer risk. In 2019, the FDA issued its clearance to report on the two most common genetic variants influencing what is called MUTYH-associated polyposis, a hereditary colorectal cancer syndrome.

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As of Sept. 30, 2021, the company had 11.9 million genotype customers and over four billion phenotypic data points.

About 80% of these customers have given consent to participate in research. Using its large database of genetically linked health traits and machine learning applied to its proprietary I/O genetic signature, 23andMe is able to pinpoint areas of the genome that contain targets for cancer therapeutics based on human genetics, the company claims.

23andMe also has a therapeutics business that uses genetic insights to validate and develop novel therapies to improve patients' lives. It has ongoing research programs across several therapeutic areas, including oncology, respiratory and cardiovascular diseases.

The company signed an exclusive multi-year collaboration agreement with GlaxoSmithKine plc GSK in 2018 to identify and prioritize genetically validated drug targets, enable rapid progression of clinical programs, and bring useful new drugs to market.

In Nov. 2021, the company acquired Lemonaid Health, Inc., an on-demand platform for accessing medical care and pharmacy services online, for $400 million in cash and stock.

"Lemonaid Health's telemedicine platform and digital pharmacy will enable us to bring better healthcare to individuals in an affordable and accessible way, and ultimately empower people to take better control of their health, the company said in a statement.

23andMe Financials: 23andMe reported revenues of $55 million for the second quarter ending Sept. 30, 2021, up from $51.80 million in the prior-year quarter. The net loss per share narrowed to 4 cents from the year-ago loss of 38 cents. The company ended the quarter with cash of $701 million, compared to $282 million as of March 31, 2021.

23andMe's Clinical Research Foray:  23andMe announced earlier this month it has commenced a Phase 1 study of 23ME-00610, an investigational antibody treatment for advanced solid tumors. 23ME-00610 is the company's first drug candidate to enter a clinical trial, targeting the CR200R1 receptor, which was identified as a promising immuno-oncology target using its proprietary generic and health survey database.

"This is an important milestone for 23andMe in our mission to help people access, understand and benefit from the human genome," said Wojcicki.

Since its SPAC listing, 23andMe stock has lost about 61% of its value. Shares began trading on the Nasdaq on June 17 following the company's merger with VG Acquisition Corp., a SPAC founded by Richard Branson, with the deal valued it at $3.5 billion.

After closing the maiden session following the SPAC merger at $13.32, the stock began a move downward. The selling stalled in early October, and the upside that followed took the stock to a high of $13.68 on Nov. 8. Since then, the stock has been stuck in a rut.

23andMe closed Friday's session down 4.25% at $5.18.

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Photo: Courtesy of Marco d'Itri on Flickr