Putting the You in Therapeutics

23andMe is quickly expanding its business model by joining forces with two big pharma companies.

By Kevin Davies

I have to admit I’ve been a huge fan of 23andMe since, well, the beginning. In the summer of 2007, my former colleague Chris Anderson, at that time chief editor of Wired magazine, offered to introduce me to a Silicon Valley stealth start-up curiously named 23andMe. I immediately pondered a possible connection with famous “23” sports figures like Michael Jordan or David Beckham.

But the moment co-founder Linda Avey told me that 23andMe planned to deliver personalized genomic data and interpretation directly to consumers (DTC), I was hooked. Indeed, it proved to be the centerpiece for the proposal for my book The $1,000 Genome.

By the time I visited 23andMe’s headquarters in Silicon Valley and nervously met the firm’s chief executive, Anne Wojcicki, 23andMe had become a household name in the genetics community. The firm picked up media accolades (Time magazine’s “Invention of the Year” in 2008), got celebrity endorsements at swanky spit parties, and showed off its marketing moxie with a flying blimp. The company’s Silicon Valley savvy overwhelmed erstwhile competitors such as Iceland’s deCODE Genetics and California’s Navigenics.

Along with another California genetics firm, Pathway Genomics (I’m on Pathway’s scientific advisory board), the competition soon abandoned any aspirations of selling DNA tests directly to consumers, leaving 23andMe in the clear. But even as hundreds of thousands of people laid out $99 for their personal genome scan, questions lingered about 23andMe’s business model and its strained relationship with the Food and Drug Administration (FDA). The agency was never comfortable with the firm’s DTC approach, but seemed content to maintain a watchful role.

All that changed in November 2013 — six years after the company’s commercial launch. The FDA fired off a cease-and-desist letter essentially curtailing 23andMe’s ability to offer health interpretations for new clients. At a stroke, 23andMe was reduced to being a provider of ancestry services, competing against the likes
of and The FDA notice did not prohibit, however, the right of customers (including new clients) to download their raw genome data and seek an alternative interpretation from a third party. (I typically recommend, which, for a mere $5, computes a comprehensive set of risk assessments based on public gene data.)

The November 2013 decision was a black mark for both sides. By ignoring repeated requests for dialogue with the FDA and appearing to thumb its nose as it embarked on a high-profile television advertising campaign, 23andMe had either deliberately or accidentally provoked the agency. As Pathway had learned several years earlier, when it considered selling DNA kits at retail pharmacy stores, the FDA doesn’t want members of the public to risk making health decisions without suitable professional consultation.

That said, I think the FDA over-reached. In its November letter to Wojcicki, the agency highlighted hypothetical examples of how 23andMe’s results could be misinterpreted that strained credulity and ignored peer-reviewed literature on the negligible risks of DTC genetic tests. The FDA also ignored accounts of clients’ improved health awareness, as well as 23andMe’s groundbreaking papers pinpointing new genetic clues in Parkinson’s disease and asthma.

In February, the FDA finally gave approval to 23andMe to market a single-gene carrier test for Bloom syndrome. Wojcicki welcomed the decision, saying it provided a “regulatory framework” for her to continue working with the FDA to deliver health data. While trying to play nice in the U.S., 23andMe opened branches abroad in Canada and the U.K., where it could continue to offer the full suite of health results.

But barely 12 months after the FDA’s cease-and-desist order, 23andMe signaled a bold new direction. Wojcicki announced two major deals with big pharma companies Genentech and Pfizer, among several others. The Genentech deal, which aims to come up with a new genetic test for Parkinson’s disease, includes a $10 million upfront payment to 23andMe and up to $50 million in milestone payments when 23andMe reaches certain objectives. Collaborating with pharmaceutical companies to study diseases and develop drugs was always one of Wojcicki’s major business objectives; the only surprise is that it took the company so long to realize it. Genentech will begin by studying some 12,000 Parkinson’s patients that 23andMe has enrolled, while Pfizer will study thousands of lupus patients. 23andMe’s database is now approaching 900,000 customers, while Wojcicki notes that four in five customers have chosen to opt in to research and answer extensive surveys about health and traits.

Netting a lucrative partnership with a drug company is one thing; evolving into a fully fledged drug discovery organization is another. But that is the plan, as evidenced by 23andMe’s stunning hire of Richard Scheller, who led R&D at Genentech for 14 years before retiring late last year to take on his new position in April. While milestone payments from big pharma deals are nothing to sneeze at, evolving into a bona fide drug discovery operation would put 23andMe on a different financial level —successfully approved drugs can earn billions of dollars a year.

Scheller, a distinguished former Stanford professor and a past winner of the Lasker Award, will head up a new therapeutics group. “I wanted a new challenge,” Scheller told Matthew Herper in Forbes. “I wanted to see if we could really take advantage of the full potential of the human genome and thought that [23andMe] is the best place to do that.” He says the 23andMe database is “unlike any other.”

Whether the customers who make up that database will be as pleased as company management about becoming a small cog in the big pharma R&D pipeline remains to be seen. It’s probably fair to say most customers did not really anticipate such a scenario when they expectorated their saliva samples. But Wojcicki says her customers can decide whether to opt in or out of sharing their data, and pharma partners will only access anonymized, aggregate information. “Our customers should be proud that they make this research possible,” says Wojcicki.

23andMe has changed the complexion of genetic testing. It will be fascinating to see if the company can make its mark in the therapeutic space.