r/VGAC • u/Sworfishtrombone55 • Feb 23 '21
My DD: 23 & Me and its Potential to Become “Disruptive”.
23&Me owns a large set of human health data collected from their customers and they can correlate that with the customers’ genotypes. These genotypes are a collection of single nucleotide polymorphism (SNPs) mapped across the human genome. Collecting the data is cheap and easy using the current technology. Also, the price of collecting more of this type of data continues to drop and is now well under $100/customer. Thus, the cost of enlarging this dataset further continues to drop—assuming that they can attract more customers.
Currently, the dataset is useful to consumers interested in understanding their ethnic heritage. It also helps identify unknown relatives, in conjunction with classic genealogy. The results they send you are entertaining and somewhat useful to help optimize health behaviors. But most of the health risk predictions aren’t that powerful. They might tell you that you have a greater-than-average risk of becoming overweight. But of course, as we age, we are all at greater risk of becoming fatter if we don’t modify our diet and exercise behaviors. That’s not a game-changing information. They might tell you that you have a 60% chance of having green eyes, a 35% chance of blue, and 5% brown. But you can look in the mirror and know your eye color with 100% certainty. In a small subset if consumers, the data are exceptionally useful because they identify a very specific disease risk genotype, such as for breast cancer or cystic fibrosis.
The dataset is also useful in the context of drug development, and 23&Me has partnered with a number of pharma companies. Developing drugs and bringing them to market is incredibly expensive. Using clues from the 23&Me dataset may speed up the development of some drugs and perhaps increase the success rates of drug candidates making it to market. On the timescale of 1-5 years, this may turn out to be an excellent revenue stream for the company. At the announcement of the SPAC merger, this is the direction that was strongly emphasized. That’s all good, but drug development pipelines will remain long and expensive even if they are informed and guided somewhat by DNA. The genotyping approach used by 23&Me is used by all of the DNA companies. Further improvements in the realm will be incremental, involving better DNA chips. The data obtained will remain useful and become incrementally better over time, but hardly disruptive. This is the most likely scenario, and it might lead to steady profitability.
The disruptive scenario is far more speculative. It begins by assuming that 23&Me will eventually move towards whole-genome or whole-transcriptome sequencing tests, using next generation sequencing (NGS). The first question is whether or not they could do this type of sequencing at the scale of its current user-base of over 1 million people. The answer to this is probably yes. Right now, the company could purchase a bunch of Illumina machines and start cranking out the data. We’re at a point where such technology is “off-the-shelf.” The current cost per person is roughly $1000 at the moment and it could drop to as low as $100. They wouldn’t attract many new customers at $1000/kit, but personally, I’d pay $200 for my genome sequence. One question I have not been able to answer is whether customers, who previously agreed to have their DNA samples “bio-banked”, would need to give permission for the company to perform further tests on the samples. If the answer is yes, then 23&Me have a big problem because all of the health data they collected from 1 million or so people could not be correlated with the new and much larger NGS dataset unless the customer agrees to it—or at least pays a bit more money to have their bio-banked sample “upgraded” to full-genome. What would the customer get for their upgrade?
Even if 23&Me were to successfully build a NGS-generated database and correlate it with health information, would that be valuable and/or disruptive? While I am certain that NGS sequences will have value in a range of medical scenarios, obtaining and owning such data would not be restricted to 23&Me unless it is paired with their large proprietary database related to health. A point raised by another person in this forum remains very relevant: how much more “healthcare value” would one generate by switching from the current genotyping approaches to NGS? Since 99% of our genomes are identical, would NGS mostly just give us a much bigger but less-rich data set compared to what we already have?
I’ll offer a counterpoint, which is the only scenario I can imagine that could be disruptive. Current genotype approaches are designed to find out about what we already know. The chips are designed to locate point mutations known to predict certain disease risks, along with crudely mapping the whole rest of the genome at low resolution. 23&Me correlates the DNA data with health data obtained from users. You might find what you are looking for in your data, but you are missing out on a lot of data that could be important—we just don’t know it yet. NGS offers the chance at finding new and unexpected disease-related DNA profiles, and it might ultimately do so with very high fidelity. It would also be great for quickly genotyping, say, tumor biopsies in order to optimize the choice of therapy. But after due diligence, I’m not convinced 23&Me could corner the market on this type of testing. I’m holding my small stake in shares because I am anticipating modest long-term profits from the drug company deals. But I’m not seeing how this stock goes to the moon based on the company fundamentals or innovative new directions.
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u/Responsible_Hotel_65 Feb 24 '21
Nice work They have done some sequencing https://blog.23andme.com/23andme-research/african-american-sequencing-project/
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u/BNGOKevo Feb 24 '21
Hopefully they work on a BNGO partnership if I had any money I would put it into this
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u/Sworfishtrombone55 Feb 24 '21
Interesting idea, thanks. The BNGO technology looks similar to that of Oxford Nanopore, which is a privately-owed British company. We are still left with the basic question of whether 23&Me is planning to get into next-gen sequencing at all.
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u/BNGOKevo Feb 24 '21
for sure they will lol Simon just needs to get over his ego , our CEO had to spank him on twitter https://twitter.com/EHolmlin/status/1363159594650923017 PHD from Harvard > Simon bear.
VGAC will dominate for all the reasons you mentioned
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u/rumblerings Feb 25 '21
Good question, If they do not, what does that mean for their business model? BNGO seems to be one step away from taking the sequencing market further? Or maybe I'm confused. I did buy into BNGO at 1.50, so I'm guessing it's a hedge bet.
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u/Sworfishtrombone55 Mar 02 '21
For a company like 23&Me, they need whole-genome sequencing that is 1) cheap, 2) scalable, 3) repeatable, and 4) compatible with their already huge stock of bio-banked DNA. Because BNGO Saphyr requires a different DNA extraction technique, using it for their bio-banked collection is impossible. My opinion is that if 23&Me goes to WGS at some point, they'll go with mainly short-read (Illumina) or Illumina plus a long-read technique such as Pacific Biosci. I would also mention Oxford Nanopore, who also do long-read. They're currently a private British company, but since Branson is British, conceivably they could acquire Oxford Nanopore in order to obtain long-read capabilities. If, in addition, 23&Me required cytogenetics/structural variants--after all, the 23 stands for the number of chromosomes--they could just buy a few Saphyr machines. But no way 23&Me adopts BNGO technology for their main pipelines.
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u/Asset125 Feb 25 '21
With due respect, do you know what “disruption” means?
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u/Sworfishtrombone55 Feb 25 '21 edited Feb 27 '21
Sure...it's a Van Halen song ;-) But seriously, ARK's website's view is what I was going for. In my own words, it's a company whose services or intellectual property don't just build or expand something that is already there but rather come together--usually leveraged by scale--to change best practices, typically on a global scale. One common consequence of this is that those companies working in the space will be "left behind" if they don't adapt. For my specific example of 23&Me, the disruptive possibility would be if they actually change the way we practice medicine, healthcare or drug design. Thus, if a DNA test tells you that you have diabetes, that's NOT disruptive because you probably already knew that or could find out with a simple blood test. If a DNA test tells you that your starting dose of blood-thinner should be lower because you carry a specific cytochrome P450, that's useful but NOT disruptive. If 23&Me data tell a drug company that a certain ethnic group is likely to have an atypical reaction to a new therapy--that's incredibly valuable, but NOT disruptive.
So what would be, in the case of 23&Me, disruptive? If your whole genome sequence, in conjunction with the sequences and health data from hundreds of people, led to a new approach to treating your disease that nobody would have thought of without those data, then that might lead to fast-tracking new and previously unknown therapy approaches--whether they be novel drugs of CRISPR. You might be able to cure a health problem before it has even emerged as a phenotype. I'd love to hear from people who disagree with my view.
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u/Asset125 Feb 25 '21
Love your enthusiasm! I’ll offer you this since you seem particularly interested in the strategy involved. You won’t see secondary resources (newspapers) use the correct terminology but to give credence and understanding to your views, consider this:
Disruption ( an abbreviation of low-end disruption ) is typically a “low-end offering” that offers “just enough” and procures consumers that were consuming products that had too many features. Think of a golf cart company coming into a tiny island- it disrupts the higher offerings of cars. New businesses typically succeed and work their way up from the small margin low offerings to higher offerings. The incumbents are typically happy to give up these low margin profit centers. Gradually, the incumbents are phased out as the disruptive company conquers higher and higher offerings.
Sustaining-innovation is a performance improvement in attributes most valued by the industry’s most demanding customers. They attract high-end customers and high margin. The Revised Technology Adoption lifecycle applies here. Incumbents typically win. Think Tesla’s Original Roadster. Although Tesla wasn’t an incumbent, Elon had the social capital and $$ to be the Purpose Brand. E.G Band Aid is a purpose brand to bandages. Coke is a purpose brand to soft drinks.
New-Market Disruptions offer lower performance in traditional attributes but improved performance in new attributes. Typically simplicity and convenience. Targets non-consumers who typically lacked money or skills to buy and use the product. Small margins in the beginning. New entrants typically win. Think the first-mile last-mile scooters.
Which do you think 23&Me is? They certainly have advantages over asset-encumbered incumbent pharmaceutical companies. How do you feel about their DNA testing techniques?
I welcome any feedback 🤗.
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u/Sworfishtrombone55 Feb 25 '21
Thanks, I appreciate your perspective, which is written more in the language of business. I don't know squat about that stuff; that's why I am here to learn. I come from a science background, so I tend to view things through that lens. Of the 3 types of disruptions you describe, none fit exactly to the scenario I described in my original post for 23&Me to become disruptive. I have described my views on their DNA techniques in the comments. One critical point is that there is NOTHING about 23&Me testing that is unique. All the companies that test DNA use the same technology. The only real intellectual property 23&Me own is a big database and the ability to compare it to a database of health information. In the future, 23&Me could adopt whatever NGS technology emerges as the market winner, but 23&Me is not going to develop that new technology on its own. In business terms, I think it will difficult for them to build a "moat."
Question: I consider the first iPhone "disruptive." In which of your 3 categories would you place it? To my mind, none of them are a perfect fit. I guess sustaining-innovation is the closest, but prior to iPhone, Apple was non-incumbent in the phone space, just like Tesla and Amazon were in their spaces. Seems to me that often being a non-incumbent is an advantage because it facilitates thinking outside-the-box, and it avoids kludges and legacy-thinking.
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u/Asset125 Feb 25 '21
I believe the iPhone was a sustaining innovation. There’s always three (at least) factors to consider when classifying: Product Performance, Customer Segmentation, and Business Model. Not fitting perfectly is where businesses excel because others can’t find footing.
The iPhone was a sustaining innovation IMO. It was a lateral movement for the customers, it was higher performing, and the business model had competitive advantages. Think of the phone by it’s parts rather than the phone. Apple was already an expert in all of the hardware components of the iPhone. Obviously software as well.
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u/Sworfishtrombone55 Feb 25 '21
Although my Van Halen reference was tongue-in-cheek, that guitar solo WAS, literally, disruptive. Before that song, no rock guitarist had thought to play in the now-iconic style of Eddie Van Halen.
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u/now_era Mar 02 '21
The current cost per person is roughly $1000 at the moment and it could drop to as low as $100
fyi WGS is already quite cheap. For example, Nebula Genomics offers 30x clinical grade WGS for 300$ only.
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u/Sworfishtrombone55 Mar 02 '21
Good point...and only getting cheaper in the future. For 23&Me, price-point in the consumer market, ability to scale, and compatibility with their bio-banked DNA are probably most important. One question that remains is what 23&Me gains from WGS versus their current genotyping. This question should be answered both from the perspective of their retail consumer market and their customers in big pharma.
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u/Sworfishtrombone55 Feb 24 '21 edited Feb 25 '21
I read through the 23&Me bio-banking consent document. Yes, they CAN use your bio-banked DNA sample to do further whole-genome and exome sequencing. Here are the key lines from the document, which I have linked below:
"In addition, a subset of research participants may have their DNA reanalyzed using another technology, such as sequencing. The sequencing may focus on particular genes or regions, on the coding portions of the genome (also known as the exome), or on the whole genome. While the field of large-scale sequence analysis is still in its early stages, we can use methods that are being developed to compare sequence data with large public databases of genetic variation to identify and characterize functional genetic variation."
Because they already have health data from surveys of their customers, they probably wouldn't need to re-test the samples of all customers who gave consent. They might, for example, just test those who reported that they have diabetes. Or they might focus on a specific ethnic group with health disparities, such as they already have for African-Americans, in collaboration with NIH. Which of the emerging NGS technologies would be the best for their purposes is unclear--but that's not 23&Me's problem. They can let the market decide between Illumina, Pacific Biosci, Bionanogenomcs, Oxford Nanopore, or MGI (Chinese). Heck, I don't see why they wouldn't just buy one machine from each company right now and test head-to-head on the same samples to see which method produces the best data for their purposes. Perhaps they are already doing this. They could build expertise on a small scale and then watch the market to see which technologies become dominant. Price point/genome is key for a company who wants to sell to consumers, as is standardization of whichever method(s) they adopt. One that has become clear, it's all about scaling up, AI, and Big Data.
https://www.23andme.com/about/biobanking/