Latest / The CEO Diary with Fexingo: Leadership Lessons, Executive Decisions, and Corner Office Stories / How Anne Wojcicki Built 23andMe Through Regulatory Fire
Transcript
- Lucas: So today I want to talk about Anne Wojcicki and 23andMe, specifically the moment in 2013 when the FDA basically told her to stop selling health reports. And how that didn't kill the company, it actually forced it to become something more durable. Luna: I remember that. It felt like the whole direct to consumer genetics industry was about to implode. But 23andMe is still around, publicly traded now. How did she pull that off? Lucas: Right. So let's set the scene. 23andMe launched in 2007, and by 2012 they had sold about 450,000 kits. The product was a saliva test that gave you ancestry info plus over 200 health reports — carrier status, disease risk, drug response. And they were doing this without FDA clearance. Luna: Which is kind of wild in retrospect. They were essentially giving medical information without regulatory approval. Lucas: Exactly. And the FDA had been circling for a while. In 2010, they sent a warning letter saying the test was a medical device that needed approval. 23andMe engaged, but it dragged on. Then in November 2013, the FDA dropped the hammer — a cease and desist letter ordering them to stop marketing health reports immediately. Luna: That must have been terrifying for Wojcicki. The company's entire value proposition was those health reports. Lucas: It was existential. But here's the thing — Wojcicki didn't panic. She didn't try to fight the FDA in court. She complied. They stopped selling health reports and retreated to ancestry-only. That sounds like a retreat, but it was strategic. She said publicly, 'We are going to work with the FDA, and we are going to get this done.' And she meant it. Luna: So what did that process look like? Because getting FDA approval for a genetic test is not a weekend project. Lucas: It took over a year and a half. They submitted a 510 premarket notification, which means they had to prove their test was substantially equivalent to something already on the market. But there was nothing quite like it. So they had to run clinical studies, validate their algorithms, show that the results were reproducible. They hired regulatory experts, built a quality management system from scratch. Luna: And during that time, they were still selling ancestry kits. So they had revenue, just a fraction of what they had before. Lucas: Exactly. They also had to lay off about 100 employees in December 2013, which was brutal. But Wojcicki kept the core team focused on the regulatory path. And in October 2015, the FDA approved 23andMe's Bloom syndrome carrier test — a single test for a rare genetic condition. It was the first direct to consumer genetic test ever authorized by the FDA. Luna: And that opened the floodgates. I remember they gradually got approval for more carrier tests, then health risk reports. Lucas: Yeah, by 2017 they had FDA authorization for 10 health risk reports, including Parkinson's and late-onset Alzheimer's. And in 2018, they got approval for the BRCA1/BRCA2 breast cancer gene variants — that was huge. So the regulatory fire actually forced them to build something that had regulatory moats. Competitors couldn't just copy them because the FDA was watching. Luna: But let's talk about the financial side. Because being regulated and approved is expensive. How did they fund all this? Lucas: They raised a lot of venture capital. By 2015, they had raised over $230 million. Major investors included Google, which was Wojcicki's sister-in-law's company — Anne is married to Sergey Brin at the time, though they later separated. But the big strategic move was partnering with GlaxoSmithKline in 2018. GSK invested $300 million for a stake in the company, and the deal was that 23andMe would use its genetic database to help GSK develop drugs. Luna: That's the pivot I find fascinating. From selling DNA tests to drug development. That's a completely different business model. Lucas: It is. And it's where Wojcicki's long-term vision comes in. She always said the real value wasn't the test kit, it was the data. By 2020, 23andMe had over 10 million genotyped customers, and they had one of the largest research-ready genetic databases in the world. So the drug development arm, 23andMe Therapeutics, became the new growth story. Luna: And that's what they took public via a SPAC in 2021. They merged with VG Acquisition Corp, which valued the company at $3.5 billion. Lucas: Right. And that SPAC deal was controversial. A lot of investors were skeptical about the valuation and the path to profitability. But it gave them access to public markets and more capital. Today, the stock trades well below that initial level, but the company is still operational. And they have a drug candidate in clinical trials for a kind of immuno-oncology therapy. Luna: So the regulatory story is really a story about patience and long-term thinking. Most founders would have given up or sold out. Lucas: Absolutely. And that's the leadership lesson I want to drill into. Wojcicki had a clear vision: she wanted to democratize genetic information and accelerate medical research. When the FDA blocked the main product, she didn't change the vision, she changed the path. She accepted the regulatory burden, invested in compliance, and used that as a competitive advantage. Luna: It's like she treated the FDA not as an enemy but as a partner in building credibility. Lucas: Exactly. And that's rare. Most tech founders see regulators as obstacles. Wojcicki saw them as a way to differentiate. She said in an interview, 'We want to be the most trusted company in genetics.' That trust comes from regulatory approval. Luna: It makes you think about other companies that have navigated similar regulatory pushback. Like, I'm thinking of Tesla and the NHTSA, or Uber and local regulators. Lucas: Yeah, but the difference is that Wojcicki didn't try to operate outside the rules. She leaned in. And she had the patience to wait years for approval. That's a different playbook. Luna: And speaking of different playbooks, it's interesting that we're talking about the value of long-term thinking and trust. If these conversations have moved your work forward in some small way, maybe it's worth considering supporting the show. We keep it ad-free because listener support makes that possible. If you're inclined, you can find us at buy me a coffee dot com slash fexingo. Lucas: Yeah, that's exactly right. It helps us keep doing deep dives like this one. And speaking of deep dives, let's get back to 23andMe's recent moves. In 2023, they launched a subscription service called 23andMe+ for $29 a year, which includes updated health reports and new features. That's another attempt to build recurring revenue. Luna: So they're trying to move beyond the one-time kit sale. That makes sense given the database is already built. Lucas: Right. And the subscription also gives them more engagement with customers, which means more data over time. The real bet is still the drug development pipeline. If one of their drugs succeeds, the payoff could be enormous. But that's a long shot, as with any biotech. Luna: What do you think are the biggest risks for 23andMe now? Lucas: Privacy concerns are a big one. People worry about how their genetic data is used. 23andMe has been transparent — they require explicit consent for research, and they don't share data with insurers or employers. But trust is fragile. And then there's competition. Companies like Ancestry.com and MyHeritage have huge databases too. And new entrants like Nebula Genomics offer whole-genome sequencing. So the market is getting crowded. Luna: And the stock price. It's been a rough ride since the SPAC merger. That puts pressure on management to show results. Lucas: Yeah, the stock is down about 90% from its peak. But Wojcicki has maintained control — she has supervoting shares. So she can make long-term bets without worrying about quarterly earnings. That's a rare luxury in public markets. Luna: It's also a lesson in founder control. She structured the SPAC deal so she kept decision-making power. Lucas: Exactly. And that brings us back to the leadership theme. She's consistently prioritized the mission over short-term stock performance. Whether that pays off in the long run remains to be seen, but it's a coherent strategy. Luna: So what's the one thing you'd want listeners to take away from this episode? Lucas: I think it's that regulatory challenges aren't necessarily the end of the road. For a founder with conviction and patience, they can be a forcing function that builds a stronger company. Wojcicki didn't just survive the FDA — she used it to build a moat. Luna: And that's a rare but powerful playbook. Thanks, Lucas. Lucas: Thanks, Luna. Next episode, we're talking about how a CEO turned around a struggling retailer — but I'll save the details for then.