Okay. All right. We shall begin again. Daniel Grosslight, healthcare technology analyst here at Citi, joined by Joe Selsavage, the CFO of 23andMe. Thank you all for joining us today. You know, 23andMe is a bit of a odd duck, if you don't mind me saying that. In that it's a lot of different types of companies in one. I guess just to get a sense of the room here, how many of you folks are focused more on biotech, life sciences? Couple. Health tech, diagnostics? You know, it's a fair mix, which I think is, you know, brings a lot of opportunity, but also perhaps, one great home for you, which tends to be an issue some of the time. I guess if we just start off to begin with on the consumer side. You had a good quarter this past quarter in terms of kit demand. That's where people, I think most know you from. Reflected a little less discounting this quarter than perhaps in previous quarters. Can you talk a little bit more about the demand you're seeing in that core kit business and how you intend to drive demand in what some might think is a saturated market? Sure. I think we're still pleased with the demand we're seeing in the kit business. You know, basically, we were expecting, you know, with inflation and, you know, other macroeconomic conditions to see some degradation in the market, especially during the holiday season, which we didn't see during our Q3. For us, you know, we really see in that kit business that really We've only penetrated about 3% of that market. We really think that there is still a broad base for us to tap in the kit business. I think what's differentiating 23andMe is, for us, is not really focusing on Ancestry, but really for us in the future is really focusing on health and wellness and going after that marketplace. Really for us, you'll see us having more of a focus on that. We believe that there's a lot of demand there for us to tap. Yeah. Your focus on health is definitely fair, especially if you look at Ancestry and some of the other smaller companies out there that are more focused on that aspect of DNA. I wonder, you know, I was reading this study a week ago or so about trust and who do patients, who do people trust with their data? Interestingly, in all categories over the life of the pandemic, trust has declined. People just don't trust companies to have access to their data. Family members, kind of. Even providers trust declined access to your data. How do you overcome that hump in healthcare to tap that rest of that market when you have such distrust, growing distrust around data? I think it really is important, Daniel, that, you know, essentially 23andMe needs to, you know, evolve and really be known as a healthcare company and a therapeutic company. Today, you know, we're broadly known for doing genetic-based testing. You know, one of the things for us, you know, we really value the privacy, you know, of our consumers. Really we want to continue to build that trust with consumers over the long term. I think, you know, you'll see us as our focus is really, you know, in our brand spending, et cetera, in getting that awareness by 23andMe that, you know, one is that we are more of a healthcare company versus genetic space testing company. Also just highlighting and developing that trust with consumers. That may take time, and especially as you mentioned, that we see degrading trust among providers out there today. Yep. One of the big growth drivers for you in that health segment is gonna be the subscription business. I know you can't give us on an annual basis subscription numbers, but maybe if you can just give some qualitative feedback around the uptake you've seen in subscriptions, attach rates, what's driving that business specifically? Absolutely. You know, we continue to see, you know, increase in our subscriber base and our subscriber revenue. It's still a small portion of our overall kit or genomics-based revenue today. However, you know, basically, we wanna make sure that going forward that subscriptions are a bigger part of our business. The reason for that really is because we wanna have longer term engagement with the consumer. We think we can really provide value and provide additional reports and information to consumers over the long term. I think, you know, one of the ways we're doing that or looking at thinking about that is last year we purchased Lemonaid Health, its own medicine company. From today, it's just not only being able to provide people with information regarding the genetic based variants and health predispositions, but helping them with through Lemonaid Health take actionable insights. Yeah. That kind of leads to my next question, where you joined 23andMe from the Lemonade side. You know, I cover HIMSS. I look at Ro. You see what Amazon is doing in DTC Health through Amazon Clinic and some other products they're developing, just close my medical. You know, the question there is, DTC telehealth is a very competitive market. CACs are very high. Unit economics are difficult in that market. How are you gonna compete in that market given some of these competitive pressures? I think one of the things is 23andMe and Lemonaid Health, we don't wanna take Lemonaid Health and for it to be another Teladoc or another Amwell. For us, it really is differentiating ourselves using genetics. You know, as an example is, you know, we want to take Lemonaid Health and provide information and consultations and medications for people using genetic-based information that they've got from their genetics test. And that's differentiated from, say an Amwell or a Teladoc where you might want to get treated for a urinary tract infection or strep throat. That's not gonna be our focus going forward. Yeah. Yeah. If I go on the Lemonaid Health website right now, you're gonna sell me some ROGAINE or Propecia or some other things like that. It's still not quite there right now on the Lemonaid Health side. When do you think you'll see that shift in strategy where genetically informed primary care is going to be the thrust of that platform? I think you'll be seeing that over the course of the next year. We've launched a few different consultations on some genetic variants, specifically the BRCA, the breast cancer gene, MUTYH for, you know, colorectal cancer, and FH. You know, we've actually provided genetic-based consultations and some follow-up confirmatory testing. That's still early, and I think we'll be just evolving the product and really doing more integration on genetics-based medicine, you know, over the next year. Okay. If I think back to the de-SPACing process, one of the key investment benefits of the consumer business was that it was going to generate EBITDA. It was gonna fund some of the science projects on the therapeutic side, but that hasn't come to fruition. It's been, you know, more challenging in terms of market. When do you think CRS is gonna break even? When do you think it will start generating that cash flow that will internally fund some of the therapeutic research? Still gonna take some time, but, you know, basically it is a focus for us to really get that consumer business to cash flow positive. You know, we're making strides in there, and I think over, you know, basically the coming quarters, you'll see progress there. We haven't announced or don't have a specific target date that we're publicizing on terms of getting cash flow positive. Yeah. I think the most important thing is you'll definitely see progress in that area. Okay. Okay. I'm gonna pause now in case anyone has a question on the consumer side. We have mics. If you have a question, you can raise your hand. If not, I'll move on to the therapeutic side research. Okay. No questions. All right, moving on to the research side. GSK opted to extend its collaboration until July of this year. Get you an additional $50 million. It's good for your cash flow. Can you just talk about your strategy going forward after that partnership ends? It's coming up in a few months. Will the agreements look like GSK, which in my view were pretty restrictive, but they give you a lot of benefit as well? First, you know, the target discovery portion of the agreement exclusivity is ending in July of this year, as you mentioned. We've identified more than 50 targets over that collaboration period, which we'll continue to work with GSK on development over time. I think what it does allow us to do after the exclusivity period is we'll be entering into new partnerships with other companies as well, for different areas as well, drug development as well. We're excited about that. We can't sort of sign any of those agreements until that exclusivity ends, right, in July of this year. You know, we think that, you know, basically our database capabilities and our therapeutic capabilities are such that not only 23andMe, but not only 1 partner can take advantage of all the capabilities. Yeah. Yeah. I think we're excited of what the future holds there for us in engaging in multiple partnerships. Okay. More of a multi-partnership approach rather than a single exclusive. Exactly. Got it. Okay. With GSK, your first asset that you developed with them or your lead asset with them, CD96, you decided to do a royalty structure there. Should we anticipate that other drugs that you develop move into later stage development are going to be done under a similar type of royalty structure? How do you anticipate that will impact your R&D spend going forward? A couple things. I mean, we have the ability under the GSK partnership to take a royalty option, you know, at various milestones with them. You know, with CD96, we decided to choose that option based on the cost of capital. I mean, GSK's cost of capital going into that program was much less than ours, and we wanted to use those R&D dollars to focus and advance other programs. We'll continue to look at all the programs that we have and when and if, it makes sense to take a, you know, either a royalty option or a partnership agreement on those. Especially as we go into later stage drug development, especially phase III, you know, it becomes very expensive, you know, especially given all the areas that we could potentially invest in. Got it. I know you get this question a lot. I know probably the answer. I'm gonna ask it anyways. Everyone wants to know when they can, you know, when they can expect to see some data out of the CD96 program. GSK is obviously in charge of that. Perhaps it's a little hard. Any guide posts you can give us on when data might be expected from that program. Unfortunately, because it's fully owned by GSK or just owned by GSK with a royalty option for us, at 23andMe are only going to know at the same time the public knows, right? When GSK releases data on that. You know, basically everything we're seeing on ClinicalTrials.gov, you know, it looks like, you know, in fiscal year or in calendar year 2024, more data will be forthcoming, but we're just relying on that website as well. Yeah. Yeah. Makes sense. Let's turn to a program there that you control, might have a little more insight into 23ME-00610. You're in phase I dose escalation studies in solid tumors there. You had some news flow. We'll get to that a little later, but I'm just curious, if you can lay out when we should expect data from 23ME‑00610. I think, you know, what our expectation is that we'll be submitting abstracts for some scientific conferences this year, to be able to release some data on the Phase I. You know, basically it will be. For us, it will be definitely and hopefully in calendar year 2023, and it's just when those abstracts are accepted and when we could release that data. I believe there was plan to enroll around 100 patients in phase I. How many patients were eventually enrolled in that program? It was approximately 148 patients. That were enrolled. Going back to the comment on that recent news flow of moving six-ten into to a phase IIa trial. What data have you seen in phase I that gave you the confidence to hit the go button on that phase II? For us, you know, it was meeting all the preclinical trial milestones that we had set in the date and in the study. We were able to actually meet all of those and move into the phase IIa. Okay. From the Phase IIa, when might we see data from that? That's unknown at this time. Right. You know, you know, for us, you know, essentially, I think the most current information we have is, we'll be releasing all the phase 1 data this year and then just moving on to the next study. Okay. Okay. That data, do you expect it to include safety, target engagement, response data? Yeah. It'll include all three of those. You know, one of the big questions I get from investors is, you have this great database, and you're monetizing it through therapeutics development. It's a very inefficient from a capital perspective, way to monetize that data. Are there any other ways that you can monetize that data, perhaps becoming more of a CRO type of offering, helping with patient clinical trial engagement and recruitment, or after helping with marketing and finding some of these patient populations, given you have all that genetic and phenotypic data as well? The answer is yes. We're continuing to look at ways to monetize that database, and engage with all pharma partners to see if we can or biotechs, to look at clinical trials, to your point here, and CROs and/or other methodologies that we can do in marketing with pharma companies. Okay. More to come on that. I'm gonna open up to questions, I guess. Hi. Can we have the mic? Hi. I had a question on the Lemonaid Health part. I mean, have you, or maybe prior to the acquisition, said whether that portion of your business is profitable and/or how much is it adding to the burn, if not? You know, it was not profitable, you know, and it is not profitable today, and probably is adding probably about $20 million to the burn on an annual basis. Thanks. Yeah. Just to follow up on that. You know, can you talk about maybe where you see leverage to gain that profitability that you're talking about that will come the EBITDA on the consumer side and where you feel you was it on the kids side or the Lemonade side where you feel like you can accelerate that? Sure. Absolutely. You know, 1 is, I believe there is just focus on growth, and 2 on subscription type product and recurring revenue in the business. I think that is probably from a revenue side, the 2 key areas. It's evolving the products and combining them. On the cost side, it's just looking at how we can become more efficient. You know, it's just In Lemonaid Health as an example, you know, we have a fully integrated medical team, but they're all employees, which is unlike other telemedicine companies, which really outsources most of those. You know, are there opportunities for us there as an example, right? I think that's where we'll be looking at a couple examples of how we can get the business to cash flow positive over time. If I look at some of your competitors in the DTC telehealth space, let's call it HIMSS, because they're the pure play public company here. You know, they've got gross margins in the mid to high 70s. Spend a lot on marketing, so they're barely even done positive. Do you think that once you get this to scale, the telehealth business to scale integrated with the kit business, that you could see gross margins in that business in, kind of the 70% range? What I can say is that, you know, I think we'll see much higher gross margins than we're seeing today. I can't necessarily guarantee that we'll see them in the high 70s, right, or mid-to-high 70s like HIMSS. 'Cause once again, I think we'll, you know, we will be differentiated and that because we are going to be using genetic space healthcare, there may be additional costs there, right? That's to be determined, to be seen going forward. Yep. Yep. Again, I think a big part of this strategy is gonna be an integrated app, 23andMe and Lemonaid. You discontinued the Lemonaid app, I think last quarter or 2 quarters ago. When do you think we'll be able to see an integrated Lemonaid 23andMe app where you can easily get your reports, push a button, talk to a Lemonaid doc? I believe that will be in fiscal year 2024. Let's talk about cash. You got a lot of cash on the balance sheet still, $432 million. You're burning a lot of cash, around $200 a year, $2 million a year. Do you think that you can reach cash flow break even on the consumer side, in time to kind of start generating, some of the cash that the therapeutics side requires? Will you have to come back to the market at some point in the next couple years to raise funds? Of course, you know, like every company we're looking at, you know, basically while we have 2+ years of cash available to us, we're looking at ways for us to extend that runway. We're looking at various ways of, you know, basically not only us moving the consumer business to cash flow positive, but we believe, you know, additional strategic partnerships and potential equity will be, you know, in play for the company going forward. You joined 23andMe, it's been about a year now or so. What's been the biggest surprise to you as you've joined the organization? The biggest surprise for me is the therapeutics capabilities of the business. Even though I was aware just generally as going through as a consumer, I know based going through the acquisition process, some of the capabilities of the company therapeutics. I think, you know, for me, the biggest surprise was, you know, one, the capabilities of the therapeutics team. You know, we've developed that over the last 5 years, to about 140 people in the therapeutics area with great capabilities of being able to develop new molecules and antibodies. Secondly, you know, what that scale of the database gives us in that area. You know, we have over 13.6 million genotype customers, you know, as we've grown that. The company and the genotype database, you know, the therapeutics team can really just take advantage of that in the drug development and drug targets as well. Got it. Okay. As I look out for the next couple years, maybe if I can just go over some of the major catalysts and just make sure we're not missing anything on our end. I guess the nearest term catalyst or news event is gonna be some type of partnership announcement after the GSK partnership ends in July. Correct. Yes. You should have some real data out of 610 sometime this year at a medical conference, perhaps closer to the back end of the year, but it's still unclear on when that is. That's correct, yes. Okay. In 2024 you'll roll out an integrated app, Lemonaid Health, 23andMe. Perhaps we'll see a shift in the Lemonaid Health strategy. Then we should have that GSK data in 2024 as well. Yeah. Lots of exciting things coming up in, you know, in the course of the next 12-18 months. All right. Well, those are all the questions that I had. Unless anyone else has some questions for Joe, I think we can wrap it up a little early. All right. Thanks, Joe, for joining us. Thank you, Daniel. Appreciate you having us today. Yeah. Thanks all for joining the conversation. Thank you, everyone. Thank you.