CHICAGO – Citing a strong holiday season that reduced the need to discount consumer genetic tests, 23andMe on Thursday raised its revenue guidance for fiscal year 2023 to a range of $290 million to $300 million from an earlier, more conservative estimate of $260 million to $280 million in revenues.
23andMe now expects a net loss of $325 million to $335 million for the fiscal year, which ends March 31. The South San Francisco, California-based consumer genomics and biopharma firm previously predicted a full-year net loss of $350 million to $370 million.
Interim CFO Joseph Selsavage said in a conference call with investors following the release of the financial results that holiday sales during the quarter ended Dec. 31 produced more revenue than expected because the company did not have to discount and promote its products as much as in previous years. He also said that the firm's earlier guidance was conservative.
"We [were] really being very cautious in how we actually deployed marketing throughout fiscal year 2023," Selsavage added.
The firm said after market close Wednesday that its fiscal 2023 third quarter revenues increased nearly 18 percent to $66.9 million from $56.9 million in the same period a year earlier, buoyed by growth in the telehealth segment. Approximately 80 percent of the total came from consumer services, including genetic testing, telehealth, and subscription services, with the balance attributed to research services, mostly related to a partnership with GlaxoSmithKline that will end in July.
Q3, which covered October through December, is typically the company's busiest in consumer sales due to the holiday season.
23andMe is now only giving annual rather than quarterly updates on its subscription services volume, but executives spoke in generalities about that segment. "We are pleased with growth and retention in that product," Selsavage said. He cited strong new sales, renewals, and upsells during Q3.
The company said that it released new genetic risk reports for asthma and for Hashimoto's disease to customers of its 23andMe+ subscription service during the recently completed quarter. The firm also added "ancestry composition detail," giving those of Ashkenazi Jewish heritage the ability to pinpoint their origins to seven genetic groups in regions of Eastern and Central Europe.
Since its $400 million acquisition of telehealth platform developer and telepharmacy services company Lemonaid Health in 2021, 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 when it launches this summer. CEO and Cofounder Anne Wojcicki said that the integration of Lemonaid is not yet complete; for example, customers still need two different logins for telehealth and genomic services.
"The subscription and the acquisition of Lemonaid, that full combination is actually what we are building towards," Wojcicki said during the call. "You should expect our subscription product as it is today to evolve relatively substantially over the next 12 months."
23andMe executives said on the call that the company cannot, for contractual reasons, announce any new pharma partnerships until the GSK exclusive drug discovery partnership formally expires in July.
Last year, GSK opted to extend its target discovery collaboration with 23andMe for a fifth and final year. In 2018, the companies had partnered to use 23andMe's genotype-phenotype database and customer research data to identify targets for new 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 during Q3.
For the three months ended Dec. 31, 23andMe reported a net loss of $93.9 million, or $.20 per share, compared to a fiscal Q3 loss of $89.4 million, or $.21 per share. The firm used approximately 453.4 million weighted-average shares to calculate per-share loss in the recently completed quarter compared to about 426.6 million weighted-average shares a year ago.
R&D expenses totaled $57.3 million in fiscal Q3, up 14 percent from $50.3 million a year earlier. The company's SG&A expenses fell 4 percent in fiscal Q3 to $70.6 million from $73.7 million the previous year.
Selsavage attributed the higher overall expenditures to increased personnel costs, including salaries and related taxes, due to inflation as well as growth in headcount.
As of Dec. 31, 23andMe had $432.8 million in cash and equivalents plus $1.4 million in restricted cash.
In Thursday morning trading on the Nasdaq, 23andMe shares were up 16 percent at $2.92.