23andMe Turns DNA Data Into Drugs in Startup’s Latest Twist

23andMe to Use Genetic Database for Drug Discovery

23andMe Inc., the Google Inc.-backed genetic-testing startup that popularized a $99 DNA spit test, will expand from screening people for diseases to inventing new medicine to cure them.

The Silicon Valley company has recruited a top biotechnology executive to help. Richard Scheller spent almost 15 years at Genentech, heading research and early development at the company that invented pioneering cancer drugs Herceptin and Avastin. He’ll lead 23andMe’s new therapeutics group.

It’s the latest evolution for 23andMe, which went from a seller of novelty ancestry kits to one of the world’s biggest repositories of genetic data, doing business with major pharmaceutical companies like Pfizer Inc. and Genentech.

Now it may compete with those giants.

“Part of what we’re trying to do here is drug discovery in a more efficient model,” Chief Executive Officer Anne Wojcicki said in a telephone interview. “Pharma companies don’t have a direct relationship with consumers, so they’re always subjects. By engaging them and giving it to them as a prize, saying, ‘You’ve powered this study and you’ve made this happen,’ we can do things in a different way.”

23andMe, named for the 23 pairs of chromosomes in human cells, is recovering after a U.S. Food and Drug Administration ruling in late 2013 left the company unable to sell health analyses from its saliva tests, hurting sales. Since then the closely held company has worked hard to get back in the agency’s good graces, and last month gained approval for its first screening kit, which focuses on Bloom Syndrome.

“We obviously like to stay busy, we were worried after the FDA approval we’d get bored,” Wojcicki said, making light of the company’s huge ambitions.

Grow Faster

“With an FDA-cleared product, we need to continue to accelerate growth,” she said. If 23andMe could find the causes of disease in its DNA data, why not try and find the cures? “I want to push the limits.”

While it is unusual for a health data company to move into drug discovery and development, “obviously they have credibility in this area as a result of the partnerships they have with a number of pharma companies,” said Dan Bradbury, founder of BioBrit LLC, a life sciences consulting and investment firm in La Jolla, California. “I think they will be taken seriously but it will take a number of years to establish the capability” to develop drugs, he said.

Potential Competition

23andMe may run into conflicts and overlap with the drug company customers to whom it sells data. One of the last things Scheller signed off on before retiring from Genentech in December was a deal with 23andMe to help find new drug targets for Parkinson’s disease. Genentech, which is part of Roche Holding AG, was also an early investor in 23andMe.

President Andy Page said 23andMe’s pharmaceutical partnerships will be unaffected, even amid potential competition.

“The idea of multiple entities accessing the database concurrently is something we’re comfortable with,” Page said. 23andMe has also told its drug and biotech partners that they may be able to license some compounds in the future.

Picking Targets

23andMe hasn’t yet picked any disease areas or specific drug targets, and is still deciding whether to seek out big pharma partners to help run clinical trials or go on its own.

When Scheller’s retirement from Genentech was announced, “I knew that I wasn’t going to stay retired very long,” he said in a telephone interview. “I wasn’t exactly sure about what I was going to do, but I knew I was going to get into human genetics.”

He didn’t have to wait long. Wojcicki e-mailed on the day of the announcement and soon after visited Scheller at his home in Palo Alto.

“We both had the same idea at the same time,” said Scheller. “I think before we had made a cup of tea we were in an agreement that this would be an exciting venture.”

While large drug companies have labs full of chemists and rosters of doctors to help test drugs in patients, Scheller said 23andMe can outsource much of the work to contract research organizations, moving fast once they find a viable drug target.

Outsourcing Research

“There’s a whole industry grown up around supporting the industry,” he said. “It’s possible to get a whole lot of work done today with CRO collaborations.”

While 23andMe is well-funded with backers that include Google and New Enterprise Associates, the company will raise more money this spring to fund the drug development project, Page said.

How much they will need to raise will depend on how far the company plans to go on its own before looking for partnering companies, said BioBrit’s Bradbury. “If they’re purely doing drug discovery, they’ll probably need a few tens of millions a year to do that,” he said. “If they take things into the clinic, depending on the indication, then they’ll be looking at several hundreds of millions”

An exact amount hasn’t been set, said Page, though he said they “anticipate a fair amount of interest.” The company has raised $126 million in four previous rounds of funding since its 2006 founding.

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