23andMe ft. Anne Wojcicki - How a DNA startup took on the FDA and redefined health tech

Lizzo dressed up like 23Me for Halloween, and we had Eddie Murphy come to Saturday Night Live and talk about 23Me. We're in crossword puzzles and jokes, everyone suddenly was exploding with stories about 23Me. And then in 2019, Kit Sales started to flatline. It was really a question of, well, what happened?

Welcome to Crucible Moments, a podcast about the critical crossroads and inflection points that shape some of the world's most remarkable companies. I'm your host, Rolf Böder. When Anne Wojcicki launched 23andMe in 2006, the company revolutionized the healthcare industry by becoming the first to offer individuals direct, affordable access to the information contained in their genome. Information to help people understand their ancestry, but also their genetic predisposition to different health outcomes. But as with any company that shakes up an industry, especially the medical establishment, there comes enormous risk and no guarantee of survival. In today's episode, we'll hear how 23andMe confronted a regulator with the power to shut down the company, took a leap into the high-risk, high-reward territory of drug development, and transformed its consumer business after booming sales suddenly flatlined.

My name is Anne Wojcicki and I am the co-founder and CEO of 23andMe. So many things played into me wanting to start 23andMe. First and foremost, I had spent about 10 years investing in healthcare companies and over time I started to realize that healthcare was this massive system that was really wildly optimized to monetize you. And I also realized how much the patient doesn't have a voice in their own healthcare. And so 23andMe really kind of came from this idea is like, how do I bring people together where the whole purpose of that community is about what we, the community, actually all see as our interest, not necessarily what is that interest of the bottom line of, you know, a drug discovery company or a healthcare company or an insurance company, but like what's reflective truly of people's needs and interests? And frankly, that is about how do you actually stay healthy as long as possible, or then crowdsource solutions if you actually have an illness and you want to have a better outcome.

Just a few years before Anne founded 23andMe, the field of genetics experienced a paradigm shift. Scientists successfully sequenced 92% of the human genome, which, amongst other insights, gave society a greater understanding of genetic contributions to numerous diseases.

I feel really lucky that I was kind of in the right place, right time of knowing the healthcare sector, knowing the tech world, and then also seeing the human genome and the cost decline that you were actually gonna be able to get access to your own genetic data at a relatively affordable price. So the mission of 23andMe is to help people access, understand, and benefit from the human genome. 23andMe was groundbreaking in a number of ways right when we launched. First off, like, people had never had access to their genomes before. You had one-off stories of people spending, you know, a million dollars, prohibitive sums, to get access. And what 23andMe is, we really democratized that access. So I think the second thing is that we were, you know, absolutely interested in providing lots of information back to individuals about, you know, things that the medical community would otherwise not return, like Alzheimer's risk. because there's not necessarily a treatment for that. And a lot of that was actually driven by my ex-husband, Sergey, who at the time there was a discovery about Parkinson's, and he wanted to know whether or not he had that risk factor and nobody would test him. And I think it's one thing that the medical world sometimes overlooks. You know, people do want to plan their lives and they can make other decisions outside necessarily just a clinical medical one, that there's lifestyle choices. And so that was one of the tests that 23andMe put on our chip, testing actually for that Parkinson's mutation. And we were able to show, obviously, that Sergey did in fact have that variant and was a carrier for it. And then I think the third thing that we did that was really controversial and groundbreaking was the idea that we were actually creating this incredible database of consented individuals who were helping us make the product better, meaning that as more and more people signed up, we were able to create relative meaning that you were able to consent to say, yes, I want to see if I'm related to anybody, or you wanted to look at your ancestry composition and you wanted to see what parts of the world your DNA came from. So we were able to actually pioneer a lot of really innovative tools to help you not just, you know, get access to your DNA, but then to also explore it and get meaning from it.

Any company that pioneers a truly innovative product faces a harrowing question early on. Will there even be a market for it? Finding that product market fit was 23andMe's first test.

We had an incredible launch. We were the New York Times cover story. We were the COVID of Wired. We had this crazy launch party during Fashion Week. We had all these slubs. And it was, again, kind of unintentional, but, like, it ended up getting so much press. And again, because it was sort of controversial, like, It was like the world of sci-fi was coming real. Like suddenly you could look at this.

Code inside of you. I was one of the earliest adopters and took my 23andMe test in 2007. I've always wondered what's wrong with me because I'd often sneeze once as soon as I stepped outside the building into bright sunlight. And I never understood why that was the case until I did 23andMe and got the results back. And it turns out there's a genetic trait called photic sneeze response, where certain people have this genetic trait that they.

Step into the sunlight and have one sneeze.

The novelty of this kind of discovery, along with more profound health and family insights, helped drive an early surge in sales.

The first price point was $1,000 and we sold like 1,000 kits our first day. And then the volume trickled down to like 15 to 20 kits a day. And for those of you who are math majors, that's not a lot of money. And It became kind of that question. It's like, well, what are we, like, how are we going to get people to think that they need their genome? Ultimately, we decided one day that we were just going to cut the price to $99 and see what happens. My engineering team called me at seven in the morning and they're like, Ann, we've sold over a thousand kits. Like, what should we do? And I was like, I don't know, like, let it rip. I think that was my exact words, like, let it rip. And you know, to make a long story short, we sold 17, 18,000 kits by the end of the day. And that was actually, frankly, all of our inventory. I realized like there's demand. Suddenly being able to get almost 20,000 people in a day to spit was like amazing because, you know, previously there hadn't really been like big studies over 10,000 people hadn't happened. We raised our Series C kind of off that data and it gave us that hope and that inspiration that we knew there is really this potential for it.

The company had finally found the kind of product market fit where customers were lining up to spit in tubes. But with 23andMe exploding in popularity, it wasn't long before the medical establishment started to turn on the company. You often see this in science that new ideas are often discounted initially. You know, people forget that Galileo was ridiculed for his notion that the universe didn't revolve around the Earth. And that was certainly the case in the early days of 23andMe, where many of the established medical profession heavily discounted the company's importance. It was really discredited in the early days.

For years, there were medical meetings that did not want us to attend, really solely based on the fact that we were a direct-to-consumer company. I had one dinner, I was describing what we were going to do, And this individual actually stood up and he left. And he said, 23andMe is gonna cause so much destruction in people's lives because women are gonna be abandoned everywhere because of the non-paternity rates. The thing that I realized is that there was a lot of general fear about genetics and information and a lot of fear about what consumers or patients in this point will do without physician supervision. But that was unsubstantiated with data. The fact that we were circumventing the medical world really just hit a nerve.

And when you circumvent the medical world, regulators start noticing.

23Andme had a history with regulatory agencies. In our earliest days, our first warning letter came from the Department of Health of California. And that actually forced us to move from working with Illumina for processing labs over to LabCorp. And we were able to resolve that one pretty quickly.

Despite the medical community's concerns and the occasional regulatory warning letter, 23andMe forged ahead, sending out testing kits. But then, in November 2013, it received something more ominous than a warning. The FDA ordered 23andMe to shut down all of its health testing services.

So when I got that letter in November, it was a real shock. And then I think the bigger shock was that it became public a matter of days later. When I got the FDA warning letter, I was actually at a offsite with the leadership team of 23andMe, and I got a text message from my assistant at the time who said, you gotta a package that was couriered to you from the FDA, and they want me to sign it. And I actually said to her, don't sign it. And then she said, I already did. It was brought over to me, and I opened it and I read it to everybody. And my take was like, you know, we've had a long history of issues. Like, we can solve this too. You know, I did not read it as being that bad. And on Monday, the letter became public. And that's actually when David Kessler called me.

The former FDA commissioner.

And said, Anne, I know you, and I know that you don't think that letter is so serious. And I'm telling you now, it is. And you have to stop. And so suddenly I had the world.

To grapple with All companies face obstacles, but when a government regulatory agency like the FDA orders you to stop selling your product, that's a true crucible moment. As a condition for selling their health product, the FDA demanded that 23andMe go through the process of getting FDA approved, an ordeal that could take years. How should the company proceed? All of the options looked daunting.

No one had ever done anything like 23andMe was trying to do. There really was no genetic consumer product at the time. So when they received the warning letter, frankly, I was a little worried. I was not sure how 23andMe was actually going to deal with this, or frankly, whether they could deal with it. My name is Richard Scheller, and I was head of therapeutics at 23andMe from 2015 to 2019. 23andMe had no experience with interacting with a regulatory agency, all of the hoops that they would have to jump through in order to get a report approved. And I wasn't sure that 23andMe was going to come out of that and actually be a successful company.

Okay, so option one was a fold. After we got the letter, there was no shortage of people who came to me and said, you know, Anne, like most companies fold at this stage. And in my mind, I kind of made note of those people and I was like, okay, never work with these people again. I was like, of course we're not gonna fold. Option two in my mind was like, well, we can fight this. Like we should fight. There was no shortage of our customers. who wrote in to say, this is outrage. How dare they try to impede my access to my own data? And that kind of rallied me up. And then the third option was just to totally comply. And there was one very influential regulatory leader who I met with, and she said to me, Ann, what do you want to do? Do you want to sell this company? in the next couple of years, because if you wanna sell this company, you can just like package this up, ship it out, and be done. But if you really wanna do the things that you're setting out to do, the way you're gonna get there is you put your head down and you do the work. And she's like, it's gonna be slow and painful, and it's gonna take you years. And are you really up for it? And honestly, I think back now, and I'm like, I knew she said the word years, But I didn't know exactly how many years. So I chose option three. I chose the last option because I said like 23andMe is a mission driven company that is set out to really have an impact on healthcare.

Making the choice to comply with the FDA's demands was one thing. Now 23andMe had to figure out how to actually follow through, something Anne admits her staff simply was not yet equipped to do.

To be honest, we did not have the right kind of team. I had a team that was very mission driven and very capable, but lacked regulatory experience about exactly how we should be pursuing a regulatory strategy. And our warning letter did come out of surprise. My main priority was finding somebody who was going to lead us through an FDA regulatory process. So hiring Kaffy Hibbs was a huge accomplishment for us.

In April 2014, Kathy Hibbs brought her more than two decades of legal expertise in clinical and medical settings to 23andMe, joining as the company's chief legal and regulatory officer.

It really was a major transition to go from being an unregulated company to a regulated company. And the engineering, the software, like everything about it was just an incredible amount of work. We were in such a hole, and in some ways, The regulatory team that we brought in after the warning letter almost felt like, you know, we are being set up to fail.

Oh, it's a huge process dealing with a regulatory agency. They asked 23andMe to show that the reports that they provide back to consumers are accurate. And I won't go into the details, but suffice it to say that this was quite a technical challenge and hurdle. And then in addition to that, the FDA wanted to be sure that a consumer could understand the report. So the FDA asked 23andMe to provide the report to a group of people, and then for the folks to take a test and to show that they could answer the questions in a way that demonstrated that they understand the report. So that was a very big lift.

It took two years of meticulous testing, proving methodologies and providing data. But 23andMe relaunched an FDA approved version of their health testing kits to the market in 2015.

The day we got our FDA authorization, our head of legal and regulatory, she laughed. She's like, it's the only time I think anyone in the regulatory team has gotten a standing ovation. Like it was really, it was really exciting.

The company was sort of under the hammer and Ann completely turned that into an enormous competitive advantage for the company, where they can now truly be the only company to offer these tests. The work they put in incrementally earning the FDA stamp of approval over time didn't just change the way regulatory agencies saw their product, it changed minds with the medical establishment and beyond.

I think that the biggest Lessons from the Crucible Moment was, you know, like the world does change, and the way it changes is not like the regulators see an aha moment and they change. It's like small steps over time. I remind people at 23andMe that when we started the company, gay marriage was illegal. The world does change, and it changes because of the effort of people who are persistent and continue to chip away at sort of the arguments with data and with activism.

With the company's health product blessed by the FDA, 23andMe was no longer the pariah of the medical world. But something else happened in 2014 and 2015. While they were buttoning things up on the regulatory side, sales of the ancestry product were accelerating. opening the door to a bold new direction for the company.

So the business really actually did quite well during that time frame. Like we hit a level of scale and we had so much genetic data that we could actually start doing really interesting research. But we started getting that scale of like well over 100,000 people, close to a million, and we were, you know, sort of the largest consented genetic database in the world.

The database was finally big enough for Anne to follow through on one of her original ambitions for the company.

I was always really excited about this potential of using human genetic data for drug discovery. Drugs that had a genomic foundation were two to three times more likely to be successful than ones that did not have a genetic foundation. from my days as a Wall Street analyst, I realized in the biotech space, you often have just animal data. You don't have large data sets. It's hard to recruit people. You do all this expensive work to set up a study and then take it down.

Anne realized that her library of data could be of extraordinary value to companies developing therapeutics.

So we started doing partnerships with pharma, and frankly, we kind of realized that there just wasn't a lot of expertise in-house at a lot of pharma companies about genomics, about how to translate from drugs to therapies. And it was an expertise that more and more 23andMe was building in-house. So we realized that if we really wanted to harness the power of what 23andMe had to offer, we should do it ourselves and lead by example.

23Andme had arrived at its next crucible moment. Instead of partnering with outside firms, should the company build out its own therapeutics division from scratch?

Starting a therapeutics division is a big, bold, risky endeavor. Making medicines is a very long and difficult process. and, in fact, most attempts to make medicines fail. It was not necessarily the case that this was a slam dunk. It was many years ago that I met Anne. We heard about 23andMe at Genentech very early on, right when the company was founded.

While at Genentech, Richard oversaw that company's investment in 23andMe's initial seed funding.

Because I was an executive committee member of Genentech. When I retired, it was required that the companies put out a press release.

When I saw that he retired, I called him.

I think it might have even been a couple hours after the press release came out. Anne phoned me. And I didn't think that it was just a coincidence, if you will, that she was phoning to say hello. And I said, why don't you come over?

I went to go see him, and we chatted briefly, and Richard Scheller is known to be very lovingly skeptical of everything. Richard was very forthright about the risks and, you know, the cash burn.

So one of the first things that I did was to put together a strategic plan which included a number of people that we might hire, how much it would cost to build out a laboratory, how long it would take to potentially come up with a medicine that would move into clinical testing, how long the clinical testing would take, how much that would cost, and really educating not only Anne, but the rest of the leadership team at 23andMe. on what drug discovery actually is, how long it takes, how expensive it is, but what might come out at the end as a medicine that could really help people.

And I said to him, I said, yes, I spent a decade investing in biotech. I'm well aware of the failures, but it's a irresistible opportunity to be able to leverage novel human genetic data that's never otherwise been seen before in this kind of to say that potentially we could really transform drug discovery.

The thing that impressed me about Anne most was her vision and her enthusiasm and her just unrelenting belief that genomics will help with human health.

Even though there was a glint in Anne's eye of building a therapeutics business, many years prior. It really took somebody of Richard's experience and skill set to help galvanize and get that off the ground.

It's my first day at 23andMe, and me was quite amusing. I came in and somebody said, well, you can use this desk. And I looked, and it was a desk in a sea of people. And at Genentech, I had an office that was mine. I had a conference room that was mine. I had a library that was mine. The closest they had to a laboratory was the kitchen where lunch was served. So, you know, we needed to build a biochemical molecular biology drug discovery lab from scratch. We had nothing. So we proceeded to hire a few more very talented people. and then eventually moved into laboratory space. We bought a lot of used equipment, actually. We would participate in auctions where a company had perhaps shut down and they were selling all of their equipment, so we would bid online to buy centrifuges and, you know, all the kinds of millions of dollars of laboratory equipment that You need in order to do experiments. It was extremely daunting, but I had in the back of my mind that, look, biotech companies were founded and they did start and they did succeed so that it wasn't impossible. One just had to, you know, do it.

I think some of the biggest challenges we've had with therapeutics is frankly is almost the perception of the company as a direct to consumer ancestry company. pharma biotech CEOs will sometimes ask me, like, you do drugs discovery? I'm like, yes, we do drug discovery. And like, with labs, I'm like, with real labs and like real labs, like a pipette. And I'm like, with pipettes, like real, like we have like real, like we know how to make antibodies. We know how to run, you know, assays. Like we have like a real working biotech and they're surprised because we're known.

For our direct to consumer genetic testing. So we decided to work on a very specific therapeutic modality, that is to make antibody therapeutics, which was somewhat more straightforward to build from scratch. So it allowed us to more quickly move forward in making therapeutics. And there were a number of breakthroughs as we began to look at the data. We saw that there were associations of particular genes with disease that suggested that those genes encoded molecules that could be important drug targets. And that was the question that we had when we started. Would that be the case? And we found a number of drug targets that we thought were worth pursuing.

It's kind of remarkable today because now I have a therapeutics team that is incredibly dedicated and it's really hard, painstaking work to develop a drug and they're sticking to it. I have an extensive collaboration with GSK. We have over 50 programs that have been identified and I think now we actually have this really amazing opportunity of working more and more with pharma and biotech partners as we have proven out just how productive this database can be.

Soon after I arrived, the folks in the consumer group asked me, how big does the database need to be for therapeutics? And the answer is, well, you know, the bigger the better. So, you know, I just said 10 million. We're somewhere around 12 to 14 million people in the database now, which makes the 23andMe genetic database by far the largest in the world. Also, the growth of the database was more than I ever dreamed that we'd be able to accomplish. To build a therapeutics division from scratch takes fortitude, but the main thing that it takes is an idea. and a belief that you're going to do something different that's gonna make a difference in patients' lives. And if you get out of bed thinking that every day, anything is possible.

In 2018, we saw an incredible inflection point where Kit sales really took off and our brand awareness hit an all-time high. Whether it was like Lizzo dressed up like 23 me at Halloween, we had Eddie Murphy come to Saturday Night Live and like talk about about 23 me, like, were in crossword puzzles and jokes. Suddenly everyone was exploding with stories about 23 me. And then in 2019, it started to Flatline. It was really a question of, like, what happened? And we did see that there was definitely more of a concern around privacy. So Cambridge Analytica was a big one. Golden State Killer was a big one. Where suddenly we needed to address the fact that people were just wanting to know what was going to happen with their data.

Amid changing tides of consumer sentiment, 23andMe was also facing increasing competition.

So after the FDA warning letter, we made the decision to continue selling the ancestry product, but not selling the health product. You know, what was actually interesting for us is we sold pretty well. So it was definitely an interesting time because we put most of our effort into health, but suddenly Ancestry was taking off. And I would actually argue one of the mistakes we made at the company is like we were not marketing heavily in that timeframe, and that's when our competitor ancestry.com really did take off.

As sales tapered off in 2019, 23andMe faced Another crucible moment. Had they saturated their market? How could they reignite growth?

It became a question of like readjusting our spend, readjusting our marketing budgets. How are we going to keep growing, but in, in a way that's going to make sense from a product perspective. It became really then about making sure that people understood, well, how is 23andMe using the data? Talking very clearly and frequently about the principles that we operate on, which is really choice and transparency.

Part of readjusting meant laying off 100 people or roughly 14% of their workforce. It also meant completely re-envisioning what a direct-to-consumer healthcare company could offer users.

In the earliest days of 23andMe, we were so consumed with just like fighting basic survival of is it safe for you to get your genetic information? Are you going to be able to understand it? And more and more we started to realize that we have that luxury of like 10 plus years of data. And I realize that we have this opportunity to actually do an even better job of keeping people ongoing up to date with their genetic information. That was a moment when we said, we need to pivot. And that became kind of that next phase for the company is really making sure that we are not just providing information, but we're going to actually become part of the full stack of helping make sure that people now also know what to do with it. by having a subscription product.

Offering ongoing telehealth services through a digital subscription would require medical professionals who could work directly with 23andMe customers. But at the time, consulting with medical professionals anywhere but in person in their offices was uncommon.

We had actually this offsite in 2019 where I thought about telemedicine and I was like, I just, I don't think we can do it.

But then, like so many other aspects of our lives, everything changed in March of 2020.

Suddenly, with the pandemic, telemedicine became accepted in a matter of weeks. So that opened up doors for us to say, we actually have this opportunity to offer telemedicine to our customers, to offer online pharmacy.

But building out a telehealth platform and an online pharmacy from the the ground up would require an enormous amount of time and resources. So the company decided it might make more sense to take a different approach.

We had this opportunity to acquire Lemonaid, and that gave us the ability to have clinicians who can work with patients in all 50 states, as well as a pharmacy. And having a pharmacy was really key for me because I look at the opportunities with pharmacogenomics. meaning like, how is that I can look at all of your medications and know which medication has a genetic component and can I get you the right medication based on your genome? And suddenly we had that opportunity.

23Andme'S acquisition of Lemonaid Health closed in November 2021.

I'd say today we're still kind of in that process of harmonizing everything and bringing everything together. We have put more and more of the right people in place. to really lead the evolution of the company. I look at crucible moments as opportunities to pivot and explore a new path. Like it forces you to look at the world in a different way. And I think when something like your sales go flat or you have a regulatory intervention or a competition comes in some way, you have an opportunity to innovate. That's the exciting moments. When it's just up and to the right, anyone can sail that kind of ship. But it's a crucible moment when it's hard and you do need to galvanize people to get that right kind of creativity. They're just scary for people because when you walk in and you're like, hey, guess what? We're going to do it in a different way. It makes people uncomfortable, but that's part of leadership. You have to lead and make people realize that the evolution is going to be better than where they are today. Looking at the path forward of 23andMe, I feel like we have this opportunity now to be really sort of the world's only leader of genomic-based medicine. And how is it that people can get affordable access to advisors on the latest in genomic medicine and how to execute on it and what to do? How do you have not just like very generic, hey, like eat this, exercise, sleep, but, you know, being able to help people understand, well, when should you get a colonoscopy? When should you get a mammogram? You know, some people really, it's toxic for them to eat fava beans. So I feel like we have this opportunity to really give personalized prevention. The biggest gap in my mind in healthcare is this idea of like, how do I keep you well? And your doctor today is not terribly interested in that engagement of keeping you well. And so we believe that there's this incredible opportunity based on your genome of helping you, you know, stay healthy as long as possible. Or if you have conditions, how do you better manage that?

In one of the strongest affirmations of Anne's vision for her company, on June 1st, 2023, 23andMe sent out an email blast with news of 23Me 610. a new first-of-its-kind investigational cancer drug, an antibody that they believe has the potential to treat patients with advanced cancers.

This is our first molecule to move into phase two of testing. In phase one, we demonstrate that the molecule is safe and tolerable. And in phase two, we test whether the molecule actually works and helps patients. And we're just in the process of that now. If it's shown to help people with cancer, it will be a tremendous breakthrough, but we still have a very long way to go in order to prove that.

But 23andMe is used to long roads. One of the benefits of spending so much time on a problem is that you're able to look back and recognize progress.

We do these surveys of clinicians, like physicians, over 90% of physicians say that they understand how genetics will make their clinical outcomes better. And I do always still think back on like those earliest days in the company when I would go on stage and I would say a consumer should have the right to access their own genome. And there was overwhelming like demand. And the medical world was like, oh my God, well, I don't know. And I do think about the team at 23andMe that did just endure, like in continuously proving out that this information is accurate, it's safe, and it's meaningful. And we slowly, like, won over the world. So it's been like such a massive transformation of acceptance. I don't know. It's just like, it's amazing to me.

Anne, who's always seen her company as pushing boundaries, continues to see that as a crucial part of 23andMe's 23andMe's DNA.

I don't worry too much about 23andMe becoming too traditional because we're so far from it. I remember at one point some big company leaders telling me like a lot of leaders who have a brand don't want to take a risk, but why else have a brand if you don't want to take a risk and move the world forward? And I feel lucky, like I have millions of customers and I have a brand. And as you get bigger, it gets harder to do things, I think it's important to make sure that you're always pushing. And frankly, that's my job, to constantly inspire and to make sure that I have other leaders who have that vision and that they are inspiring.

And one more medical term for good measure.

And I do think it becomes contagious.

This has been Crucible Moments, a podcast from Sequoia Capital. Join us next time as Jensen Huang shares how NVIDIA survived near bankruptcies, revolutionized computing with the release of their GPU, and persevered to become stewards of the AI revolution.

Crucible Moments is produced by the Epic.

Stories and Vox Creative podcast teams, along with Sequoia Capital. Special thanks to Anne Wojcicki and Richard Scheller for telling their stories.