The $115m series E round closed by US-based personal genetics service provider 23andme last week at a $1.1bn valuation, which made it the sector’s first unicorn, showed the potential for companies offering similar services.
The round was led by Fidelity Management & Research, and also featured genetic research company Illumina, Google Ventures and WuXi Healthcare Ventures, respective corporate venturing subsidiaries of internet technology provider Alphabet and pharmaceutical firm WuXi PharmaTech, Casdin Capital, Xfund, New Enterprise Associates and MPM Capital.
23andme has now raised a total of $225m in debt and equity since it was founded in 2006, with past investors including pharmaceutical firm Johnson & Johnson, which backed the company’s 2011 series C round through its Johnson & Johnson Development Corporation unit, pharmaceutical company Roche, biotechnology provider Genentech, Mohr Davidow Ventures and Alphabet CEO Sergei Brin.
The company runs a personal genetics testing service that takes saliva samples from customers through the post and tests them for genealogy and medical information, including details on inherited conditions, drug response and inherited traits and risks, which is then provided back to the customer.
The personal genetics sector was relatively new when 23andme entered it, but the company has since been joined by several competitors, most notably Invitae, a spinout from diagnostic testing company Genomic Health, which went public in February this year through a $116m initial public offering after raising more than $200m in equity.
Apart from Invitae, the other notable entrant into the industry over the past few years has been Navigenics, which was acquired by Life Technologies in 2012 after raising cash from investors including Alphabet, then known as Google, and Mohr Davidow Ventures.
23andme will use the funding secured in the round to expand its operations, and much of it looks set to support new laboratory space that will be used for therapeutic research, and which will include a sequencing lab. It comes as the company prepares to expand its services to offer US customers carrier status reports.
Part of 23andme’s fundraising success can be attributed to its corporate investors, including Illumina, the developer of the HumanOmniExpress-24 format chip used by the company in its testing. The interest of pharmaceutical companies such as WuXi PharmaTech on the other hand could well be linked to 23andme’s research.
The genetics specialist has published 32 peer-reviewed studies in scientific journals over the past five years and estimates 80% of its users agree to participate in its research, the findings of which could well be vital to a pharmaceutical sector increasingly looking to genetics technology in drug development. If investing in the company can give a pharmaceutical producer the chance to partner on that research, it could prove extremely lucrative in the long run.
WuXi PharmaTech’s participation in the series E round is also significant in that it could provide 23andme with a route into the potentially huge Chinese market. 23andme has launched localised services in Canada as well as European countries including the UK, but if it manages to be the first specialised entrant into a country the size of China, it could mean a considerable bump to its business.