
23andMe Misses in 2Q24 and Losses Widen; Given Cash Concerns, Management Increasingly Focused on Margins with Price Increases, Headcount Reductions, and Planned Lower Ad Spending
11-9-23 (by: Scott Gleason) 23andMe has announced its financial results for the second quarter of fiscal year 2024 with total revenue of $50 million, a 34% decrease from the same period in the prior year. Analysts had been looking for revenue of $56.8 million. Management stated that the decline was primarily due to the termination of its previous agreement with GSK resulting in only one month of revenue under the new agreement in the quarter. 97% of revenue was tied to its consumer service division this quarter. When asked about the recent cyberattack, the company stated that it has not seen a volume impact associated with it yet, and is still collecting information to better assess potential liabilities and insurance payouts under the pending litigation. Cash burn continues to be the primary investor concern with the company and management noted it is raising prices and lowering advertising spend along with headcount reductions.
During the quarter the company had a number of new technology updates. In the consumer segment, 23andMe successfully implemented increased kit and subscription pricing. The company also introduced 23andMe+ Total Health, a comprehensive health membership featuring clinical-grade exome sequencing, biannual blood biomarker testing, and access to clinicians with specialized genetics training. Furthermore, 23andMe has enhanced its 23andMe+ Premium subscription with the launch of two new digital health features: HealthTracksTM, a behavior change tool integrating lifestyle and genetics, and Health Action PlanTM, which provides tailored health recommendations based on personalized genetic reports. The company also expanded its FDA-authorized pharmacogenetics report to include Simvastatin, a widely prescribed cholesterol-lowering drug with over 8 million users, and received FDA clearance for reporting 41 additional genetic variants in the BRCA1 and BRCA2 genes. The company can also now add additional variants without further FDA approval.
From a research and milestone perspective, 23andMe announced a non-exclusive data license with GSK plc, extending their collaboration for drug target discovery using the extensive 23andMe database. The company received a $20 million upfront payment for this one-year data license, showcasing its commitment to leveraging genetic and phenotypic information for research purposes. The company noted that over 80% of its 14 million customers to date have consented to the company using their genetic data and personal health information for research purposes.
The company reported adjusted EBITDA in the quarter of ($45) million compared to ($30) million last year. Cash balances at the end of September were $256 million versus $387 million last year. The company noted workforce reductions in August, and the decision to choose royalties versus funding new drugs as providing cost benefits looking ahead. However, the significant cash burn continues to raise questions around the company’s long term financial viability.
Anne Wojcicki, Co-Founder & CEO of 23andMe, emphasized the company’s focus on helping customers improve their health in a personalized and actionable manner.
Looking ahead, 23andMe lowered its full-year guidance, with revenue projected to be in the range of $240 million to $250 million for FY2024. The net loss is anticipated to be in the range of $345 million to $325 million, with an adjusted EBITDA deficit in the range of $180 million to $160 million.