23andMe CEO Anne Wojcicki on Bringing Health Information Directly to People

In this podcast, Motley Fool contributor Brian Orelli interviews Anne Wojcicki, the CEO of 23andMe (ME 3.54%), about her company and why it's looking to tell you much more than the names of your long-lost relatives. 

They discuss:

• Opportunities in direct-to-consumer healthcare.
• Creating more personalized medicine.
• The limits of genetic testing.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on April 24, 2022.

Anne Wojcicki: [MUSIC] When I think one of our legacies, hopefully, will be, is that 23andme has really proven that complicated information can go direct to a consumer, it does not have to have a one-to-one interaction with the physician. [MUSIC]

Chris Hill: I'm Chris Hill and that was Anne Wojcicki, the CEO of 23andMe, a DNA testing company that can give you personalized health insights based on your genetic information. The company went public in late 2020 through a SPAC. Since then, the stock has lost about two-thirds of its value, but the company is continuing to take some big swings on the future of personalized medicine. Motley Fool contributor Brian Orelli caught up with Wojcicki to talk about the state of direct-to-consumer healthcare, how she thinks about acquisitions, as well as the possibilities and limits of her company's genetic tests. [MUSIC]

Brian Orelli: Hello, Fools. I'm Dr. Brian Orelli, Fool.com contributor and analyst for the Fool's Biotech Breakthroughs service. I have the great pleasure of talking with Anne Wojcicki, the Co-founder, CEO, president, and director of the genetic testing company 23andMe. Welcome, Anne.

Anne Wojcicki: Thanks, Brian. Nice to meet you.

Brian Orelli: I'd like to get to all the things that you're working on in 23andMe because there's a lot of them. But first, let's start with the genetic tests that the company started with in 2006. How did you come up with the idea of going for a direct-to-consumer genetic tests, which I think was probably a little bit controversial at the time, if I remember correctly?

Anne Wojcicki: It was certainly controversial. It actually came from my investing days. I worked on Wall Street for 10 years and I actively investing in all the genetics companies right around the time the human genome was first sequenced and there's companies like Affymetrix and Illumina came a little bit later. But Human Genome Science, Insight, and Francis Collins, the director of the National Institutes of Health, came out and said, "Genetic is going to revolutionize how we diagnose, treat, and prevent all human disease." I was unbelievably thrilled, the idea that we're going to be able to subdivide every disease and know which ones have a genetic component, you're going to be able to use pharmacogenetics, meaning genetics associated with drug response.

We see all this natural variation like in the population today, like type 2 diabetes is not the same in everyone, Parkinson's is not the same in everybody. I was unbelievably thrilled, and then I was also unbelievably dismayed that the technology was just not really being adopted that quickly. Even today, one of my disappointments is that genetics is not routinely used as part of primary care. Most people today have not had a genetic test as part of their healthcare system. 23andMe really started out of this idea that we have the potential to be consumer-first and let people get access to what I think is one of the most transformative technologies in our lifetime and enable people to get access to it and benefit from it. If you think of our mission statement, it's about how people access, understand, and benefit from the human genome. That mission statement has really held true now for 15 years, we're absolutely on that mission to enable the access. We absolutely believe we can deliver the content in a way people can understand it and we absolutely believe you are going to benefit from it through our healthcare-related services as well as from our therapeutic programs.

Brian Orelli: Many genetic testing companies work through doctors who order the tests. Can you talk about the advantages and challenges with direct-to-consumer versus the other routes?

Anne Wojcicki: It's part of what I learned, actually working globally. I spent a lot of time working in India and they had much more of a direct-to-consumer healthcare market. They price things and they do things to maximize access, whereas I feel like sometimes we have decisions in the U.S. healthcare system that are about maximizing margin. Think about today, everyone would benefit from having their own sequence and it's not adopted for all kinds of reasons. One of those reasons is in part the physician barrier, you have to go and get an approval from a physician, that means you have to set up an appointment, means the physicians have to be trained on it. Mostly today, you have insurance will set up all kinds of barriers for access. For instance, if you want to get a breast cancer genetic test, you have to also be able to say that you are of Ashkenazi Jewish descent. One thing 23andMe knows is roughly 20 percent of our customers who have genetic variance associated with breast cancer, specific BRCA ones, never knew that they had Jewish ancestry. The reason why we went direct-to-consumer is that if you really want to enable access, you have to eliminate all those barriers. The two barriers that are really huge is having to go through a physician and then having to go through insurance to pay for it, so we made it affordable and we made it accessible.

Brian Orelli: Can you talk about how your tests actually work, what's the advantages and disadvantages of doing what you're doing versus full genome sequencing?

Anne Wojcicki: Yeah, it's interesting. The human genome is unbelievably fascinating, one of the most interesting aspects is we're all 99.5 percent the same, so 23andMe does not do a full human genome analysis where we look at every single variant, we look at the variants that are known to differ between humans. There's a number of variants that are associated with things like cystic fibrosis or other conditions you could eventually passed down to children or variance like the BRCA mutation I brought up. Then you get a really long tail of variants that are just in the population but are really infrequent. There are studies that have come out, like guys and girls, one group where they are running a full exome analysis, meaning just against more than what we're doing, but not quite a whole human genome and they find that it's roughly 1-3 percent of people are learning something in addition to what 23andMe would've potentially given them. The value proposition for the individual saying, I'm going to go in pay, potentially four times as much money but only 1-3 percent of us are going to learn anything incremental. The value proposition is not really there yet for whole-genome sequencing, but what 23andMe has optimized for is saying what are those variants that are common within most of the population where we can put them out to our customers? We're really a phenomenal screen. Like we look broadly across all variations and we help maximize really that best value, also really focusing on the affordability of that test.

Brian Orelli: I think you have over 12 million people who've taken one of your tests now. What does that kind of scale do for you on the ancestry side and then also on the health test side?

Anne Wojcicki: One of the things that I always realized investing in healthcare is that a lot of decisions that happened that come down to you are not as driven by data as I would like, or they're driven by potentially smaller datasets.

One of the things that's amazing that we have seen is the rise of these big data companies like Facebook and Google and YouTube and all the things that they've done. There are all the things that people are concerned about, but there's some amazing abilities to really hone in and predict what you potentially might be interested in and what you potentially are going to like. My ideas were always I want to have that data to tell me like, what do I need to do to be as healthy as I can be? Like, use all of this idea of data to help me live the best and healthy as possible life. When I was little and I first heard about genetics and there's always that debate of genes and environment. Genes are not predicted, it's not always your destiny. You can have something in your DNA, but your environment factors in, and I heard that message and to me, it was like this is the most optimistic story ever because it means I could be born with a genetic variant. That means I'm at higher risk, but I can do something in my environment, it's not deterministic.

Almost nothing is deterministic. I can do something but what should I do? The way that we're going to figure out what to do, is you have to have huge amounts of data to be able to do that analysis to figure out specifically for you, what does it potentially that you need to do? By having the size and scale that we have 12 million people. One of the core thing that 23andMe is focused on is this idea of the last part of our mission statement how people access, understand, and benefit from the human genome. How are we going to benefit from the human genome? But we're going to apply all this knowledge that we have to our life. Hopefully, one of the most important things we'll do is we'll help our customers either really figure out how to prevent disease and we'll give them the tools and the real insight, how do you actually prevent disease or will help them better manage it and treat it if we can. But that's what data does for us is it's going to help us really understand what the human genome means.

Brian Orelli: They have 12 million people differently. You're getting to the point where I think you can detect maybe 0.1 percent. If I read that correctly, diseases that are important one percent of the population.

Anne Wojcicki: Yeah. It was one of the things that we said. You want to have a critical mass of people who if I start to look at the 23andMe that you want to have, enough people who have lupus, so you could do research and enough people who have atrial fibrillation that you could do research. Enough people with Type 2 diabetes. We wanted to make sure that we had enough people, and that's where we hit those borrowers saying like if we have 10 million people will have enough in all diseases that are over a certain frequency. That's one of the reasons why we said we had this goal of going to over 10 million is because we wanted to be able to have statistical power when we actually do research to have enough people. What the amazing they're when you have that enough people as you can start to see associations with things like one of the programs that we have in the clinic now, you can see associations between autoimmune disease and cancer. If you're only setting when disease area you're pretty limited and what's unusual about 23andMe for studying everything all at once. It's complicated but again, part of the ways that you can actually start to make sense of everything is by having incredibly large numbers.

Brian Orelli: You also have a new subscription service. We love subscription services at The Motley Fool because it's a recurring revenue and there's potential to juice your margins. I think you had one a few years ago, maybe around 2010 and then you stopped offering it. What did you learn from the first step with the subscription and how is it going so far with this one?

Anne Wojcicki: We always talked about having a subscription service. In part at the time when we launched the product, the No. 1 thing that we were focused on, was size and scale and the research potential. At that time we were really just focused on the simplicity like how can we actually get people in? If we have continued this subscription service early on, maybe it would have been fine. But I wanted to maintain that simplicity for us, and we've rolled it out. Now in part, because our customers were telling us they essentially wanted that over 40 percent of our customers come back on a quarterly basis, which is an amazing numbers, and we need to return value to them. If I don't have a subscription service it's hard for me to justify that in-house from product developed as I've been looking at all my resources. But if I have a subscription service, I actually have now a team that's dedicated the same way. Let's put out additional content, let's keep doing research and people are genetics were constantly, I think about COVID-19, like all really interesting topics came out with that. We want to be able to continuously return value to our customers. By having a subscription products, we can justify that in-house and we can actually really start to meet those needs.

Brian Orelli: On the healthcare side, can you talk about the FDA authorizations that you've received for your tests? I know you ran into some issues with the FDA many years ago, but it seems like you're back on the right side regulators for now.

Anne Wojcicki: We're back on the right side is one thing I actually, I love to advise other companies on this just because when we launched we had all the right intention. Like it wasn't like we were trying to circumvent the system or tried to avoid. But we had really been advised that we didn't need to go through the FDA. When we got that warning letter, it was like, first it was a shock. Then secondly, I was like, how do we actually change things? I think one of the most impressive things we've done with like we hired an amazing leader who led the transition and two, what she do she convince everyone in the company that we were going to change. We had to really essentially build the entire product from the ground up and so it's kudos to that team. It's like hopefully inspirational than anyone who needs to like totally pivoted accompany you absolutely can. Many years later now almost 10 years later, we have a number of FDA authorizations were the only ones who actually have all these health authorizations. Part of what we're trying to really prove out, and I think one of our legacies hopefully will be is up 23 news really proven that complicated information can go direct-to-consumer does not have to have a one-to-one interaction with the physician. Again, part of what we specifically aimed to do is how can you actually make it easy and accessible as possible to get access to your genetic information. Then obviously we recently acquired the company Lemonaid with the idea now is for some people who do have questions, how do I easily and simply now make it possible for them to be able to have to get those questions answered.

Brian Orelli: Yes, let's talk about Lemonaid Health. Just for the viewers, this is Lemonaid Health, which is different from Lemonade the insurance provider, which is also a Fool recommendation. In addition to having the health on the end of it, they also spell it differently Lemonaid is A-I-D to help other people where the insurer spelled like drink without out of the way. [laughs] Just the one when I saw the headline, I was like what are they do? Why are they buying an insurance company that does car insurance, and house insurance, and then I read enough to figure out what you were doing. What drew you to the acquisition and how does adding Lemonaid health help 23andMe grow?

Anne Wojcicki: A couple of it, when I was talking earlier and I talked about this idea is like most people today still don't have access to genetics as part of their primary care. I think it's a huge we're 20 years post-Human Gene and being sequenced. It's not widely integrated into care. I think that's a huge disappointment and I spend, it's interesting when you look at 23andMe, we have lots of partnerships but almost no provider health system partnerships. But not because there's not a lot of an interest, but genetics is just not part of primary care. Physicians aren't trained the time and energy efficiency takes around prevention is not necessarily seen as worth the initial cost and investment of getting people tested. Part of the reason why we acquired Lemonaid is this idea that our customers are getting all of these various inputs. They're getting their genetic information. I get might watch input, I get my ringing input, I'm getting all that. I have my lifestyle information.

There's all kinds of data about where you live and the risks that are associated with the where you live. I am getting all this input, but then I have questions, and if I just call my primary care doctor and get a seven minutes, like it's not going to be productive. We all have that experience of going to the doctor and you get a pamphlet that's not reflective of you at all, and you all get the exact same guidelines. Like we want something that's personalized. Ultimately, my dream as I look at things like the U.S. Prevention Task Force guidelines, how do I personalize that so that all of us, like I'm 48, I think, but not all 48-year-olds are the same. What I do is different than others, so are my risks different? They should be. Again, going back to this interplay between genes and environment, my risks are different because I live my life in a different way than others. How can I also give someone a more personalized set of recommendations about what they should do? In Nirvana, we think about how do you actually say something like type-2 diabetes? Are there different ways based on your genes and your environment, how you live, where you might be able to help prevent it in the way versus somebody else? Maybe sleep's more important, maybe diet's more important, maybe there's certain influences where we each need to be able to be customized more and more. That's the ultimate goal, and the first step for us is, let's put the infrastructure in place.

I have access to a phenomenal group of healthcare providers that can operate in all 50 states and I have pharmacy that's integrated and that opens up the door for things like pharmacogenetics, which we know that most medications today have a genetic component of either adverse events or why you are likely to respond. I think I'm going to be able to be the first group that can really deliver personalized genetics-based care at scale. Because again, we have data at scale. Like I already have 12 million customers who have their genetics, and now we have this opportunity to add in more and more of the coaching and the medical side and really help people live a more optimal life. I just also have to call out, there's been a sudden rise in virtual care and telemedicine.

The one thing that really attracted us to the Lemonaid team was how thoughtful they were with quality. Because I think ultimately, one of the things again, and I'm really proud of to me is trust with our customers is really everything. Saying that we're always going to do right by the individual, making sure that we do that, and you see there's all other suggestions out there of ways that you can overly promote medications or overly promote care. Our ultimate customer is the individual, and that's one of the advantages we have of being direct-to-consumer, like we're advocating for the individual. Lemonaid is one of the only direct-to-consumer healthcare virtual care companies out there, and also with that same mission. As you think about mergers, aligning values is one of the most important components.

Brian Orelli: Let's move onto drug development because it's something new that you guys have gotten into fairly recently compared to the age of the company. Can you talk about how using all this genetic health data that you have, how you use that to develop drugs?

Anne Wojcicki: Drug discovery starts with an insight. Someone's in a lab, they make a discovery, and then you think about, can you alter human biology based on what you just discovered? What 23andMe has been able to do at scale is to start to understand all of these specific variations that happened in our human genome lead to different outcomes. For instance, there's one example where you can have a specific mutation and you can have really low LDL rates. People can then understand that mutation and then create a drug that essentially mimics the downstream implications of that mutation. What 23andMe has been able to do is generate genuinely unique insights into human biology, and because we can see things that nobody else can see and we can have an insight into human biology, and then we think about, what's the best way that we could potentially have an impact on it? Is it with an antibody, is it the small molecule? Are we going to do this in-house? Do we partner it? What do we do? We generate these incredible datasets of insights about human biology. We don't look at it based on this specific disease areas. Like, "Hey, we'll just focus on cardiology or GI, we look across all the data and we say where can we potentially have the biggest impact for our customers, and then also where is there an unmet need and how can we actually develop it?" We started therapeutic in 2015 and we were very lucky to pull in Richard Schiller, who used to be a head of R&D at Genentech, and he started the team really out of like we didn't have any lapse. We had nothing. We gave him an office, and we now today have an incredible program where we have over 100 scientists, we have labs, and we have this large collaboration with GSK where we have over 40 programs underway, and we have two programs that are actually in the clinic.

Brian Orelli: As we close out here, what's one thing that investors should look at to gauge the health of 23andMe going forward more focused on the tests or on Lemonaid or on the therapeutics, or everything?

Anne Wojcicki: A lot of people just don't understand 23andMe because we have this complicated consumer side and the therapeutic side. Even when we went public, lots of people would say like, we should get rid of the therapeutic side or like you should get rid of this consumer side. People don't understand that the health of each side is what is truly unique. It's truly this intersection. It's like an infinite loop between the two. When I think about how you evaluate 23andMe, core to what we have here is the underlying asset of our data. Again, as the largest shareholder, what I push my team to always do is to be innovative because we have information that no one else has, and we can push to keep innovating. We're the first ones who came up with a DNA relatives tour, we're the first one who came up with ancestry composition. We have lots of novel programs on the therapeutic side. What I think about us doing is making sure that the dataset that we have continues to be really unique, and that we are continuing to push and innovate on the opportunity of genetic-based care for all, and that we continue to move programs forward on therapeutics. At the same time, we're very cognizant of it's unclear times and we have a lot of cash on hand, and cash is really important. [MUSIC].

Brian Orelli: Great. Thank you for talking with me today, Anne.

Anne Wojcicki: Was lovely. Thank you, Brian [MUSIC].

Chris Hill: As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill, thanks for listening. We'll see you tomorrow.