23andMe Could Be The Next Big Thing In Biopharma

Mountain View, California-based startup 23andMe is partnering up with drug giant Pfizer Inc. (PFE) to undertake a study to explore the possible genetic underpinnings of inflammatory bowel diseases (IBDs). 23andMe is a privately held genomics and biotechnology company, and is currently working on a number of research projects on genetic testing.

Under the agreement with Pfizer, 23andMe will test the DNAs of 10,000 IBD-afflicted patients using its toolkit. The research objective is to find if genetics data can be used to explain the cause of IBDs, and hence contribute to drug developments for the disease. IBD is an autoimmune disease that causes inflammation in the digestive tract, and generally has two forms: Crohn’s disease and ulcerative colitis. The ailment affects approximately 1.4 million Americans, and no treatment has been discovered for it as yet.

Pfizer can greatly benefit from the partnership if 23andMe is able to discover the cause of IBDs. Pfizer is testing its arthritis pill Xeljanz against IBD in a labeling expansion. It has spent $1 billion for the development and commercialization of the drug. The treatment of arthritis with Xelanjz is currently priced at $25,000 per year. Assuming that the Xelanjz treatment for IBD will cost the same as for arthritis, and that all 1.4 million IBD patients in the US are treated with the drug, Pfizer has an opportunity to generate revenue of a staggering $35 billion.

Furthermore, Pfizer has four other experimental drugs for IBD in its pipeline. However, the value of 23andMe’s partnership value lies in the fact that by getting information about how the disease is contracted, Pfizer can develop better treatment for it and surpass competitors working in the same space.

The company, founded in 2006 by Anne Wojcicki, offers personalized DNA reports through saliva testing using its Personal Genome Service toolkit. It provides patients raw genetic data from the test and from the ancestry reports. 23andMe discontinued its health reports, which covered information on the patients’ disposition to hereditary diseases, due to a ban by the Food and Drug Administration in November 2013.

If the partnership with Pfizer is successful, 23andMe can gain a lot of prominence in the biotech sector, and grab the attention of the pharmaceutical giants that are looking to find a cure for the bowel disease. Therefore, 23andMe is a key partner for these companies, given its focus on genetic research and data collection. It achieved milestones in genome study relating to the Parkinson’s disease after it contributed data to a paper published in the journal Nature Genetics, which helped to discover key genetic risks related to the disorder.

The startup is working on a web-based genetic search engine, access to which will be provided only to selected partners in the pharmaceutical industry and academia. The National Health Institute (NHI) recently granted 23andMe $1.4 million for the development of the search engine, which will serve as a genetic database of over 400,000 people and 40 million single nucleotide polymorphisms (SNPs).

The company’s President Andy Page said, “We (23andMe) want to be that last mile of communication and interpretation of genetic data.” If it succeeds, 23andMe can get into substantial partnerships with other biopharmaceuticals, and eventually monetize its research. The company has the potential to emerge as a big player in the industry that major pharmaceuticals rely on for their data and research requirements.

23andMe is already backed by pharmaceuticals like Roche Holding Ltd. (ADR) (RHHBY) and Johnson & Johnson (JNJ), through their venture funds. Johnson & Johnson’s funds contributed $9 million to the company in 2011. Genentech, Inc., a holding of Roche, also partnered with the company to conduct an online metastatic breast cancer study in January last year. The study aims to understand the difference between patients’ response to Avastin and to Roche’s drug Bevacizumab.

Similarly, in 2012, Johnson & Johnson’s subsidiary, Janssen Research & Development, LLC, also sponsored a study in collaboration with 23andMe to observe the response of 1,000 patients to anti-TNF-alpha therapeutics as a treatment for rheumatoid arthritis.

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