Personal GenomicsRethinking the BusinessModel for 23andMeBy:Adrianus MradiptaChia DingshanFeng HouyuanOng Fu LinPeh TiongSengXu Libing

1. Introduction– Genetics– 23andMe

3. The New Frontier– Introduction– Proposed Business

Model: DTC & B2B

Content

2. Current Business Model & Assessment– Value Proposition, Customer

Selection, Value Capture, Scope of Activities, Strategic Control

– Assessment & Recommendation

What is inside the Genome?

OR

Source: https://www.23andme.com/gen101/genes/

Y chromosome (From Father) and Mito-chondrial (From Mother) are used for identification process.

Cousin

Cell Reproduction make mistakesSNPs (single nucleotide polymorphisms)

SNP also influence disease susceptibility or response to drugs

Source: https://www.23andme.com/gen101/genes/

SNP causes change in physical appearance (e.g. Curly or Straight Hair)

Observable traits are known as:

DNA Sequencing & Technology Improvements

Cost of genome sequencing is dropping

• Sub-$1,000 full genome sequencing is around the corner

• In January 2014, Illuminaannounced a machine that could sequence a full human genome for $1,000

Advancements in Genomics

Advancements in Computing (Big Data)

Ability to Convey Clinical Significance

New Opportunities are Opening Up!

• 23andMe• Based in Mountain View, CA• Founded in 2007 by Anne

Wojcicki, ex-wife of Google co-founder, Sergei Brin

23andMe: How it Works

DNA Sequencing & Analysis23andMe performs SNP Sequencing (vs. full genome mapping)(+) Cheaper, faster(-) Less information

• Health Reports *– Carrier Status– Disease Risk– Drug Response* Health reports currently suspended

23andMe: How it Works

• Ancestry Reports– Ancestry compositions– DNA relatives– 23andMe family tree tool– Maternal & paternal lineage

TIME Magazine Invention of the Year 2008

http://content.time.com/time/specials/packages/article/0,28804,1852747_1854493,00.html

Problems with FDA

• Note that the company is currently having issues with FDA

• Health reports are currently suspended, as of Dec 2013

Validity? Accuracy?

http://www.npr.org/blogs/health/2013/12/06/249231236/23andme-bows-to-fdas-demands-drops-health-claims

Current Business Model

23andMe Consumers

$99

DNA Report

Labs

RI

Govts

Money

Service

Future PlansAs 23andMe grows, business model will shift

Business Model

http://www.forbes.com/sites/matthewherper/2013/06/13/expect-to-see-23andme-ads-as-the-company-tries-to-take-genetic-tests-mainstream/

Current Business Model

CUSTOMER SELECTION

VALUE PROPOSITION

VALUE CAPTURE

SCOPE OF ACTIVITIES

STRATEGIC CONTROL

• Provides a cheap & convenient personal genetics service that produces fast results that will give insights on the customers’ health* & ancestry information

• Cheap: $99, cheaper than competitors• Convenient: kit sent directly to customer’s doorstep• Fast: 2-3 weeks for results to be ready• Insights: disease risks especially

Current Business Model:

Value Proposition

Provides a cheap &convenientpersonal genetics service that produces fastresults that will give insights on the customers’ health* & ancestry information

Current Business Model:

Value Proposition

• Assessment– Huge part of the value proposition

is removed with FDA’s orders– Limitations of Health Reports:

• SNP sequencing: 1 million genes sequenced from a total of 3 billion

• Nature vs. Nurture: 30-70• No follow-up data analysis –

regarding advise & lifestyle changes needed

– Limitations of Ancestry Reports:• Limited by number of people in the

database

http://venturebeat.com/2014/03/12/23andme-ceo-we-need-to-return-to-delivering-health-information/http://www.theguardian.com/technology/2014/mar/09/google-23andme-anne-wojcicki-genetics-healthcare-dna

Current Business Model:

Value Proposition

• Recommendations– Sort things out with FDA & restore

value proposition through health reports

– Link up with physicians/nutritionists/dieticians to add analysis, thus enhancing value proposition

Current Business Model:

Customer Selection

“We’re not really focused on a specific age group or gender or fitness level. It’s the people who have this control mindset”

- Neil Rothstein 23andMe Marketing Chief

• For health reports:Consumers who want to be proactive about their health

Current Business Model:

Customer Selection

• 23andMe recognizes the importance of building lead users!

• Lead Users: Parkinson’s network– Free kit to anyone diagnosed with

Parkinson’s– Largest Parkinson’s genetic research network

with 10,000 people

Current Business Model:

Customer Selection

• For ancestry reports:– Serve a more niche market– Specialized customer groups, such as adopted children

http://ireport.cnn.com/docs/DOC-918630http://www.fourstateshomepage.com/story/dna-helps-reunite-family/d/story/okB1oVl_ukq5It6zsrUWxA

Current Business Model:

Customer Selection

• Assessment– Good use of lead users– Health reports: No focus Too wide customer selection for a start-up.

May stretch resources & difficult to act on• Recommendations

– Focus on specific segments– Eg. People who care about their health and buy vitamins or go to the

gym– Make it for convenient for these people

• Value Chain for genetic reports:

DNA Sequencer Manufacturer

DNA Sequencing

Genetic Data Analysis

DatabaseManagement

Delivery Services

ConsultancyServices

Key to business?

Yes Yes Yes Yes No No

Sources Outsource None

Activity PurchaseIn-housecapability

In-housecapability

In-house capability

Outsource None

Criteria of selection

Out of business scope,

Lower cost,Better technology

Key capability Key capabilityKey

capabilityLowest costs

Potential area to explore

Current Business Model:

Scope of Activities

Assessment•Controlled the key capability areas•Consultancy services is a valuable area to explore

Recommendations•Link up with consultancy services (eg. Physicians, dieticians, nutritionists, gyms)•Partner with clinics, vitamin stores, gyms as additional source of distributions•Will also enhance value propositions & value capture

Current Business Model:

Value Capture

• Currently, 23andMe generates ALL its revenue through sales of the personalized genetics service

• The company has experimented with many models to maximize revenue & generate user base

2007 2008 2009 2010 2011 2012 2013

Product Offerings

Health Reports (started with 14 reports at

launch)

Split into 3 products:Ancestry, Health & complete

report

Recombined the products

244 Health Reports + Ancestry Report

Dec: Healthreports

suspended

Model One-time feeInitial fee

+ subscription modelOne- time fee

Price $999 $399$399 +

$5/month$299 $99 $99

Current Business Model:

Value Capture

• Assessment– Commend reduction of price & removal of subscription to

expand user base– However, still too expensive for the mainstream market– Unable to move to targeted method of value capture: sale of

data to research institutes/universities

• Recommendations– Quickly further reduce price point to expand user base.

Consider: free? expand user base move to B2B sale of genetic data

– More value capture options: commission and referral fee from consultancy services

• Complementary Assets• No hold over complementary assets• Delivery & consultancy services are common, DNA sequencer

manufacturer can sell to anyone• Improve relationship with complementary assets, eg. Long

contracts with manufacturers/delivery services to reduce price.

• Appropriability Regime• Scale & network effects: Larger database will yield better results• Weak patent protection:

• “Polymorphisms Associated with Parkinson’s disease”• Designer baby – no relation to main business

• Need to strengthen IP portfolio, esp. in data analysis through R&D and open innovation

Current Business Model:

Strategic Control

Proposed Business Modelin Healthcare

23andMeConsumers

$99

DNA Report

Labs

RI

Govts

Money

Service

DNA

Physicians

Referral fees &

commissionReferral

Nutritionists Dieticians

Recommendations

CUSTOMER SELECTION

VALUE PROPOSITION

VALUE CAPTURE

SCOPE OF ACTIVITIES

STRATEGIC CONTROL

Genetic Services in Sports

The New Frontier

Yao Ming and His Family

A “Natural” Selection

• Yao's grandfather, one of Shanghai's tallest men, was discovered too late for basketball but his son, the 6ft 7in (2.01 m) Yao Zhiyuan, soon found himself dragged into the sports system.

• There he was paired off with the 6ft 3in (1.90 m) Fang Fengdi, China's women's captain (more than half a foot taller than the average man in Shanghai)

• The two were encouraged to marry in a system with undertones of eugenics, the controversial gene-pool manipulation espoused by the Nazis and previously trumpeted by Beijing.

• Yao's birth had been anticipated for decades by communist officials -desperate to boost national pride through sports - who had been tracking his family for two generations.

No accident … Yao Ming towers over Jason Smith.

Photo: AP

http://www.smh.com.au/news/basketball/yao-ming-the-basketball-giant-made-in-china-by-order-of-the-state/2006/01/18/1137553645228.html

Yao Ming and Shaq

“Sports” Genes

• In 2003, a seven-scientist team tested some 400 elite athletes for the ACTN3 gene.

• Everyone has two copies of that gene, each of which comes in one of two variants, R or X.

• The R variant instructs the body to produce alpha-actinin-3, a protein found only in fast-twitch muscle fibres, the kind that contract rapidly and violently to facilitate explosive movement

• Genotyping an individual as a XX genotype is positively associated with endurance performance.

• Not a single one of the 32 Olympic sprinters in the study had two X variants.

http://www.google.com/patents/EP1546403B1Actn3 genotype screen for athletic performance

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1180686/

ACTN3R X

Figure was taken from Yang et al., 2003.

Transcended mere chatter

• In the wake of the '03 study, the Manly Warringah Sea Eagles of Australia's National Rugby League began testing players so that workouts could be tailored for those apparently more disposed to explosive powerlifting and sprinting

Beyond ACTN3

• The Duke football team sought institutional permission to submit players' DNA to a university researcher who will look for genes that predispose players to particular injuries.

http://www.sportscotland.org.uk/media/701955/the-speed-gene.pdf

http://www.ncbi.nlm.nih.gov/pubmed/23681449

Sports GeneticScreening (1)

“Injuries” Genes

http://www.academia.edu/3139286/Athletic_performance_and_risk_of_injury-Can_genes_explain_all

• Athletes are at increased risk of acute and chronic musculoskeletal tissue injuries as a result of training and/or competition.

• Many are polygenic traits, with each individual gene having a small effect on the phenotype, but added together having a significant contribution.

• Predisposition to muscle, tendon, ligament, and/or other injuries can negatively impact an athlete’s ability to train optimally and perform during competition

• Ultimately ending their competitive careers or preventing them from reaching their full potential.

Uzbekistan Is Using Genetic Testing to Find Future OlympiansThe country is experimenting with "sports selection at the molecular genetic level."

Ron Synovitz and ZamiraEshanova

Feb 6 2014, 12:59 PM ET

• Rustam Muhamedov, director of the genetics laboratory at Uzbekistan's Institute of Bioorganic Chemistry, announced the program for "sports selection at the molecular genetic level" on January 5 in the government-owned Pravda Vostoka newspaper

• Muhamedov says that after the 50 genes of a child are tested from a blood sample, "their parents will be told what sports they are best suited for"— such as distance running or weightlifting.

• Muhamedov's announcement marks the first time any country's Olympic Committee has been officially linked to a program using genetic tests to recommend specific sports programs for children.

Sports GeneticScreening (2)

http://www.theatlantic.com/international/archive/2014/02/uzbekistan-is-using-genetic-testing-to-find-future-olympians/283001/

Uzbek weightlifter Ruslan Makarov at the London 2012 Olympic Games.(Reuters/Dominic Ebenbichler)

Nature vs. Nurture (1)A Conversation with David Epstein, author of “The Sports Gene”Published on September 3, 2013 by Jonathan Wai, Ph.D. in Finding the Next Einstein

• A mantra of football coaches is that “You can’t train speed.”

• A study today that followed Oklahoma State football players over four years of strength training in college football

• Improved their strength immensely in the weight room, but they didn’t improve in running speed at all.

• Ideally you want an Achilles tendon that is both long and stiff, and stiffness you actually can change to a degree through training. But the length is purely a function of the distance between your calf and your heel bone, and that’s something you’re born with and you can’t change.

“You Can’t Train Speed”—Slow Kids Never Make Fast Adults

Nike

http://www.businessinsider.com/16-revelations-about-sports-and-genetics-2013-8?IR=T&op=1

Nature vs. Nurture (2)A Conversation with David Epstein, author of “The Sports Gene”Published on September 3, 2013 by Jonathan Wai, Ph.D. in Finding the Next Einstein

• Eye sight is more important than reaction time when it comes to hitting a fastball

• Our brains recognize the ball as it leaves the pitcher's hand and predicts where the ball will go based on visual information. Eye sight is the most important genetic aspect of hitting, and 58% of MLB players have superior depth perception

• Albert Pujols is only in the 66th percentile of reaction time compared to college students

http://www.businessinsider.com/16-revelations-about-sports-and-genetics-2013-8?IR=T&op=1

Albert PujolsGetty Images/Jason Miller

Nature vs. Nurture (3)A Conversation with David Epstein, author of “The Sports Gene”Published on September 3, 2013 by Jonathan Wai, Ph.D. in Finding the Next Einstein

• Only two players in the NBA in 2010-11 didn't have unusually large wingspans.

• Humans typically have a height to wingspan ratio of 1 : 1

• It's 1 : 1.063 among NBA players

http://www.businessinsider.com/16-revelations-about-sports-and-genetics-2013-8?IR=T&op=1

Stephen Dunn/Getty Images

A Conversation with David Epstein, author of “The Sports Gene”Published on September 3, 2013 by Jonathan Wai, Ph.D. in Finding the Next Einstein

• Your ability to get better with practice is genetic

• Scientists have found that practice isn't created equally for everyone.

• Different people can do the same exercises for the same amount of time and their improvement over time will be totally different. For instance some people's aerobic capacity won't get better even with deliberate training.

• That's part of the reason why it will take some people 3,000 hours of practice to achieve mastery, and others 10,000.

http://www.businessinsider.com/16-revelations-about-sports-and-genetics-2013-8?IR=T&op=1

Michael Steele/Getty Images

Donald Thomas won the high jump world championships after 8 months of training

Nature vs. Nurture (4)

Unexploited Market

SPORTSGENETICS(DATA)

SCOUTING

23andMe

Private TrainersNutritionistsPrivate Health

PractitionersHealth and

Wellness Clinics

Government Laboratory

MoneyService

( Data )

Research and Development

Pharmaceutical

Companies

Reputation

Hospitals

BasketballFootball Baseball

Professional Sports Leagues & Training Academies Businesses

Money

Reports and updates to

individual accounts

DNA Kit

Existing

Consumer

New Consumer

Referrals

Genetic Screening

Service

Saliva

Subscription Credits

per Referral

ExperienceIntellectual

Property

Protection

Subscription

( Annually )

Health Products

and

Consultancy

Services

Money

(Data Privacy Rights)

Sports Traits Data

Questionnaires

Exposure

(Referrals)

Commission

Patents

Money

Patents Filing / Infringements

Money

Exposure

from

Sponsorship

Sponsorship

(Merchandise)Data

(Referral of sport talents)

Genetic Screening

Education Courses

SPORTSGENETICS(DATA)

SCOUTING

SPORTS

Customer SelectionDirect to Consumers(DTC)

23andMe

Reports and updates to

individual accounts

DNA Kit

Existing

Consumer

New Consumer

Referrals

Saliva

Subscription Credits

per Referral

Experience

Subscription

( Annually )

Money

(Data Privacy Rights)

Sports Traits Data

Questionnaires

Direct-To-Consumers

• Young individuals with interest to predict and discover their athletic strengths / sports niche

• Sports career options to attempt and pursue• Prospects of turning into Elite Professionals

o Weekend athletes and sports enthusiasts devoted to tailor workouts / diets to their body types

o Keep in shape

Value Propositions(DTC)• Easy to use DNA Test Kits at the comfort of own

home

• Competitive/affordable pricing for personal genome test with State-of-the-art technology

• Global Exposure to wide range of Professional Sports Leagues as compared to specific ones

• Subscription fee credits for new customer referrals

• Fast and reliable serviceso All tests done in CLIA-Certified Laboratory

• Accurate and detailed data analysis (interpretation)

o through the company’s network of qualified practitioners and nutritionists

23andMe

Reports and updates to

individual accounts

DNA Kit

Existing

Consumer

New Consumer

Referrals

Saliva

Subscription Credits

per Referral

Experience

Subscription

( Annually )

Money

(Data Privacy Rights)

Sports Traits Data

Questionnaires

Value Capture(DTC)

• Sales of the personalized genetics service

o DNA Test Kits o DNA Reports with specific sport traits analysis

• “Sports Scouting Service” (S3) Subscription Fee

o Option to include oneself into Company’s “Sports Scouting Database”

o Consumers opted in will be tagged as “Talents”

o Database accessed by Businesses

23andMe

Reports and updates to

individual accounts

DNA Kit

Existing

Consumer

New Consumer

Referrals

Saliva

Subscription Credits

per Referral

Experience

Subscription

( Annually )

Money

(Data Privacy Rights)

Sports Traits Data

Questionnaires

Customer SelectionBusiness to Business(B2B)

Business to Business

Sports Market Segment – “Talent Data”• National Olympic Committees• Professional Sport Leagues• Talent Identification Companies • Training Academies

R&D Market Segment – “Health Report Data”• Universities / Colleges• Hospitals • Government / Commercial

Healthcare Market Segment– “Health Report Data”• Nutritionists• Dieticians• Physicians / Physiotherapists

Value Propositions(B2B)

• Ease of data usage and Interpretation

o Customised report for the different market segments

o In-house education and training

• Highly reliable data o Sports talent recruitment o Laboratories R&Do Healthcare services

• Competitive/affordable pricingo Increase rate of diffusion o Build-up installed base

Value Capture(B2B)

• Subscription fee

Sports Market Segmento Access to the “Sports Scouting Service” o Access to the talents’ videos, audition,

records etc.

R&D Market Segmento Access to anonymous health database

• Commissions

Sports Market Segmento Certain percentage of transfer fees for

successful drafts into Pro-Team/National Teams

Healthcare Market Segmento Certain percentage of sales collected

from successful consultancy referrals

Scope of ActivitiesDTC & B2B

DNA Sequencer Manufacturer

DTC Personal Genomics Services

Sports trait Genome Patent

DatabaseManagement

ExclusiveSales Team

ConsultancyServices

Key to business?

Yes Yes Yes Yess

Yes No

Sources Hybrid Outsource

Activity Purchase In-housecapability

1. In-housecapability (primary)

2. Purchase (secondary)

In-housecapabilityHouse -housecapability

In-housecapability

Partnership

Criteria of selection

Out of business scope,

Lower cost,Better

technology

Key capability Key technologyKey capability

assetExclusiveresources

Out of business

scope

Strategic Control

o Invest in making brand stronger and build brand equity

o Uphold reputation through Deliver high standard of

services and products

Deliver company’s promises to customers

Ensure customers privacy/ confidentiality

CompanyBrand

Strategic Control

Complementary assets

o Secure long-term commitment

DNA kit manufacturers (printing, containers)

Distribution channels (FedEx, DHL, delivery companies)

Strategic Control

o Outsource to contractors

o Achieve low cost through economy of scale

Bulk manufacturing of DNA kits

Bulk distribution of DNA kits

AccessoriesProducts

Strategic Control

o Enhance Public Awareness

Conferences/Seminars/Talks

TVs shows/ Radios/ Newspapers/Magazines

Training and courses

o Specialized in-house trained sales forces to direct promote

ServicesMarketing

Strategic Control

o Patent key technologies developed though their R&D

o Build up and patent genes which correspond to sports traits

IP Protection

• DNA Sequencing technology is advancingo Cost reducing but throughput increased

• Increasing interest in sequencingo More research groups using the technologieso Companies working on future technologies

• Next Generation Sequencing (NGS)o Data will be more easily to be interpreted

• A Big Business Opportunities for 23andMeo To leverage on the two pillars “healthcare” and “sports” business to drive growtho “healthcare” as the foundation, “sport” industry as the high payoff business.

Conclusion:Future on DNA SequencingOpens to New Business Models