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23andMe gets thumbs up from big pharma with $50 million Genentech deal

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The FDA might have banned its medical reports in the US, but 23andMe still has a stockpile of genetic data to sell

Despite setbacks from regulators, 23andMe is attracting serious interest from heavy-hitters in the pharmaceutical industry. The ambitious genetics startup has received a first payment of $10 million from biotech company Genentech in exchange for genetic data donated by customers of 23andMe’s personal genome service. Forbes reports that the Silicon Valley company — which is partly backed by Google Ventures — can look forward to additional payments of "as much as $50 million," with Genentech reportedly planning to dig out anonymous individuals from the company's database for further study.

23andMe's medical reports have been banned — but it still has the genetic data that they collected

For 23andMe, the investment is a lifeline. In late 2013, the company was banned from selling the health reports produced using its saliva test kits after they were judged to be in violation of the FDA’s marketing guidelines. Although the company was allowed to continue selling ancestry reports and uninterpreted genetic information, some members of the medical community seized upon the ban as proof that 23andMe’s mission to make genetic testing available outside the doctor’s office was misguided. However, by this point the company had attracted some 800,000 customers, three-quarters of whom consented to have their data used anonymously for medical research. It’s this information that is now being sold on for use in for-profit medical research to keep 23andMe afloat.

This may surprise some of the startup's customers, but by all accounts, selling anonymous medical data was always part of the company's business plan. It was certainly never going to make enough money to survive from its home tests alone. (In 2012 it slashed the prices for its kits from $299 to $99 while rival firm deCODEme sold a similar service for $1,100.) However, interest in this data from Genentech shows that the multi-trillion dollar big pharma industry is finally taking 23andMe seriously. Genentech isn't just a biotech company — it's also the US arm of Swiss giant Roche, the world's fifth-largest pharmaceutical company which boasts annual revenue of some $50 billion. It's not the first such deal either — 23andMe has previously partnered with Pfizer to further research into inflammatory bowel disease.

without FDA approval to sell home dna tests, 23ANDMe can only survive for so long

The problem now for 23andMe is that its current database of genetic information will only be useful for so long. Speaking to Forbes, chief executive Anne Wojcicki says that the company is "in it for the long haul," but it will need to work hard to get the FDA on side and return to offering the public DNA tests. However, it's already expanding to the UK, and if big pharmaceutical companies continue to validate its work and methods, then government approval will likely follow.