Consumer diagnostics player 23andMe officially pivots to add drug discovery

Richard Scheller

23andMe has advanced from a flurry of recent partnering with major biopharmas to aiming to join their ranks. The consumer diagnostics company has brought in the former EVP of research and early development from Genentech, Richard Scheller, as CSO and head of a newly created therapeutics group. The move seems likely to be a precursor to a major cash infusion--since drug development is a very cash-hungry business, particularly when paired with an ongoing genomic analytics business that's also recently gone into overdrive.

The company, founded in 2006, hasn't disclosed any financings since a Series D in 2012 raised about $58 million. 23andMe has raised a total of $146.7 million, according to SEC filings.

Existing investors are deep-pocketed enough to support all of 23andMe's aggressive maneuvers of late. They include New Enterprise Associates, Google Ventures and MPM Capital. The company is also backed financially by its CEO, Anne Wojcicki, and her estranged husband, Google ($GOOG) co-founder Sergey Brin.

23andMe is scarcely alone among diagnostics companies in its recent high profile--several others have snagged major investments or deals including the $1.2 billion Roche ($RHBBY) investment in and partnership with Foundation Medicine ($FMI) and a $117 million IPO for consumer diagnostic company Invitae ($NVTA), while their stealthier peers such as Dr. Patrick Soon-Shiong's NantHealth and Elizabeth Holmes' Theranos are reported to be raising billions.

But 23andMe may be the only recent diagnostics company to turn toward a model of drug development driven by genomic data--a concept which proved attractive to investors about a half-dozen years ago but proved less than fruitful then. The industry seems anxious to revisit this ground, now that huge strides have been made in linking disease processes to genomic data.

Quite a few major biopharmas have made major drug development deals with diagnostics companies recently, though, with 23andMe prominent among their partners. In January, 23andMe disclosed partnerships with Genentech, a unit of Roche, and Pfizer ($PFE), although the terms remained undisclosed. The former is focused on Parkinson's disease, while the latter is directed at lupus. Amgen ($AMGN) may have kicked off the whole trend of biopharma taking genomic assets seriously when it paid $415 million in December 2012 for the remnants of deCODE Genetics.

As for 23andMe, its core consumer diagnostics business got a boost when the FDA cleared its test for genetic disease Bloom syndrome in February. It was a sign that the agency is amenable to working with the company, which got slapped with a warning letter more than a year prior.

It's not clear yet which technologies or indications will attract the company's new drug R&D focus.

"I believe that human genetics has a very important role to play in finding new treatments for disease," Scheller said in a statement. "I am excited about the potential for what may be possible through 23andMe's database. It is unlike any other."

- here is the Scheller release