23andMe (ME)2023-05-26 01:30Financial Data and Key Metrics - Revenue for the 3 months ended March 31, 2023, was 299 million, an increase of 10% year-over-year [45] - Consumer services revenue accounted for 88% and 83% of total revenue for the 3 and 12 months ended March 31, 2023, respectively, while research services revenue, primarily from the GSK collaboration, accounted for 12% and 17% respectively [47] - Net loss for the 3 and 12 months ended March 31, 2023, was 312 million, respectively, compared to 217 million in the prior year [50] - Adjusted EBITDA deficit for the 3 and 12 months ended March 31, 2023, was 161 million, respectively, compared to 151 million in the prior year [51] - The company ended the quarter with 553 million as of March 31, 2022 [60] Business Line Data and Key Metrics - The consumer business saw a 10% year-over-year revenue growth in fiscal year 2023, driven by higher average selling prices on PGS kits and a 51% year-over-year growth in 23andMe+ subscription members, now totaling over 640,000 members [13][38] - The therapeutics business presented Phase 1/2a clinical data for 23ME-00610, an antibody targeting CD200R1, showing acceptable safety and tolerability profiles, with ongoing Phase 2a trials in multiple cancer types [24][25][26] - The company continues to integrate Lemonaid telehealth and pharmacy services with its genetic services, focusing on personalized healthcare and mental health services [21] Market Data and Key Metrics - The company has over 14 million genotype customers, an 11% year-over-year growth, creating the world's largest crowdsourced platform of genetic information paired with billions of phenotypic data points [36] - The Novartis collaboration aims to raise awareness for Lipoprotein(a), a genetic risk factor for cardiovascular disease, leveraging 23andMe's customer base and Lemonaid's telehealth capabilities [39][73] Company Strategy and Industry Competition - The company is prioritizing margin expansion and cash burn minimization over top-line growth in its consumer business, while continuing to invest in therapeutic assets [52][61] - The integration of Lemonaid services into the 23andMe app is planned, aiming to create a holistic experience for customers, combining genetic insights with telehealth and pharmacy services [95][105] - The company is actively seeking new partnerships and collaborations, particularly after the GSK target discovery exclusivity period ends in July 2023 [40][65] Management Commentary on Operating Environment and Future Outlook - Management highlighted the potential of combining genomics with telemedicine and pharmacy services to recruit new customers and engage existing ones, emphasizing the importance of mental health services [5][21] - The company expects to continue improving its adjusted EBITDA deficit in fiscal year 2024, driven by margin and operating expense discipline, with a projected adjusted EBITDA deficit of 195 million [11][79] - The company is optimistic about leveraging AI to enhance its drug discovery and development processes, as well as automating business functions at scale [99][109] Other Important Information - The company increased subscription prices for 23andMe+ members, reflecting the additional benefits provided, and continues to focus on delivering premium insights and features [18][19] - The company is evaluating the use of its capital for both consumer and therapeutics businesses, including responsibly opting in and out of therapeutic programs based on market conditions [60][97] Q&A Session Summary Question: What is the expected burn rate for therapeutic spend in fiscal 2024, and when will the consumer business be EBITDA positive? - The therapeutic adjusted EBITDA deficit is approximately $23 million per quarter, with potential increases as drug development progresses [68] - The company does not have a specific date for when the consumer business will be EBITDA positive but is making meaningful progress toward that goal [85] Question: How will the Novartis collaboration on Lipoprotein(a) be monetized? - The collaboration leverages 23andMe's ability to educate and engage customers, with potential for follow-up testing and services through Lemonaid [73][88] Question: What is the plan for integrating Lemonaid services into the 23andMe app? - The company plans to integrate Lemonaid services into the 23andMe app, creating a holistic experience for customers that combines genetic insights, telehealth, and pharmacy services [95][105] Question: What is the long-run business outlook for 23andMe, and what are the plans to become profitable? - The company aims to continue improving margins and moving toward cash flow positive in the consumer business, while investing in therapeutic assets [108] Question: How is 23andMe planning to implement AI into its practices? - The company is leveraging AI in various areas, including drug discovery, automation, and enhancing customer engagement, with a focus on integrating AI into its personalized health offerings [99][109] Question: Will the company require a dilutive capital raise in the future? - The company is evaluating its capital needs and will be opportunistic in fundraising, with a focus on allocating capital to the best ROI for shareholders [101]