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23andMe Fiscal Q2 Revenues Grow 37 Percent as Firm Leans Into DTC Primary Care Strategy

CHICAGO – 23andMe said Monday after market close that revenues for its fiscal year 2023 second quarter grew 37 percent, driven by telehealth and research services.

For the quarter ended Sept. 30, the firm booked $75.7 million in revenues, up from $55.2 million in the same period a year earlier. The South San Francisco, California-based consumer genomics and biopharma company attributed the stronger sales mainly to telehealth revenue and research services, though margins were lower in telehealth compared to Q2 2022. Lower revenue from consumer services partially offset other gains in the recently completed quarter.

Since its $400 million acquisition of telehealth platform developer and telepharmacy services company Lemonaid Health a year ago, 23andMe has started expanding beyond its core consumer genetic testing services into a new business line called genomic health service as it seeks to gain a foothold in the primary and preventive care market.

That service, which is currently in beta testing, will be offered directly to consumers.

"We believe that the integration of genetic health information with telehealth and digital pharmacy services has the potential to revolutionize the diagnosis, prevention, and treatment of human disease," CEO and Cofounder Anne Wojcicki said in a conference call with investors Monday. "We further believe that 23andMe is best positioned to accomplish this at scale with a direct-to-consumer service."

Wojcicki said that the Lemonaid platform "allows us to have a complete loop" for individuals to have their questions about genetic test results answered and then receive remote care from Lemonaid's clinicians.

"We have this ability to help our customers get precision medicine, but it is not commonly integrated in the existing pharmacy system or with most practitioners," she said. Lemonaid gives 23andMe the opportunity to create some of that integration.

"I'm absolutely enthused about the continued evolution of direct-access healthcare in a genomic-driven, primary-preventative world," Wojcicki added.

With this DTC focus in mind, Wojcicki said, 23andMe recently hired Daniel Chu as chief product officer. Chu held a similar position at Waymo, the commercialization arm of Google's widely publicized self-driving car project.

Consumer services, which include personal genome services, telehealth, and subscription services, accounted for 75 percent of 23andMe's revenue in Q2, with the rest coming from research services. A partnership with GlaxoSmithKline as well as $4 million in nonrecurring payments from other, unspecified partners accounted for most of the growth in those services.

For the three months ended Sept. 30, 23andMe reported a net loss of $66.1 million, or $.15 per share, quadruple the FY 2022 Q2 loss of $16.5 million, or $.04 per share. The firm used approximately 449.9 million weighted-average shares to calculate per-share loss in the recently completed quarter compared to about 406.9 million weighted-average shares a year ago.

23andMe went public during FY 2022 Q2 through a merger with a special purpose acquisition company.

R&D expenses totaled $52.6 million in FY 2023 Q2, up 18 percent from $44.5 million a year earlier. The company's SG&A expenses grew 80 percent to $53.7 million from $29.9 million last year.

Interim CFO Joseph Selsavage attributed the higher SG&A expenditure to rising labor costs and a heightened sales and marketing effort for the telehealth business. Selsavage, the former CFO of Lemonaid Health, took over as interim chief financial and accounting officer of the parent company in September after former CFO Steven Schoch resigned.

As of Sept. 30, 23andMe had $410.9 million in cash plus $1.6 million in restricted cash.

For the second consecutive quarter, the company confirmed earlier guidance of $260 million to $280 million in revenues for fiscal year 2023, with a predicted net loss of $350 million to $370 million.

23andMe added approximately 300,000 new customers to its database in Q2, bringing its total number of genotyped customers to 13.4 million. During the recently completed quarter, the company released new genetic risk reports for anxiety, fibromyalgia, and seasonal allergies for customers of its 23andMe+ subscription service.

23andMe currently has a therapeutics research pipeline of more than 50 targets. Two drug candidates are in Phase I clinical studies, and on Monday, the company said that it is expanding its study of 23ME-00610, an investigational antibody targeting CD200R1 in patients with advanced solid tumors, to include indication-specific cohorts. 

Company scientists will present a trials-in-progress poster for 23ME-00610 at this week's Society for Immunotherapy of Cancer meeting.

The firm said in January that GSK opted to extend their target-discovery collaboration for a fifth and final year, until July 2023. In 2018, the companies partnered to use 23andMe's genotype-phenotype database and base of customers willing to donate personal data to identify targets for personalized therapeutics. As part of the initial deal, GSK made a $300 million equity investment in 23andMe.

GSK made a final payment of $50 million to 23andMe in October, after the end of Q2.

23andMe said late last month that it has received 510(k) clearance from the US Food and Drug Administration for its pharmacogenetics report for SLCO1B1 that includes interpretive drug information for simvastatin. The clearance modifies labeling of a previously approved clearance for SLCO1B1 to remove a requirement for confirmatory testing before prescribing the drug for high cholesterol and triglycerides based on the 23andMe report.

With the exclusive partnership with GSK expiring next year, Wojcicki said 23andMe sees opportunities for additional partnerships, though she acknowledged that the company will need to move fast to replace the lost revenue by next summer.

Selsavage did not directly answer a question from an analyst about whether revenue growth from the genomic health service is slowing but said that the firm would provide details in its Q4 results. He also dodged a question about whether the company would need to raise additional capital in the next three years.