23andMe Raises $250M For Consumer Disease-Risk Tests, Drug R&D

Xconomy San Francisco — 

Once barred from giving consumers disease-related information about their DNA, 23andMe recently received approval to market such genetic tests directly to consumers—and it now has reeled in a boatload of cash to ramp up those efforts, and more.

The Mountain View, CA-based genetic testing company said Tuesday it has raised a new $250 million round of private funding, led by high profile Silicon Valley firm Sequoia Capital, a new investor in the firm. Sequoia partner Roelof Botha is joining the 23andMe board of directors.

The cash will help two major initiatives. First, 23andMe wants to make up for lost time and push its tests that give consumers information about their risk of developing various diseases, such as Parkinson’s disease, cognitive disorders, and even some cancers. The company says it has published more than 80 peer-reviewed studies supporting the use of these tests to assess a patient’s risk of developing disease. In April, the FDA approved the marketing of 23andMe’s $199 testing service. But in its decision, the FDA cautioned that the tests are for informational, not diagnostic purposes. The FDA urged consumers to discuss test results with their doctors.

Five years ago, 23andMe was signing up tens of thousands of consumers for its genetic testing services. But in 2013, the FDA put a stop to that, warning the company that it was marketing its genetic testing kit without proper regulatory approvals. Among the FDA’s concerns was the potential for patients to use information from these tests to make treatment decisions. For two years, 23andMe was barred from giving its customers disease-related information, other than their raw data files without interpretation. All the while, 23andMe also sold its “spit kits”—customers spit into a vial and send it back for analysis—to help people explore their ancestry.

The first regulatory thaw came in 2015 when the FDA allowed 23andMe to market a targeted test for the genetically inherited Bloom syndrome. The company had conducted additional studies to demonstrate to the FDA the accuracy of its Bloom syndrome test, and the regulator subsequently classified such screening tests as class 2 medical devices, a lower-risk category.

The company has also moved aggressively into a second business, drug research and development, and the new cash will also support those efforts—potentially a more lucrative market than consumer testing. Eventually, the company wants to develop drugs on its own. It brought in former Genentech executive Richard Scheller in 2015 to lead a new drug development team.

23andMe has already opened its vast database, with genetic and other information from more than 1 million customers, to companies looking for clues that will help shape their drug research. A deal with Pfizer (NYSE: PFE) has led to insights about depression, for example.

23andMe is also helping pharma companies recruit for new studies. In May, the company announced it was working with Germany-based The Grunethal Group to enroll up to 20,000 U.S. participants to study the link between genetics and pain response. Last month, it unveiled a partnership with Denmark’s Lundbeck to recruit up to 25,000 people to study the role of genetics and environmental factors in depression.

23andMe is pressing forward as other genetic testing companies stake out positions in the market. In August, Boston-based genetic analysis startup Veritas Genetics acquired fellow Harvard spinout Curoverse, a company whose software manages large amounts of genomic data. Instead of one-time genetic testing, Veritas aims to make genetic testing a service that consumers use over their lifetimes to assess disease risk or potential drug interactions.

Other companies are trying to develop ways to make genetic testing part of patient care. Wuxi NextCODE analyzes a patient’s DNA sample, which the company says can help a physician diagnose disease faster. The company, whose operations are in Cambridge, MA, Iceland, and China, closed a $240 million Series B funding round last week. Sequoia, spreading its bets in genetic analysis, joined as a new NextCODE investor.

Other new investors in 23andMe include Euclidean Capital, Altimeter Capital, and the Wallenberg Foundation. Fidelity Management & Research Company and Casdin Capital, firms that previously invested in the company, also participated in the round. In total, 23andMe says it has raised $491 million.

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