23andMe Funding Values Genetics Startup at $1.1 Billion

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  • Fidelity leads latest round with Google Ventures, NEA
  • Proceeds will fund new consumer product, drug discovery

Anne Wojcicki, co-founder and chief executive officer of 23andMe, speaks during a keynote session at the South By Southwest (SXSW) Interactive Festival in Austin, Texas.

Photographer: David Paul Morris/Bloomberg

Silicon Valley genetic-testing company 23andMe Inc. raised $115 million in venture-capital financing as it prepares to introduce a new consumer product and expands its drug-discovery arm.

The Series E funding round was led by Fidelity Management & Research Co. and included previous investors Google Ventures and New Enterprise Associates as well as new backers such as Casdin Capital and WuXi Healthcare Ventures, the firm said Wednesday in a statement. The financing implies a valuation of $1.1 billion for 23andMe, according to a person close to the company.

The startup, which has popularized a $99 DNA test that analyzes consumers’ spit for genetic information, wanted Fidelity to lead the round because “there’s not many financial institutions with core competencies in both the consumer business and therapeutics business," 23andMe President Andy Page said in a telephone interview. Bringing on WuXi as a new investor also could help 23andMe tap the Chinese market in the future, he said.

The proceeds will be “sufficient for the near term," meaning that Mountain View, California-based 23andMe won’t consider an initial public offering in 2016, Page said.

Fidelity spokesman Charles Keller declined to comment on the funding round, saying that the investment manager doesn’t discuss specific companies. 

“We invest in a limited number of late-stage private companies when we believe there is a good long-term opportunity for shareholders to benefit from the early growth as a company executes,” Keller said in an e-mail.

Revamped Product

23andMe, named for the 23 pairs of chromosomes in human cells, currently provides reports on consumers’ ancestry and hasn’t included a health analysis on their susceptibility to genetic-related conditions since a standoff began with the U.S. Food and Drug Administration in late 2013 over whether it should have sought regulatory clearance to sell the tests.

In February, the FDA gave 23andMe authorization for a test for Bloom syndrome and also determined that the company no longer needs agency approval for tests on autosomal recessive disorders, which are genetic conditions in which two abnormal genes must be present for the disease to manifest, one inherited from each parent. 23andMe has said it will have a revamped product with health analysis back on the market by the end of the year.

The proceeds from the latest financing round will be used to help accelerate work on the new product, Page said. It also will be used to expand 23andMe’s new drug discovery arm, which the company set up in March under the leadership of former Genentech veteran Richard Scheller. 23andMe is also building a research lab for the therapeutics team and a sequencing laboratory that will be used both for the consumer product and for research efforts, according to Page.

Grand Ambitions

23andMe is “finally at the cusp of fulfilling its grandest ambition to change the way medical research is done and to bring the power of genomics to every single individual," said Patrick Chung, a 23andMe board member and co-founder of Menlo Park, California-based venture capital firm Xfund, which is backing 23andMe for the first time.

23andMe is facing increased competition in consumer genetic testing kits. Ancestry.com LLC also sells a DNA kit for ancestry information and has said it’s working on a health-focused testing kit. Like 23andMe, it’s teaming up with traditional drugmakers, providing data on consumers’ genetic codes to hunt for clues about how diseases develop. Ancestry.com, for example, is working with Calico, a biotechnology firm created by Google Inc. More niche products, such as Color Genomics’ genetic test for breast and ovarian cancer mutations, also are starting to proliferate in the market.

Chung isn’t bothered by the increased competition. 23andMe’s vast database of information -- not just on consumers’ genetic makeup but also on characteristics such as symptoms that patients report in questionnaires -- is a “data asset that nobody else has,” he said, and will allow 23andMe to stand out in the field.

“Leveraging this platform will allow 23andMe to change drug discovery from one mostly initiated by small biological models, to a discovery process initiated by data scientists working at scale," Google Ventures general partner Blake Byers said in an e-mail. "23andMe knows their dataset better than any external group."

Previously, 23andMe indicated in a financial filing that it would raise as much as $150 million. The company never intended to raise that amount, Page said.

“We initially set out to raise $75 million in our Series E Round,” Page said. “Due to the strong interest from investors, we decided to increase the amount raised to $115 million. We filed the Form D to state the maximum amount of $150 million so we had flexibility."