23andMe succumbs to a dark genetic fate

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Even before it was founded as a public company, 23andMe never really had a chance. The DNA testing company's shares fell, sales were disappointing and profits failed to materialize. Co-founder Anne Wojcicki now wants to privatize 23andMe at a meager price. This misfortune is the result of both nature and nurture.

As far as business models go, 23andMe was stunted from the start. Customers pay to spit into a tube, send it back and learn what is written in their genes. The results can range from discovering genes linked to serious diseases to more frivolous revelations, such as the genetic tendency to hate the sounds of other people eating.

The problem is that after this big reveal, there isn't much scope for repeat business. When 23andMe's backers took advantage of tough market conditions to merge with a special-purpose acquisition company, the company was forecasting $400 million in revenue by 2024, boosted by activities such as drug development. It grossed just $220 million.

Wojcicki takes the blame, although a broader decline in valuations of experimental drugmakers hasn't helped. The godfathers share some responsibility: Citigroup and the defunct Credit Suisse launched 23andMe in 2021. The Citi analyst said the $10 share was worth $14, only the share price halved in just over six months.

Even an injection of Richard Branson's DNA didn't help. The Virgin mogul founded Spac, which acquired 23andMe, and gave it an IPO. His involvement with other blank check companies also failed. An investment in eco-disinfectant maker Grove Collaborative has shrunk by 97 percent. Of the two space companies Branson sold to Spacs, Virgin Galactic's operations are on hold and Virgin Orbit went bankrupt.

The best hope for 23andMe is a takeover by Wojcicki, who in July proposed buying the portion of the company she doesn't own for 40 cents a share. This was rejected by independent directors who subsequently resigned. With the stock trading at 27 cents, things aren't looking so bad anymore.

Still, it's not clear what Wojcicki would get. As many as 13 U.S. states — covering a third of the population — have enacted laws that force companies to get consent from providers of genetic data before transferring it to a new owner, say privacy advocates at the Electronic Frontier Foundation. If many say no, the value of 23andMe's most important asset could melt away before the ink is dry on a deal.

That's another reason for investors to take what they can get and learn from their mistakes – namely, being stuck in a fragile, unproven business model in a hyped market. Genetic testing makes it possible to predict future challenges right from the start. 23andMe's supporters have done nothing of the sort.

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