The genetics testing company 23andMe will enter the public markets via a special purpose acquisition corporation sponsored by Virgin Group founder Richard Branson, a deal that values the company at $3.5 billion.
The transaction with VG Acquisition Corp. will provide a burst of capital to 23andMe as it seeks to expand its business beyond direct-to-consumer genetic testing to develop novel therapeutics. Last fall, 23andMe formed a partnership with the drug giant GlaxoSmithKline to discover new drugs using data culled from millions of the company’s customers.
Anne Wojcicki, the founder of 23andMe, told STAT in an interview that she was excited to go public, and that it is time for 23andMe “to really put our foot on the gas and go.”
“Being a public company makes you better,” Wojcicki said, quoting Salesforce founder and CEO Marc Benioff, “It’s the right time in the company. And there’s just a huge opportunity for us on both the therapeutics side and the consumer side. And like I said, I’m eager to run.”
The addition of Branson, a British investor who has built a business empire with Virgin Group, will make a splash in the markets as it seeks to attract new investors and capital.
Branson told STAT that he has been interested in 23andMe since its beginning, when he was an early investor. The test allowed him to learn that he had an Indian great-great-great grandmother. He said that as his team went through the SPAC process, 23andMe stood out, adding that he sees Wojcicki as “very impressive.”
“In my opinion, there’s no better way to invest your money than in health care,” Branson told STAT. “And the returns can be exceptional. And of course, by investing in health care, you could save your life or a family member’s.”
Branson and Wojcicki will each invest $25 million in the fund formed to bring the company public. They will be joined by investors Fidelity Management & Research Company LLC, Altimeter Capital, Casdin Capital, and Foresite Capital.
The transaction is expected to deliver up to $759 million of gross proceeds through the contribution of up to $509 million of cash held by VG Acquisition Corp’s trust account and a $250 million private placement of stock, priced at $10 per share. Current shareholders of 23andMe will own 81% of the combined company, whose cash balance will be more than $900 million at the deal’s closing.
The company, founded in 2006, built its business selling genetic testing kits directly to consumers. In 2017, the Food and Drug Administration gave 23andMe clearance to market its tests as a way to detect a select group of hereditary conditions, including Parkinson’s disease and several hereditary blood disorders. The next year, the FDA cleared 23andMe to market pharmacogenetic tests, which look for genetic markers of drug metabolism. But 23andMe has doubled down on its focus on therapeutics as signs emerged of a slump in consumer genetic testing. In January 2020, 23andMe laid off 14% of its staff amid falling sales of its DNA testing kits.
23andMe is among the highest-profile companies to go public via a special purpose acquisition corporation, or SPAC, a way of entering the markets by combining with a group of investors formed with the purpose of acquiring another company. The approach, which has become increasingly popular in recent months, is generally seen as a potentially less risky method of entering the markets via a built-in pool of investors.
The combined company will trade under the ticker symbol ME.
Correction: An earlier version of the story incorrectly characterized the enterprise value of the company. The $3.5 billion is the value of outstanding stock minus cash.