Personalized DNA testing company 23andMe is going public with a SPAC deal announced Thursday.
The SPAC Deal: 23andMe is going public with VG Acquisition Corp (NYSE: VGAC), a SPAC from Virgin Group.
The deal values 23andMe at $3.5 billion. A $250-million PIPE includes $25-million investments from both Virgin Group’s Richard Branson and Anne Wojcicki, 23andMe’s co-founder and CEO.
Existing investors in the company include Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Genentech and Sequoia.
Shares of 23andMe will trade as “ME” on the NYSE if the deal is approved. VG Acquisition shareholders will own 11% of the new company.
About 23andMe: 23andMe is a direct-to-consumer company that “revolutionized personalized healthcare and therapeutic development through human genetics,” according to Thursday’s press release.
The company provides results like ancestry reports and family tree building with its users and also allows the option to participate in genetic research. Around 80% of customers choose to participate in the genetic research, which has given 23andMe a huge library of data.
The company has provided results for 10.7 million customers and gathered genetic research from 8.5 million customers who consented.
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Growth Ahead: One area of future growth for 23andMe could be its drug development program being done in partnership with GlaxoSmithKline (NYSE: GSK), which is also an investor in the company.
GlaxoSmithKline invested $300 million in 23andMe and will share 50-50 the costs and profits for drugs in the partnership.
The company has over 30 therapeutic programs in the pipeline targeting areas like oncology, respiratory, cardiovascular and more.
Drugs take a long time to be created and approved, and 23andMe believes its database and research can solve those problems. Its CD96 is in Phase 1 trials, and the company thinks can hit the market in four years compared to a seven-year average for approved drugs.
23andMe also said in its presentation the drug is twice as likely to be successful compared to 90% of trial drugs that fail.
A new area of growth for 23andMe is its 23andMe Plus subscription service launched in October. This segment had over 75,000 subscribers as of January, providing a yearly subscription revenue stream of $29 per customer.
Financials: The company sees its cumulative customer count growing to 11.2 million in fiscal 2021 and reaching 16.4 million by fiscal 2024.
Revenue for 23andMe declined from $441 million in fiscal 2019 to $305 million in fiscal 2020. The company is guiding for revenue to decline again to $218 million in fiscal 2021. Revenue for the following three fiscal years is projected at $256 million, $317 million and $400 million, respectively.
Price Action: Shares of VG Acquisition gained 31.03% in Thursday’s session, closing at $17.65.
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