Q3 2022 23andMe Holding Co. Earnings Call

February 10, 2022

Good morning, and welcome to 20 <unk> fiscal year, 2023rd quarter Financial result conference call as a reminder.

Operator: Good morning, and welcome to 23andMe's Fiscal Year 2022 3rd Quarter Financial Results Conference Call. As a reminder, this call is being recorded. At this time, all participants are in a listen-only mode.

Call is being recorded at this time all participants are in a listen only mode.

Operator: As to prepare remarks, there will be a question and answer session. I will now turn the call over to Wade Waltz, Vice President of Investor Relations, to lead the call-off. Thank you.

After prepared remarks, there'll be a question and answer session.

I would now like turn the call over to wait while vice President of Investor Relations to lead the call off.

Please go ahead.

Wade Waltz: Thank you. Before we begin, I encourage everyone to go to investors.23andmead.com to find the press release we issued earlier today reporting our financial results for the quarter. A replay of today's webcast will also be available on our website for a limited time within 24 hours after the event.

Before we begin I encourage everyone to go to investors that 23, <unk> dot com to find the press release, we issued earlier today reporting our financial results for the quarter.

A replay of today's webcast will also be available on our website for a limited time within 24 hours. After the event. Please.

Wade Waltz: Please note that certain statements made during this call regarding matters that are not historical facts, including but not limited to management's outlook or predictions for future periods, are forward-looking statements. These statements are based solely on information that is now available to us. We encourage you to review the section entitled Forward-Looking Statements in our press release, which applies to this call. Also, please refer to our SEC filings, which can be found on our website and the SEC's website, for a discussion of numerous factors that may impact our future performance. We also discussed certain non-GAAP measures; important information on our use of these measures, and reconciliation to U.S. GAAP, can be found in our earnings release.

Please note that certain statements made during this call regarding matters that are not historical facts, including but not limited to management's outlook or predictions for future periods are forward looking statements. These statements are based solely on information that is now available to us.

We encourage you to review the section entitled forward looking statements in our press release, which applies to this call also please refer to our SEC filings, which can be found on our website and the SEC's website for a discussion of numerous factors that may impact our future performance.

We also discuss certain non-GAAP measures important information on our use of these measures and reconciliation to U S. GAAP, maybe found in our earnings release.

Joining us on our call today are Andrew <unk>, our Chief Executive Officer, and co founder, Steve Scherger, Our Chief Financial Officer, and Kenneth Hill, and our head of Therapeutics and now I would like to turn the call over to Ann.

Wade Waltz: Joining us on our call today are Anne Wojcicki, our Chief Executive Officer and Co-Founder, Steve Shook, our Chief Financial Officer, and Kenneth Hillen, our Head of Therapeutics. Now I'd like to turn the call over to Anne. Thank you, Wade. We've made significant progress on both our consumer business and therapeutics efforts in these last few months. The mission of 23Me is to help people access, understand, and benefit from the human genome. We pioneered a path for people to get direct access to their genetic information and learn important information about their ancestry and health.

Thank you Wade we've.

We've made significant progress on both our consumer business and therapeutics effort.

Few months.

The mission of 23 and me is to help people access understand and benefit from the human genome.

We pioneered a path for people to get direct access to their genetic information and learn important information about their ancestry and health.

Wade Waltz: With over 12 million customers who have signed up to join the 23andMe community, there is an incredible opportunity to introduce a new type of primary care that is based on one's genetic risk. We have heard from our customers that they often take their genetic information to their physicians, but they don't know how to integrate this information into their care.

With over 12 million customers, who have signed up to join the <unk> 23 in the community. There is an incredible opportunity to introduce a new type of primary care that is based on one genetic risks.

We have heard from our customers that they often take their genetic information to their physician, but they don't know how to integrate this information and so their care.

Anne Wojcicki: We have the opportunity to further help our customers benefit from the knowledge about their genome by providing a genetics-based primary care service for our customers. I am thrilled that we got the opportunity to acquire Lemonade Health this quarter, as it opens up the door for us to enable our customers to get kinetics-based primary care from healthcare providers who are trained on our reports. I look forward to talking with you more about this service as we prepare to roll it out.

We have the opportunity to further help our customers benefit from the knowledge about their genome by providing a genetic based primary care service for our customers.

I am thrilled that we got the opportunity to acquire Lemonade health this quarter as it opens up the door for us to enable our customers to get genetics based primary care health care providers, who are trained on our report.

I look forward to talking with you more about this service as we prepare to roll it out.

As part of our mission to help customers benefit from the human genome, we continue to pioneer New health and ancestry report.

Recently, we received FDA clearance for a direct to consumer genetic tests on the hereditary prostate cancer marker further expanding our ability to provide individuals with direct access to impactful health information that can help them make important life decision.

Anne Wojcicki: Further expanding our ability to provide individuals with direct access to impactful health information that can help them make important life decisions. We also launched two new health reports for our 23 and need plus members. 23andMe Plus is our premium content subscription service that provides subscribers with new reports and features through the course of their membership, giving them even deeper insights into their health. With our database of over 12 million genotype customers and billions of health-related data points, we are uniquely positioned to provide our customers with these health insights. The new reports include a nearsightedness report and a severe acne report.

We also launched two new health reports for our 'twenty, three and need plus members.

<unk> plus is our premium content subscription service that provides subscribers with new reports and features through the course of their membership.

Them, even deeper insights into their health.

With our database of over 12 million genotype customers and billions of health related data points, we are uniquely positioned to provide our customers with these health insights.

The new reports include a near side didn't report any severe acne reports.

Finally, we added new ancestry analysis for our customers. This new analysis include additional insights into cut some customers indigenous genetic ancestry from North America and ancestral connection to 'twenty five African ethno linguistic groups.

Anne Wojcicki: Finally, we added new Ancestry Analysis for our customers. This new analysis includes additional insights into some customers' indigenous genetic ancestry from North America and ancestral connections to 25 African ethnolinguistic groups. On the therapeutic side, we advanced our first wholly-owned therapeutic program into a Phase I clinical trial. 23 and May 6, 10, is our second Immuno-On-Cology drug to enter clinical trials following our CD-96 program, and marks an important milestone in our goal to find new medicines for patients with serious unmet medical needs.

On the therapeutic side, we advanced our first wholly owned therapeutic program into a phase one clinical trial.

23, and me 610 is our second immuno oncology drug to enter clinical trials.

<unk> or <unk> 96 program and.

And marks an important milestone in our goal to find new medicines for patients with serious unmet medical need.

Anne Wojcicki: We look forward to continuing to advance our pipeline of more than 40 programs across a range of disease areas, addressing targets that we have validated using human genetics. We were pleased to see GSK, our key collaborator in therapeutics, elect to extend the exclusive target discovery period of our collaboration for a fifth year, so together we can continue to discover and validate novel drug targets using our proprietary genetic and health survey database. Under the terms of our collaboration agreement for this one-year extension, we will receive a one-time payment of 50 million.

We look forward to continuing to advance our pipeline of more than 40 programs across a range of disease areas addressing targets that we have validated using human genetics.

We were pleased to see GSK are key collaborator and therapeutics elect to extend the exclusive target discovery period of our collaboration for a fifth year. So together, we can continue to discover and validate novel drug targets using our proprietary genetics and health survey.

Database.

Under the terms of our collaboration agreements for this one year extension, we will receive a onetime payment of $50 million.

Our collaboration with GSK has been very productive and we believe the decision by GSK to extend the collaboration further demonstrates the value of our unique database, who are discovering novel targets for drug development.

Anne Wojcicki: Our collaboration with GSK has been very productive, and we believe the decision by GSK to extend the collaboration further demonstrates the value of our unique database for discovering novel targets for drug development. Our mission from the beginning has been to help people access, understand, and benefit from the human genome. I'm excited about the reports we launch, Our Progress on Therapeutics Programs and Our Acquisition of Lemonade Health. All of these will help our customers benefit from the human genome. And with that, I will turn the call over to Steve to review our financial results for the quarter. Thanks, Sam.

Our mission from the beginning has been has been to help people access understands and benefit from the human genome.

I am excited about the reports, we launched our progress on Therapeutics program and our acquisition of Lemonade health.

All of these will help our customers benefit from the human genome.

And with that I will turn the call over to Steve to review, our financial results for the quarter.

Thanks Sam.

With the closing of eliminate transaction in November we are now in full swing planning the integration of our personal genome service with Lemonade Telehealth services, which include online access to health care professionals, who can offer E prescribing pharmacy and testing services.

Steve Shook: With the closing of the Lemonade transaction in November, we are now in full swing planning the integration of our personal genome service with Lemonade's telehealth services, which include online access to healthcare professionals who can offer e-prescribing, pharmacy, and testing services. Our ultimate goal with this integration is to provide genetics-based primary care at scale for our customers. This unique offering would enable millions of people to learn about their genetic health risks and to partner with medical professionals to take preventative actions to potentially live healthier lives.

Our ultimate goal with this integration is to provide genetic space primary care at scale for our customers.

This unique offering would enable millions of people to learn about their genetic health risks and to partner with medical professionals to take preventative actions.

To potentially live healthier lives.

As part of the integration starting this quarter eliminated health's financial results are incorporated into ours.

Steve Shook: As part of the integration, starting this quarter, Lemonade Health's financial results are incorporated into ours. We are also updating our financial guidance for the current fiscal year to reflect the inclusion of telehealth operations into our consumer segment. We are pleased that GSK continues to find value in our collaboration and last month opted to extend the exclusive target discovery period of the ongoing collaboration. Under the terms of the collaboration agreement, GSK will pay $50 million for the extra year of exclusivity, representing a double layer of the annual payment during the previous four years.

We're also updating our financial guidance for the current fiscal year to reflect the inclusion of telehealth operations into our consumer segment.

We are pleased with GSK continues to find value in our collaboration in last month's opted to extend the exclusive target discovery period.

Ongoing collaboration.

Under the terms of the collaboration agreement GSK will pay $50 million for the extra year of exclusivity representing a doubling of the annual payment during the previous four years.

Steve Shook: We believe that using our database to genetically validate targets for drug development has the potential to increase the probability of success and could ultimately lead to substantial economic upside for us in the long term if the resulting medicines are successfully commercialized. Recently, we announced that we had made the decision to elect the royalty option on our joint immuno-oncology program with GSK targeting CD96. Prior to taking the royalty election, the CD-96 program was advancing under a 50-50 cost and profit share arrangement between 23 and VNGSK.

We believe that using our database to genetically validated targets for drug development has the potential to increase the probability of success and could ultimately lead to substantial economic upside for us in the long term if the resulting medicines are successfully commercialized.

Recently, we announced that we had made the decision to elect the royalty option on our joint immuno oncology program with GSK targeting CD 96.

Prior to taking the royalty election.

96 program was advancing under a 50 50 cost and profit share arrangement between 23 and me and GSK.

Steve Shook: Now, with our decision to elect the royalty option, we will be eligible to earn tiered royalties up to the low double digits if the program is successfully brought to market. This option allows us to retain economic upside if the program is successful while curtailing further development costs as the program advances into large, late-stage clinical trials. This option provides 23andMe with greater flexibility to allocate more capital and resources to the advancement of additional exciting programs within our therapeutic portfolio.

Now with our decision to elect the royalty option, we will be eligible to earn tiered royalties up to the low double digits. If the program was successfully brought to market.

This option allows us to retain economic upside of the program is successful while curtailing further development costs as the program advances into large late.

Late stage clinical trials.

This option provides 23 and me with greater flexibility to allocate more capital and resources into the advancement of additional exciting programs within our therapeutic portfolio.

Now, let me turn to our third quarter financial performance.

Steve Shook: Now let me turn to our third quarter financial performance. Revenue for the three and nine months ended December 31, 2021 was $57 million and $171 million, respectively, representing increases of 3% and 10%, respectively, over the same periods in the prior year.

Our revenue for the three and nine months ended December 31, 2021 was $57 million and $171 million, respectively, representing increases of 3% and 10% respectively over the same periods in the prior year.

Third quarter revenue growth was primarily due to the addition of two months of telehealth revenues from the recent acquisition of eliminate health and higher subscription revenue.

Steve Shook: Third quarter revenue growth was primarily due to the addition of two months of telehealth revenues from the recent acquisition of Lemonade Health and higher subscription revenues. These increases were partially offset by lower Personal Genome Service, or PGS, revenue primarily due to the shift in a Promotional Channels Partners event which occurred in the 2nd quarter of fiscal 2022 as compared to the 3rd quarter of fiscal 21. Nine-month revenue growth was primarily driven by higher PGS revenue, subscription revenue, and the addition of two months of revenue from the telehealth business. Looking at the composition of our revenue, consumer services revenue represented approximately 81% of total revenue for the three and nine months into December 31st, 2021.

These increases were partially offset by lower personal genome service or PGS revenue, primarily due to the shift in our promotional channels partners event, which occurred in the <unk>.

Second quarter of fiscal 2022, as compared to the third quarter of fiscal 'twenty one.

Nine month revenue growth was primarily driven by higher PGS revenue subscription revenue and the addition of two months of revenue from the telehealth business.

Looking at the composition of our revenue consumer services revenue represented approximately 81% of total revenue for the three and nine months ended December 31 2021.

Steve Shook: Research services revenue, which was substantially all from the GSK collaboration, accounted for approximately 19% of total revenue. Our gross profit for the three and nine months ended December 31, 2021 was $27 million and $86 million, respectively, representing a 7% and a 19% increase over the same periods in the prior year. The three and nine-month improvements were driven primarily by revenue increases in telehealth services and subscription services, as well as lower lab processing costs and, in the case of the nine-month period, increased PGS rates. Operating expenses for the three and nine months ending December 31, 2021, were $124 million and $271 million, respectively, compared to $71 million and $191 million for the same periods in the prior year.

Research services revenue, which was substantially all from the GSK collaboration accounted for approximately 19% of total revenue.

Our gross profit for the three and nine months ended December 31, 2021 was $27 million $86 million, respectively, representing a 7% and a 19% increase over the same periods in the prior year.

The three and nine month improvements were driven primarily by revenue increases and telehealth services and subscription services as well as lower lab processing costs.

And in the case of the nine month period increased PGS revenue.

Operating expenses for the three and nine months ended December 31, 2021 were $124 million and $271 million, respectively compared to $71 million on $191 million for the same periods in the prior year.

Steve Shook: The increase in operating expenses was primarily attributable to increased sales and marketing expenses consistent with the seasonal promotion activities of the PGS business, as well as therapeutics-related research and development expenses. One-time transactional costs associated with the acquisition of Lemonade and the incorporation of Lemonade's ongoing operating expenses as we integrate telehealth into our business. Looking at the bottom line, net losses for the three and nine months ending December 31, 2021 were $89 million and $148 million, respectively, compared to net losses for the same period in the prior year of $45 million and $117 million, respectively.

The increase in operating expenses was primarily attributable to increased sales and marketing expense consistent with the seasonal promotion activities of the PGM business.

Therapeutics related research and development expenses.

One time transactional costs associated with associated with the acquisition of lemonade.

And the incorporation of eliminates ongoing operating expenses as we integrate telehealth into our business.

Looking at the bottom line net loss for the three and nine months ended December 31, 2021 was $89 million and $148 million respectively.

Compared to net losses for the same period in the prior year of $45 million and $117 million respectively.

Sure.

Steve Shook: The increase in the net loss for the three- and nine-month periods ending December 31, 2021 was primarily driven by higher operating expenses as noted earlier and, in the case of the nine-month period, offset by changes in fair value of warrant liabilities of $33 million. Now, let's look at our adjusted EBITDA. Details on how we... If I can adjust the diva dobs, please see our earnings press release. Total adjusted EBITDA for the three and nine months ended December 31, 2021, was a loss of $64 million and $121 million, respectively, compared to a loss for the same periods in the prior year of $25 million and $65 million, respectively. This increase in total adjusted EBITDA deficit was driven primarily by the increased operating expenses mentioned previously excluding one-time transaction costs.

The increase in the net loss for the three and nine month periods ended December 31, 2021 were primarily driven by higher operating expenses as noted earlier and.

In the case of the nine months period offset by changes in fair value of warrant liabilities of $33 million.

Now, let's look at our adjusted EBITDA.

For details on how we define adjusted EBITDA. Please see our earnings press release.

Total adjusted EBITDA for the three and nine months ended December 31, 2021 was a loss of $64 million and $121 million respectively.

Compared to a loss for the same periods in the prior year of $25 million and $65 million respectively.

This increase in total adjusted EBITDA deficit was driven primarily by the increased operating expenses mentioned previously excluding onetime transaction costs.

Looking specifically at the adjusted EBITDA for the three and nine months ended December 31, 2021 for the consumer and research services segment, we saw a loss of $32 million $33 million, respectively compared to losses for the same period in the prior year $2 million and $5 million respectively.

Steve Shook: Looking specifically at adjusted EBITDA for the three and nine months into December 31, 2021 for the consumer and research services segment, we saw a loss of $32 million and $33 million, respectively, compared to losses for the same period in the prior year of $2 million and $5 million, respectively. The higher current period adjusts that even Dodd's deficit in this segment was driven primarily by the previously mentioned increase in sales and marketing expense as well as the impact from the inclusion of Lemonade's telehealth results.

The higher current period adjusted EBITDA deficit.

In this segment was driven primarily by the previously mentioned increase in sales and marketing expense as well as the impact from inclusion of <unk> eliminates telehealth results.

It is important to note the quarterly adjusted EBITDA for the consumer and research services segment will have seasonal variation just as the consumer segment topline does and will be further impacted by the timing of our media spending pattern, which has varied over time.

Steve Shook: It's important to note the quarterly adjusted EBITDA for the consumer and research services segment will have seasonal variation just as the consumer segment top line does and will be further impacted by the timing of our media spending pattern, which has varied over time.

For this reason, we focused managerial Lee on our full year adjusted EBITDA performance, we continue to work towards economically efficient growth for the consumer and research services segment overtime.

Steve Shook: For this reason, we focus managerially on our full-year adjusted EBITDA performance. We continue to work towards economically efficient growth for the consumer and research services segments over time. We ended the quarter with a strong balance sheet, including $586 million in cash, which provides us substantial capital for advancing our strategic objectives.

We ended the quarter with a strong balance sheet, including $586 million in cash, which provides us substantial capital for advancing our strategic objectives.

In the third quarter, we paid approximately $102 million in cash consideration as part of the acquisition of eliminate health.

Steve Shook: In the third quarter, we paid approximately $102 million in cash consideration as a part of the acquisition of lemonade health. Now, let's take a look at our updated guidance. Our guidance will include the impacts that we expect from the inclusion of Lemonade's telehealth business into our results. We are increasing the projected range for full-year revenue for fiscal 2022, which will end on March 31, 2022, from a previous range of $250 to $260 million to a revised range of $268 to $278 million.

Now, let's take now, let's turn to our updated guidance.

Our guidance will include the impacts that we expect from the inclusion of eliminates telehealth business into our results.

We are increasing the projected range for full year revenue for fiscal 2022, which will end on March 31, 2022 from a previous range of $250 million to $260 million to a revised range of 268% to $278 million.

This increase in projected revenue is primarily due to the addition of telehealth services to our consumer business.

Steve Shook: This increase in projected revenue is primarily due to the addition of telehealth services to our consumer business. We are decreasing the projected range for full-year net loss from a previous range of $210 to $225 million to a revised range of $205 to $220 million.

We are decreasing the projected range for full year net loss from the.

The previous range of $210 million to $225 million.

To a revised range of $205 million to $220 million.

Kenneth Hillen: This decrease in projected net loss is primarily due to the favorable effect of the Warrant Fair Value Adjustment following Warrant Redemption in December, offset by the inclusion of five months of telehealth operations, integration costs, and merger-related transaction costs. We are increasing the projected loss for our Consolidated Full Year Adjusted EBITDA, with the range moving from a previous range of $143 million to $158 million to a revised range of $148 million to $163 million as we include net losses from our telehealth business, which we expect will be partially offset by other beneficial effects in our operations.

This decrease in projected net loss is primarily due to the favorable effect of the warrant fair value adjustment following warrant redemption in December offset by the inclusion of five months of telehealth operations integration cost merger related transaction costs.

We are increasing the projected loss for our consolidated full year adjusted EBITDA with the range moving from a previous range of $143 million to $158 million.

To a revised range of 148% to $163 million as we include net losses from our telehealth business, which we expect will be partially offset by other beneficial effects in our operations.

Now I will turn the call over to Kenneth Hill to provide us an update on our therapeutics progress.

Kenneth Hillen: Now I will turn the call over to Kenneth Hillin to provide us with an update on our therapeutic problems. Thank you, Steve, and I'm pleased to report on the progress we're making on the therapeutics front. The therapeutics business was established with the goal of improving the productivity of drug discovery and development by starting with human genetic information. Research has shown that genetically validated drug targets have at least double the probability of success in becoming medicine.

Thank you, Steve and I'm pleased to report on the progress, we're making on the therapeutics front.

The therapeutics business was established with the goal of improving the productivity of drug discovery and development by starting with Cuba and genetic information.

Research has shown that genetically validated drug targets have at least double the probability of success in becoming medicines.

Kenneth Hillen: Our team uses the genetic information from our database to identify drug targets that have the potential to address areas of high unmet medical need and then generates the preclinical data and product candidates for drug discovery and clinical development. We recently advanced 23andMe 610, our first wholly-owned program, into the clinic. And 610 is an exciting example of how we are translating our data into investigational therapeutics. This is an antibody that targets the CD200R1 protein, which is known to be an important regulator of both T-cell and myeloid cell function. CD200R1 was initially identified as a promising immuno-oncology target from our proprietary genetic immuno-oncology signature.

Our team uses the genetic information from our database to identify drug targets that have the potential to address areas of high unmet medical need.

And then generates the preclinical data and the product candidates for drug discovery and clinical development.

We recently advanced 23, and the 610, our first wholly owned program into the clinic 610 is an exciting example of how we're translating our data into an investigational therapeutics.

This is an antibody that targets for CB 200, or one protein, which is known to be an important regulator of both T cells and myeloid cell function.

CB $200. One was initially identified as a promising immuno oncology target from our proprietary genetics immuno oncology signature.

Kenneth Hillen: We discussed this program in some detail at the virtual R&D day event last month. And if you're interested in learning more about our CD200R1 and 23andMe 610 programs, you can access the presentation on our investor website. Recently, as Anne said, GSK decided to extend the discovery phase of our collaboration by an additional year. This is a testament to the collaboration's productivity and success in identifying and validating new targets for drug discovery and advancing product candidates into development. In less than four years, we have jointly identified over 40 therapeutic programs and have advanced an Indian oncology antibody targeting CD96 into clinical development.

We discussed this program in some detail at the virtual R&D day event last month, and if youre interested in learning more about our CD 200, or 123, and <unk> 610 program you can access the presentation on our Investor website.

Recently, as Anne said GSK decided to extend the discovery phase of our collaboration by an additional year.

This is a testament to the collaboration productivity and success in identifying and validating new targets for drug discovery and advancing product candidates into development.

In less than four years, we have jointly identified over 40 therapeutics programs kind of advance that immuno oncology antibody targeting CD 19, six into clinical development.

Gsk's decision to extend the exclusive target discovery period of the current collaboration for an additional year demonstrates the conviction they have for our collaboration and the value our platform provides in identifying targets and at a time.

Kenneth Hillen: GSK's decision to extend the exclusive target discovery period of the current collaboration for an additional year demonstrates the conviction they have for our collaboration and the value our platform provides in identifying targets and advancing new product candidates based on human genetics. The CD96 program is a prime example of the potential value 23andMe brings to drug discovery and drug development. We were able to genetically validate the CD226 axis, which includes CD96, with our proprietary database.

<unk> new product candidates based on human genetics.

The <unk> 96 program is a prime example of the potential value of 23 and me brings to drug discovery and.

Drug development.

We were able to genetically validate the CD <unk> six axis, which include senior 96 with our proprietary database.

This validation combined with the phase one data makes us hopeful that targeting CD 96, we will have the potential to provide cancer patients with a new medicine in the fight against cancer.

Kenneth Hillen: This validation, combined with the Phase 1a data, makes us hopeful that targeting CD96 will have the potential to provide cancer patients with a new medicine in the fight against cancer. Our decision to take a royalty option for the CD-96 program was based on several. First, we believe GSK is well-positioned to independently move this program forward because of its leading portfolio of antibodies targeting the CD226 axis. Second, this decision allows us to strategically deploy capital and resources as we advance our portfolio of therapeutic programs at 23 and up.

Our decision to take a royalty option for the <unk> 96 program was based on several reasons.

We believe GSK is well positioned to independently and move this program forward because of its leading portfolio of antibodies targeting the CDK six axis.

This decision allows us to strategically deploy capital and resources as we advance our portfolio of therapeutic programs at 'twenty three and beyond.

We believe that the growth of our database combined with our advanced computational and drug discovery capabilities will continue to yield valuable insights and novel therapeutic opportunities.

Kenneth Hillen: We believe that the growth of our database, combined with our advanced computational and drug discovery capabilities, will continue to yield valuable insights and novel therapeutic opportunities. Now, let me turn the call back over to Anne. Thanks, Kenneth.

Let me turn the call back over to Ed.

Thanks Kenneth.

Anne Wojcicki: I am excited about the progress we've talked about today and even more excited about what we have coming. As I look forward, I see us rolling out genetics-based primary care that can deliver personalized, prevention-oriented, genetics-based healthcare at scale by integrating telehealth services with our personal genetic services. We also have on the horizon our next-generation polygenic risk score reports that will incorporate by-style factors to improve risk-efficient estimates, and we will continue to advance our therapeutics pipeline of over 40 programs addressing targets validated by human genetics.

I'm excited about the progress we've talked with you about today and even more excited about what we have coming.

As I look forward Ics Rolling out genetics based primary care that can deliver personalized prevention oriented genetics based health care at scale by integrating telehealth services with our personal genetic services.

We also have on the horizon, our next generation polygenic risk or report that will incorporate lifestyle factors to improve risk estimate estimate.

And we will continue to advance our therapeutic pipeline of over 40 programs addressing targets validated by human genetics.

Now, let's open it up for questions.

Anne Wojcicki: Now, let's open the line up for questions. Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touchtone telephone. Again, to ask a question, please press star then 1. Our first question comes from Tiago Fawp. The line is open.

Thank you.

Ladies and John would you like to ask a question. Please press Star then one on your Touchtone telephone again to ask a question. Please press Star then one.

Our first question comes from Thiago Bob.

Your line is open.

Our childhood here from credit Suisse. Thank you. Thank you so much for taking the question and congrats on the progress.

Questioner (Tiago Fawp): I'm Chiago here from Craigslist. Thank you. Thank you so much for taking the question and congratulations on the progress. A couple of questions for me, so I appreciate you guys including the lemonade impact on the guidance, which kind of gives us a sense for current revenue. Contribution. I'm curious if you can comment on the potential growth of that revenue base either relative to comps in the telehealth business or in any other way that can help us get a better sense of the growth trajectory, and or if there will be any other indicators that I did made available quarterly so we can kind of track the performance of that.

Couple of questions for me so.

You guys, including the eliminated it back to the guidance that kind of gives us a sense for current revenue.

<unk> I'm curious if you can comment on the potential growth of that revenue base, either relative to comps in the telehealth business or in any other way that can help us get a better sense of good growth trajectory.

And or is there will be any other indicators that I did made available quarterly. So we can kind of track the performance of that business segment I understand that it's pretty early on and there is certainly an integration aspect of it but to the extent that you guys can provide any detail there would be helpful.

Questioner (Tiago Fawp): The business segment I understand is pretty early on, and there's certainly an integration aspect of it, but to the extent that you guys can provide an email, that would be helpful. And then just one follow-up on the therapeutics, and that's related to the opt-out, and I think folks kind of understand the rationale for opting in for a royalty instead of spending the 50-50 on the R&D side with GSK. It's a hard question to answer probably, but is there a way to kind of estimate the ballpark of the investment you would have to make by having to pay for 50% of development in such a broad program, and how will that kind of inform your decision going forward? Is it going to be more – are you more likely to keep the 50-50 in smaller indications, larger indications? How is that going to play out?

And then just one follow up on the therapeutics and Thats related to the opt out an ASIC folks kind of understand the rationale on opting in for a royalty instead of spending the 50 50 on the R&D side with GSK.

It's a hard question to answer probably but is there a way to kind of estimate the ballpark.

The investment you would have to make by by having to pay for 50% of development and such a broad program.

And how would that kind of inform your decision going forward is it going to be more.

You are more likely to keep the 50 50 in smaller indication of larger indications how does that kind of play out. Thank you.

Yes, so I can take your first question and maybe I'll, let kind of kick off the second one and I can chime in if.

Steve Shook: Yes, so I can take your first question and maybe I'll let Kenneth kick off the second one, and I can chime in if it helps. So on lemonade, we are in our disaggregation of revenue. We're going to give you the quarter. And so that's going to be an attention that we file tomorrow. You'll see that that numbers around seven and a half or eight million dollars, and our guidance gives you, you know, kind of a look with five months of lemonade.

If that helps.

So on eliminated we are in our disaggregation of revenue, we're going to give you the.

The quarter, and so thats going to be in the 10-Q that we filed tomorrow.

That number is around.

Seven $5 million to $8 million.

And our guidance gives you.

Kind of a look with five months of eliminated so that that.

Steve Shook: So that number I just gave you is for two months in the quarter, and our guidance gives you a sense, versus prior guidance, of the uptick we expect, as we said in the script, largely driven by the addition of Lemonade to the revenue base. And I would say they are growing.

Number I just gave you for two months in the quarter and our guidance gives you a sense versus prior guidance of the uptick we expect.

As we said in the script largely driven.

Driven by the.

The addition of eliminate two the.

To the revenue base.

And I would say.

They are growing.

Steve Shook: That part of the business is growing. We'll be disclosing that as we go along. We won't disaggregate our guidance into pieces.

That part of the business is growing.

We'll be disclosing that as we go along we won't disaggregate our guidance.

Into the pieces.

And I would say the other thing is that there is some very fundamental planning going on at.

Kenneth Hillen: And I would say the other thing is that there is some very fundamental planning going on that Paul Johnson, who runs a consumer business now, is leading that's really delving into how this consumer experience is going to evolve and how the genetics business and the digital primary care business are going to come together and sort of how that's going to affect a lot of things related to the economics of our business. And so it's something that's just going to play out over time, and we're just not going to disaggregate for now. I'll let Kenneth start out with the CD96 decision. There are a lot of capital allocation issues in this and others, so I'll let Kenneth take that. Yeah, no, and no.

Paul Johnson.

Who runs the consumer business now is leading.

That's really delving into how this consumer experience is going to evolve and how the how the genetics business and.

Digital primary care business are going to come together and sort of how that's going to.

Affect a lot of things.

Related to the economics of our business and so it's it's something that's just going to play out over time and we're not we're just not going to.

Disaggregate for now.

Let tenants start out with the CD 96 decision there are a lot of capital allocation issues in it and others. So I'll, let kind of take that.

Yes, Thanks Stephen.

Kenneth Hillen: Thanks, Steve. David, maybe just to reemphasize what I said during the call earlier is that, in the first place, this is a place where we've got a lot of confidence that GSK is well-equipped to move this program forward in immunology. The second thing is that we're working with a portfolio and we're looking to maximize return on investment. And how we make those decisions and choices today, I think, will change and evolve over time.

Maybe just to kind of reemphasize, what I said during the call earlier.

In the first place this is a place where we've got a lot of confidence.

<unk> is well enabled to move this program forward as an immuno oncology.

The second thing is that we.

It really is we're working with a portfolio and we're looking to maximize the return on investment.

And how we make those decisions and choices today, I think will change and evolve over time for example, as our cost of capital hopefully drops over time.

Kenneth Hillen: For example, as our cost of capital hopefully drops over time, we may be prepared to invest in more programs as we move into the clinic. But I don't think it's about whether it's going to be just small indications or big indications. If we really felt there was an incredible opportunity to maximize return on investment, we would definitely want to continue investing in a program and working with GSK. But it will really be program by program; we'll make those decisions, but it will be in the context of an overall portfolio where our goal is to maximize that return on investment. Steve, I don't think you have anything to add. No, no, that's good.

May be prepared to invest in more programs as we move into the clinic.

I don't think its about is it going to be just smaller indications are big indications. If we really felt there is a incredible opportunity to maximize return on investment.

Definitely want to continue.

And our programming and working with GSK, but it will really be on <unk>.

Program by program, we will make those decisions, but it will be in the context of an overall portfolio.

Our goal is to maximize that return on investment.

Steve I don't know if you've got anything to add.

No no that's good that's good got it.

Questioner (Tiago Fawp): Got it. Yeah, that makes perfect sense. Thanks again for the question. Thank you. Our next question comes from Daniel Rose, Light Up City, things on the come here. Realizing that you won't actually book most of the revenue until the fourth quarter, can you comment on how kit sales this holiday season compared to last year's and perhaps a more normalized holiday season, specifically around the number of kit sales and the ASPs this holiday season versus prior years? Yeah, I wouldn't say that we're going to get into any of that detail specifically.

Thanks again for taking my questions.

Thank you. Our next question comes from Daniel <unk> of Citi.

Things on the come here.

I think that you wont actually book most of the revenue until the fourth quarter can you comment on how kit sales. This holiday season compared to last years, and perhaps a more normalized holiday season, specifically around the number of kit sales and <unk>.

The Asps this holiday season versus prior years.

Yes, I wouldn't say that we're going to get into any of that detail specifically, what I would say first and foremost is that the way that the year is playing out from.

Questioner (Daniel Rose): What I would say first and foremost is that the way that the year is playing out from, you know, from a kit sales point of view, relative to the guidance we've been giving and how all of those kit sales will, you know, make their way into revenue and deliver that guidance, I would say we're pretty much exactly where we wanted to be, and thought we would be, and so it's playing out, you know, pretty much according to that plan So as you look at the guidance and you look at, particularly when you look at the second quarter guidance before we had Lemonade in there, you can see that we expected there to be growth versus the prior year.

From a kit sales point of view.

Relative to the guidance, we've been giving and how all of those kit sales.

Make their way into revenue and deliver that guidance I would say, where we're pretty much exactly where we wanted to be thought we would be and so it's playing out pretty much according to that.

That plan that.

We started out guidance with this year so.

As it is.

You look at the guidance and you look at.

Particularly when you look at the second quarter guidance before we had eliminated and there you could see that there than we expected there to be growth versus prior year.

And now with lemonade.

Questioner (Daniel Rose): And now with Lemonade, that's gone up to, I think, 10 to 14 percent when you do the math. And within that, I'd say we're about right where we thought we would be based on the plan that's behind that guidance. And that's about what we can say. I would say the way we went about the promotion activities during the holiday season had a lot of similarities to last year. We kind of went about it in much the same way.

Gone up to.

10% to 14% when you do the math.

And within that I'd say, we are.

We're about right, where we thought we would be.

Just on the plan, that's behind our guidance and Thats about about what we can say I would say the way we went about the.

The promotion activities in the holiday season.

A lot of.

It had a lot of.

Similarities to last year, we kind of went about it much the same way.

Steve Shook: And so, you know, nothing radically has changed in the way that we've executed the year, and the results have given us about what we expected. Okay, have you seen more adoption of the health... aspect of the kids versus ancestry? If we were to look just at a breakdown of percent from Jess Antresary versus Health Class Ancestry, are those trending more towards health plus ancestry?

So.

Nothing radically radically has changed in the way that we've executed the year and the results are given us about what we expected.

Okay have you seen more adoption of the health aspect of the kits versus ancestry. If we were to look just at our breakdown of percent from just answered ancestry versus plus ancestry have those trended more towards health plus an ancestry.

Questioner (Daniel Rose): And can you comment on the... subscription attachment rates you're seeing? Yeah, I would say we're on the latter. We're, you know, we're pleased with how customers, you know, incoming customers are taking the subscription and, and, and so, as we noted in the script, the subscription is starting to really matter to gross margin. It's kind of moving the needle a little bit on an all-in revenue basis against our big base.

And then can you comment on the.

Subscription attachment rates you're seeing.

Yes, I would say on the latter.

We're pleased with.

How customers incoming customers are are taking the subscription.

And so we're.

As we noted in the.

The script.

The subscription is starting to.

Really matter too.

Gross margin, it's kind of moving the needle a little bit.

All in revenue basis against a big base, it's not.

Questioner (Daniel Rose): It's not that material, but I think we're happy with it and probably have more to say at year-end about where that's come from in the year in totality, but I would say we're really happy with the growth that that represents. C. As to mix, we don't really talk about mix. We lean, as you know, everything we do promotionally leans into the health side, and we continue to push that. And I would say there's nothing radically different about mix as we've gone through time either.

It's not that material.

But I think we're happy with it.

And we probably have more to say at year end about kind of where thats come in the year.

And.

In totality, but I would say, we're really happy with the growth that that's seen.

As to mix, we don't yes, we don't really talk about mix, we lean as you know everything we do promotional leans into the health side and we continue to push that.

And I would say there is nothing.

Radically different about mix as we've gone through time either.

And a fairly stable range.

Got it Okay, and then go into that eliminate acquisition I. Appreciate you breaking out that revenue for US can you break out the EBITDA contribution.

Steve Shook: It's in a fairly stable range. Got it, okay. And then going to that Lemonade Acquisition, I appreciate you breaking out that revenue for us. Can you break out the EBITDA contribution this quarter for Lemonade? And then it looks like if I just annualize the change in EBITDA for the five months that you have Lemonade this year, it gets me to a full year Lemonade number of around negative $12 million in EBITDA. Is that kind of where it's at right now?

This quarter four lemonade and then it looks like if I if I just annualize the change in EBITDA for the five months that you have.

Eliminating this year gets me to a full year eliminate number of around negative $12 million in EBITDA.

Thats kind of where.

It's at right now.

Yes, we will be providing you a little bit of.

Questioner (Daniel Rose): Yeah, we'll be providing you with a little bit of information on Lemonade in the 10-Q. In addition to the revenue that we've given you, we'll share the... We'll share the net loss associated with it, which I believe was about $8.5 million. And uh So that will be in the 10-Q. Okay, that's helpful. And the last one, just on the therapeutic side, I understand that you evaluate each project based on ROI, but can you give us a sense if you're really going to cut back on R&D spend in the near term, meaning the next 12 to 18 months because you no longer have to shoulder 50% of the CD96 program, or will you just be reallocating some of that spend to other programs in the near term? I would answer that yes, no, we won't.

Information on.

On eliminated in the 10-Q.

In addition to the revenue that we've given you will shed a little share.

We will share the net loss associated with it which I believe was about $8 5 million.

And.

And so thats and that'll be in the 10-Q.

Okay. That's helpful. And then last one just on the therapeutic side.

Understand that you have.

Alright I appreciate it.

Go ahead, sorry, sorry.

On the therapeutic side I understand that you.

Each project based on ROI, but can you give us a sense youre really going to cut back on R&D spend in the near term, meaning the next 12 to 18 months because you no longer have to shoulder, 50% of the CD 96 program or will you just be reallocating some of that spend to other programs in the near term.

I would answer that yes, we will.

Yes.

I mean, maybe I think one of the reasons.

Steve Shook: I mean, maybe, you know, I think one of the reasons that we looked at the amount that we could capture with the royalty in terms of the total value of the CD96 program, and we felt good about that without having the capital exposure of, you know, large, long, complex trials moving forward in combination with multiple molecules. But, you know, we really are excited about the P006 program; it's what we own, so it's a great example of exactly where we want to be investing our capital at 23andMe in terms of therapeutics programs.

We looked at the amount that we could capture with the royalty in terms of the total value of the Cte 96 program and we felt good about that without having the capital exposure of the large loan complex Charles moving forwards in combination with multiple molecules.

But we really are excited about Peter was there were six program, it's where we own. So it's a great example of exactly where we want to be investing our capital at 23 and me in terms of Therapeutics program. So we were very fortunate and blessed that we have many opportunities with which to deploy capital. So we're we definitely see.

Steve Shook: So, we're very fortunate and blessed that we have many opportunities with which to deploy capital, so we definitely see significant long-term value and upside over time and continue to make those investments. And Steve, feel free to chip in.

<unk> long term value and upside over time.

And I continue to make those investments are starting to see to chicken.

Steve Shook: Yeah, and I think we, you know, we give you all the time, and we'll do the same thing this time, and in the tentative, we give you kind of the composition of R&D between the consumer business and R&D. And what you'll see if you've been following that along is that the rate of growth of spending on the therapeutic side of R&D has been, you know, noticeably much higher than the average of that total line.

Yes.

And we give you all the time and we'll do the same thing this time and attendance you would give you kind of the composition of R&D between the consumer business and R&D and what Youll see if <unk> been following that along.

The rate of growth of spending on the therapeutic side of R&D has been.

It has been noticeably much higher than the average of that total line, so more and more and more of that.

Steve Shook: So more and more and more of that R&D line is being accounted for by therapeutics, and that's very intentional on our part. And, you know, we see it as just a major driver of building value and future revenue. So you can expect that to continue to happen, and redeployment of that stream of spend when we decide to, you know, take the royalty option on something like CD96 would be a natural thing for us to do. As you know, we have tens of programs that we can potentially put money into, so there's no lack of alternatives. Yep, I got it.

R&D line is being accounted for by Therapeutics, and that's very intentional on our part and we see it as a just a major driver of <unk>.

Building value and future revenue. So you can expect that to continue to happen and redeployment of that.

That stream of spend when we decided to take the royalty option on something like <unk> 96 would be a natural thing for us to do.

As you know we have tens of programs that we can potentially put money into so there's no there's no lack of alternatives.

Yep got it thank you.

Thank you.

Questioner (Daniel Rose): Thank you. Thank you. I'm showing no further questions in the queue.

I'm showing no further questions in the queue I'll turn the call back over to Wade Walke for any further questions.

Wade Waltz: We have some retail questions that have come in from our Q&A platform, and I want to take the time to answer some of those top questions today. The first question is, what plans do you have for the massive amounts of data collected and how do you translate that into shareholder value? I can take that.

Thank you very much we have some retail questions that have come in from our Q&A platform.

When it takes time to answer some of those questions today.

The first question.

What plans do you have for the massive amounts of data collected and how do we translate that into shareholder value.

I can take that.

Wade Waltz: Thanks. That's a great question and something that we have been thinking about since we started this company. There are really two elements to this, and I look at it on the consumer side as well as on the therapeutic side. There is a real opportunity for us to continue to deliver valuable health and ancestry information to our customers. And we've seen that over the years our customers appreciate, they value, it's meaningful for them, so delivering that information back to them on their health is something that we will absolutely be able to continue to do better and better.

That's a great question and something that we have been thinking about for <unk>. Since we since we started this company.

Really two elements with it and I.

Look at it on the consumer side as well as on the therapeutic side Theres, a real opportunity for us to continue to deliver valuable health and ambulatory information back to our customers and we've seen that over the years that our customers.

They appreciate the value and profit.

So for them.

Levering that information back to them on their health.

It's something that we will absolutely be able to.

And to be better and better and we've named the debt.

Wade Waltz: And we've made the commitment that we are looking at how we're going to use our data and integrating these additional data sets like wearables, to be better and better at risk predict, on the therapeutic side, the more data we have, the better we actually have insights and we're able to develop novel therapeutic targets. So as our data grows, there's tremendous opportunity on therapeutics of what we've seen with GSK in our over 40 programs and we are enthused with the fifth year extension with GSK, but also quite enthused is the post GSK world where we will be able to be independent and we spend a fair amount of time thinking about what are all those different ways that we will be able to really make sure that we are maximizing value from all of that data that ultimately will benefit our customers in the world at large. Great.

And that meant that we are looking at how we're going to use our data and integrating these additional datasets like wearables.

It could be better and better at risk prediction.

Yes.

On the therapeutic side the more data we have the better we actually have insight.

We were able to develop novel therapeutic targets.

As our data grows.

This tremendous opportunity on therapeutics, and what we've seen with GSK and are over 40 programs.

And we are enthused with the fifth year extension with GSK, but also quite intuitive.

Post GSK World, where we will be able to be independent and we spend a fair amount of time thinking about what are all those different ways that we will be able to really make sure that we're maximizing value from all of that data that ultimately will benefit our customers in the world at large.

Okay.

Great.

Anne Wojcicki: The next question is actually a compilation of about three questions that were related to the same topic, and it is, what are your plans for future growth, product expansion, and expanding research and development efforts into new products? Yeah, growth is, the Lemonade Acquisition was a key component of, you know, how we're thinking about growth in the future. And we see that our customers are engaged with genetic information. They want it, but they really want to better understand how to apply it to their lives.

Next question is actually a compilation about three questions that were where they get the same topic.

And it is what are your plans for future growth product expansion and expanding research and development efforts into new products.

Yes, Greg.

It does.

They eliminate acquisition was a key component of <unk>.

How we're thinking about growth in the future.

We see that our customers are engaged with the genetic information they wanted but they really want to better understand how to apply it to their life. So we are big believers that there is an opportunity to pioneer a new type of health care World, which is.

Anne Wojcicki: So we are big believers that there is an opportunity to pioneer a new type of healthcare world, which is based on your genetics and really focused on prevention. And so, Lemonade is a key component of how we're starting to think about growth in the future. And I just also want to call out the pharmacogenetics opportunity, which is, you know, leveraging the reports that we have today that have gone through the FDA to help our customers understand what their genetic variant is and how that impacts various medications they might take and be able to integrate that into the Lemonade pharmacy. What was the second part? Wait.

Based on your genetics and really focused on prevention and so laminate is a key component of how we are starting to think about growth in the future and I. Just also wanted to callout, the pharmacogenetics opportunity, which is leveraging the reports that we have today that have gone through the FDA that can help our customers understand why does there.

And I think risks or their genetic variant and how that impacts various medications, they might take and be able to integrate that in with eliminate pharmacy.

What was the second part weight.

The second part was.

Anne Wojcicki: The second part was expanding research and development efforts into new products. Yeah, that goes along with some of the things I was talking about before in terms of starting to look at all of this data we have. And there's an incredible opportunity with all the new types of data collection that is happening. So whether it's your heart rate variability, or your steps, or EKGs that are coming from various devices, there's a lot of opportunity for us to start to incorporate this into our reports.

Spending on research and development efforts into new products.

Yes that goes along with some of the things I was talking about before in terms of starting to look at all of this data we have and there's a there's an.

Credible opportunity with all the new types of data collection that is happening.

Whether it's your heart rate variability or your steps or EQ.

<unk> that are coming on various devices. There is a lot of opportunity for us to start to incorporate that into.

Anne Wojcicki: So what we really think about, just to briefly summarize it, is being the best at risk prediction and really being able to be the best people that can look at a number of different datasets or amass all this data into one where we can actually give you that best risk prediction.

Our reports so what we really think about just to the high level summarize it is being the best at risk prediction.

And really being able to be the best people that can look at a number of different datasets are math all of the data until one where we can actually give you that bathroom risk prediction. So that's really where we're highly focused on on the consumer side.

Anne Wojcicki: So that's really where we're highly focused on the consumer side. Great, the next couple of questions are on the financial side. The first one is, what are the two or three long-term revenue drivers that the team is most excited about? Sorry, was Steve going to take that?

Great next couple of questions are more on the financial side.

The first one is what are the two or three long term revenue drivers, but the team is most excited about.

So I would say you're going to take that sorry can you say that one again.

Wade Waltz: Sure. But what are the two or three long-term revenue drivers that the team is most excited about? Sorry, I had you on mute.

Sure.

What are the two or three long term revenue drivers that the team is most excited about.

Steve Shook: I was starting to talk. Yeah, Steve, do you want to take that, or do you want me to? Yeah, I'll take that. Pretty straightforward.

Sorry, I had you on mute I was starting to talk.

Yes, Steve you wanted to take that or you want me to yes, I'll take that yes, it's pretty straightforward.

We're talking a lot about lemonade and.

And where that's fitting into the future of the consumer product and I think the way to think about that is that the addressable market that we are.

We're going to be accessing as we moved from just the.

Personal genetics business and research services, which drive our revenue so far.

Steve Shook: You know, we're talking a lot about lemonade and and and and and where that's going to fit into the future of the consumer product. And I think, you know, the way to think about that is that the addressable market that we're going to be accessing as we move from just the prime, you know, the personal genetics business and research services, which have driven revenue so far, going into the primary care world, and its addressable market is enormous relative to our earlier addressable market. So that's a big driver.

Going into the primary care world and its addressable market is enormous.

Relative to our our earlier addressable market. So that's a big driver.

And on the therapeutic side and we're putting all of this investment on the therapeutic side and we fully anticipate that that will drive future revenue.

As those programs move into becoming products in either.

Either we're taking are.

Profit.

Steve Shook: And on the therapeutic side, you know, putting all this investment in the therapeutic side. And we fully anticipate that that will, you know, drive future revenue, as those programs move into becoming products, and either or, we're taking our profit participation in those, and we're taking royalties in those, so that's that's a really profound opportunity as we move those along. So, you know, those are going to be the primary things. And then I think the other thing, and Anne's talked about it before, is that there are other ways.

Participation in those that were taking royalties in those so.

That's that's a really profound opportunity as we move those along so those are going to be the primary thing and then I think the other thing <unk> talked about it before as there are other ways. When we talk about our mission of benefiting from the human genome that this data platform probably has other ways that we could.

Steve Shook: You know, we talk about our mission of benefiting from the human genome, and this data platform probably has other ways that we could work with partners, not only earn some return for ourselves on the investment in the platform, but, you know, bring those insights out and bring those to customers to help them live a better life. And so I think there are other ways that we're going to find to do that. Great, and the next question is, what are you doing to make 23 me profit? Yeah, and this goes back to a little bit of our more recent history.

Work with partners.

Not only earn some some return for ourselves on the investment in the <unk>.

And the platform but.

Bring those insights out and bring those two.

To customers to help them live a better life and so I think there are other ways that we're going to find to do that.

Great and the next question is what are you doing to make 'twenty through new profitable.

Yes.

Steve Shook: We started to bear down on the current portfolio of revenue-earning businesses, and we began to bear down on getting that toward cash flow breakeven. And as you know, if you follow our filings, when we moved from fiscal 2019 through the end of fiscal 21, we moved the consumer business, which is where we really put that focus, from around an $85 million adjusted EBITDA position to above breakeven. We were about $12 or $13 million in the positive last year.

This goes back to a little bit of our more recent history, we started to bear down on the current portfolio of revenue earning businesses.

We began to bear down on getting that towards cash flow breakeven in and as you know if you follow our.

Follow our filings when we move from fiscal 2019 through through the end of fiscal 'twenty one.

We moved the consumer business, which is where we really put that focus from from from around an $85 million.

Adjusted EBITDA position to about breakeven maybe but.

12 or $13 million to the positive last year.

As we bring this big new piece of business into our midst and we begin to go through that again, we're going to focus on customer level economics like we did before.

Steve Shook: As we bring this big new piece of business into our midst and we begin to go through that again, we're going to focus on customer-level economics like we did before. We're going to increasingly look at lifetime value relative to acquiring those customers. That business of digital primary care and associated pharmacy, et cetera, gives us a much better platform for recurring revenue. And so that's going to be a big part of it.

We're going to increasingly look at lifetime value.

Relative to acquiring those customers.

That business.

Digital primary care and associated pharmacy et cetera give us.

A much better platform for recurring revenue.

And so that's going to be a big part of it and then I think the other thing the other way to think about efficiency here and.

Steve Shook: And then I think the other thing, the other way to think about efficiency here, and Paul talks about this a lot, is that this would be a very much a product-led plan that we put together, not relying as much on marketing and more leaning on investing in product innovation and having it be product-led. And both of those things will, I'm convinced, do their magic over time as we get going. Thanks, Steve.

And Paul talks about this a lot is.

This would be very much a product led plan that we put together and not relying as much on on marketing and more leaning on investing in product innovation and having a deep product led in both of those things.

I'm convinced do their magic over time, as we get going.

Okay.

Thanks, Steve.

Wade Waltz: The next question is, do you see a merger with a pharmaceutical company part of your vision? We're always evaluating options. We do not have anything top of mind that we're strategically thinking about, but we're always, you know, as a responsibility to shareholders, evaluating options that do come our way, but it's not part of my strategic vision. Okay. The next one is, are there any plans for partnering with healthcare providers and insurance companies? Also a great question.

The next question is do you see a merger with a pharmaceutical company part of your vision.

Okay.

We don't we're always evaluating options, we do not have anything top of mind.

We're strategically thinking about but we're always.

As our responsibility to shareholders, we're always evaluating options that do come our way.

But it's not part of my strategic vision.

Okay.

The next one is are there any plans in partnering with health care providers and insurance companies.

Also a great question.

We always look at this and I think.

Anne Wojcicki: We always look at this, and I think it's something that obviously most companies in healthcare are working with healthcare providers and insurance companies and more traditional systems. Part of what is very unique and different about 23andMe is that we are direct-to-consumer, and because of that, our incentives are really aligned with our end customer. I am a big believer that there is an opportunity that's entirely outside of the existing system, meaning reimbursement and the traditional healthcare world, to provide a new type of care for individuals.

It's something that obviously most companies in healthcare are working with health care providers and insurance companies and more traditional system part of what is very unique and different about <unk> is that we are a direct to consumer and because of that our incentives are really aligned with our end customer.

I am a big believer that there is an opportunity that's entirely outside of the existing system, meaning the reimbursement in the traditional health care world to provide a new type of care for individuals.

And.

Anne Wojcicki: For that reason, we are not actively exploring any insurance relationships right now or more traditional types of partnerships. It's something we're always evaluating and meeting, but not something that I really look at because I think it would deviate us from our mission of being direct-to-consumer and really always doing right by our customers. Thanks. And our next question is, do you have any plans to expand to Europe? We do actually sell in a number of European countries.

For that reason, we are not actively exploring any.

Insurance relationships right now or.

The more traditional types of partnerships or.

Something.

We are evaluating a meeting, but not something that I really look at it because I think it would deviate us from our mission of being direct to consumer and really always doing right by our customer.

Okay.

Thanks, and our next question is do you have any plans to expand to Europe .

We do actually sell in a number of European countries, we have held and ancestry and some in ancestry alone.

Anne Wojcicki: We have help in ancestry and some and ancestry alone in many. Our samples are processed in the US, and we are not in every country in Europe, largely because there are different language requirements or different regulatory requirements.

Lenny.

Our samples are processed in the U S and.

We are not.

In every country in Europe .

Archie because theres different language requirements are different regulatory.

Requirements, but we do have health and ancestry and a number of country as well as ancestry.

Anne Wojcicki: But we do have health and ancestry in a number of countries as well as ancestry only and even more. Thanks, Anne. I think with that, we'll wrap up the Q and A session, and I'll turn it back over to you, Anne, to wrap up the call. Great, thank you.

Ancestry only in EBIT more.

Thanks, Dan I think with that we'll wrap up the Q&A session and I'll turn it back over to you and to wrap up the call.

Anne Wojcicki: Well, I appreciate everyone participating. We appreciate the questions that come in, and we look forward to engaging with you on our next call. Thank you so much.

Great. Thank you well I appreciate everyone participating we appreciate the questions that come in and we look forward to engaging with you at our next call.

Thank you so much.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.

Operator: Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.

Operator: BF-WATCH TV 2021, [music] This video was made in cooperation with the U.S. Department of State. No part of this recording may be reproduced without the support of the U.S. Department of State. This video was made in cooperation with the U.S. Department of State. No part of this recording may be reproduced without the support of the U.S. Department of State

Okay.

[music].

Okay.

Yes.

[music].

Operator: U.S. Money Reserve, VG Acquisition, Good morning and welcome to 23andMe's Fiscal Year 2022 3rd Quarter Financial Results Conference Call. As a reminder, this call is being recorded. At this time, all participants are in a listen-only mode.

Good morning, and welcome to the 20th Grammys fiscal year 2022 third quarter financial results Conference call. As a reminder, call is being recorded at this time all participants are in a listen only mode.

Wade Waltz: After the prepared remarks, there will be a question and answer session. I will now turn the call over to Wade Walke, Vice President of Investor Relations, to lead the call off. Thank you.

After prepared remarks, there'll be a question and answer session.

I would now like turn the call over to Wade Walke, Vice President of Investor Relations to lead the call off.

Please go ahead.

Before we begin I encourage everyone to go to investors that 23, <unk> dot com to find the press release, we issued earlier today reporting our financial results for the quarter.

A replay of today's webcast will also be available on our website for a limited time within 24 hours. After the event. Please.

We also discuss certain non-GAAP measures important information on our use of these measures and reconciliation to U S. GAAP, maybe found in our earnings release.

Anne Wojcicki: Joining us on our call today are Anne Wojcicki, our Chief Executive Officer and Co-Founder, Steve Shook, our Chief Financial Officer, and Kenneth Hillen, our Head of Therapeutics. Now, I'd like to turn the call over to Anne. Thank you, Wade. We've made significant progress on both our consumer business and therapeutics efforts in these last few months. The mission of 23andMe is to help people access, understand, and benefit from the human genome. We pioneered a path for people to get direct access to their genetic information and learn important information about their ancestry and health.

Joining us on our call today are <unk> <unk>, our Chief Executive Officer, and co founder, Steve Scherger, Our Chief Financial Officer, and Kenneth Hill, and our head of Therapeutics and now I'd like to turn the call over to Ann.

Thank you Wayne.

We've made significant progress on both our consumer business and therapeutics effort. These last few months.

The mission of twenty-three me is to help people access understand and benefit from the human genome.

We pioneered a path for people to get direct access to their genetic information and learn important information about their ancestry and health.

Anne Wojcicki: With over 12 million customers who have signed up to join the 23andMe community, there is an incredible opportunity to introduce a new type of primary care that is based on one's genetic risk. We have heard from our customers that they often take their genetic information to their physicians, but they don't know how to integrate this information into their care.

With over 12 million customers, who have signed up to join the 23 community. There is an incredible opportunity to introduce a new type of primary care that is based on one genetic risk.

We have heard from our customers that they often take their genetic information to their position, but they don't know how to integrate this information and to their care.

Anne Wojcicki: We have the opportunity to further help our customers benefit from the knowledge about their genome by providing a genetics-based primary care service for our customers. I am thrilled that we got the opportunity to acquire Lemonade Health this quarter, as it opens up the door for us to enable our customers to get kinetics-based primary care from healthcare providers who are trained on our report. I look forward to talking with you more about this service as we prepare to roll it out.

We have the opportunity to further help our customers benefit from the knowledge about their genome by providing a genetic based primary care service for our customers.

I'm thrilled that we got the opportunity to acquire lemonade helped this quarter as it opens up the door for us to enable our customers to get genetics based primary care health care providers, who are trained on our report.

I look forward to talking with you more about this service as we prepare to roll it out.

Anne Wojcicki: As part of our mission to help customers benefit from the human genome, we continue to pioneer new health and ancestry reports. Recently, we received FDA clearance for a direct-to-consumer genetic test on a hereditary prostate cancer marker, further expanding our ability to provide individuals with direct access to impactful health information that can help them make important life decisions. We also launched two new health reports for our 23andMe Plus members. 23andMe Plus is our premium content subscription service that provides subscribers with new reports and features through the course of their membership, giving them even deeper insights into their health.

As part of our mission to help customers benefit from the human genome, we continue to pioneer New health and ancestry report.

We also launched two new health report for our 'twenty, three and need plus members.

23, <unk> plus is our premium content subscription service that provides subscribers with new reports and features through the course of their membership.

Giving them even deeper insights into their health.

Anne Wojcicki: With our database of over 12 million genotype customers and billions of health-related data points, we are uniquely positioned to provide our customers with these health insights. The new reports include a nearsightedness report and a severe acne report.

With our database of over 12 million genotype customers and billions of health related data points, we are uniquely positioned to provide our customers with these health insights.

The New report include a near Sightedness report and a severe acne report.

Anne Wojcicki: Finally, we added new Ancestry Analysis for our customers. This new analysis includes additional insights into some customers' indigenous genetic ancestry from North America and ancestral connections to 25 African ethnolinguistic groups. On the therapeutic side, we advanced our first wholly-owned therapeutic program into a Phase I clinical trial. 23andMe 610 is our second immuno-oncology drug to enter clinical trials following our CD96 program, and marks an important milestone in our goal to find new medicines for patients with serious unmet medical needs.

Finally, we added new ancestry analysis for our customers.

This new analysis include additional insights into cut some customers indigenous genetic ancestry from North America, and ancestral connection to 'twenty five African ethno linguistic groups.

On the therapeutic side, we advanced our first wholly owned therapeutic program into a phase one clinical trial.

23, and me 610 is our second immuno oncology drug to enter clinical trials following our CD 96 program.

And marks an important milestone in our goal to find new medicines for patients with serious unmet medical needs.

We look forward to continuing to advance our pipeline of more than 40 programs across a range of disease areas addressing targets that we have validated using human genetics.

Debase.

Under the terms of our collaboration agreements for this one year extension, we will receive a onetime payment of $50 million.

Our collaboration with GSK has been very productive and we believe the decision by GSK to extend the collaboration further demonstrates the value of our unique database for discovering novel targets for drug development.

Our mission from the beginning has been has been to help people access understand and benefit from the human genome.

Im excited about the reports we launched our progress on Therapeutics program and our acquisition of Lemonade health.

All of these will help our customers benefit from the human genome.

With that I will turn the call over to Steve to review, our financial results for the quarter.

Thanks Sam.

Steve Shook: With the closing of the Lemonade transaction in November, we are now in full swing planning the integration of our personal genome service with Lemonade's telehealth services, which include online access to health care professionals who can offer e-prescribing, pharmacy, and testing services. Our ultimate goal with this integration is to provide genetics-based primary care at scale for our customers. This unique offering would enable millions of people to learn about their genetic health risks and to partner with medical professionals to take preventative actions to potentially live healthier lives. Part of the integration, starting this quarter of lemonade helps the natural results are incorporated into out.

Our ultimate goal with this integration is to provide genetics based primary care at scale for our customers.

This unique offering would enable millions of people to learn about their genetic health risks and to partner with medical professionals to take preventative actions.

To potentially live healthier lives.

As part of the integration.

This quarter eliminated health's financial results are incorporated into ours.

Steve Shook: We are also updating our financial guidance for the current fiscal year to reflect the inclusion of telehealth operations into our consumer segments. We are pleased that GSK continues to find value in our collaboration and last month opted to extend the exclusive target discovery period of the ongoing collaboration. Under the terms of the collaboration agreement, GSK will pay $50 million for the extra year of exclusivity, representing a double leg of the annual payment during the previous four years.

We're also updating our financial guidance for the current fiscal year to reflect the inclusion of telehealth operations into our consumer segment.

We are pleased that GSK continues to find value in our collaboration in last month's opted to extend the exclusive target discovery period.

The ongoing collaboration.

Under the terms of the collaboration agreement GSK will pay $50 million for the extra year of exclusivity representing a doubling.

The annual payment during the previous four years.

Steve Shook: We believe that using our database to genetically validate targets for drug development has the potential to increase the probability of success and could ultimately lead to substantial economic upside for us in the long term if the resulting medicines are successfully commercialized. Recently, we announced that we had made the decision to elect the royalty option on our joint immuno-oncology program with GSK targeting CD96. Prior to taking the royalty election, the CD96 program was advancing under a 50-50 cost and profit share arrangement between 23andMe and GSK.

Recently, we announced that we had made the decision to elect the royalty option on our joint immuno oncology program with GSK targeting CD 96.

Prior to taking the royalty election. The CD 96 program was advancing under a 50 50 cost and profit share arrangement between 'twenty three and beyond GSK.

Steve Shook: Now, with our decision to elect the royalty option, we will be eligible to earn tiered royalties up to the low double digits if the program is successfully brought to market. This option allows us to retain the economic upside of the program as it is successful while curtailing further development costs as the program advances into large, late-stage clinical trials. This option provides 23andMe with greater flexibility to allocate more capital and resources to the advancement of additional exciting programs within our therapeutic portfolio.

Now with our decision to elect the royalty option, we will be eligible to earn tiered royalties up to the low double digits. If the program is successfully brought to market.

This option allows us to retain economic upside of the program is successful well curtailing further development costs as the program advances into large.

Late stage clinical trials.

This option provides 23 and me with greater flexibility to allocate more capital and resources into the advancement of additional exciting programs within our therapeutic portfolio.

Steve Shook: Now let me turn to our third quarter financial performance. Our revenue for the three and nine months ended December 31st, 2021, were $57 million and $171 million, respectively, representing increases of 3% and 10%, respectively, over the same periods in the prior year. Third quarter revenue growth was primarily due to the addition of two months of telehealth revenues from the recent acquisition of Lemonade Health and higher subscription revenues. These increases were partially offset by lower Personal Genome Service, or PGS, revenue primarily due to the shift in a Promotional Channels Partners event which occurred in the second quarter of fiscal 2022 as compared to the third quarter of fiscal 21.

Now, let me turn to our third quarter financial performance.

Third quarter revenue growth was primarily due to the addition of two months of telehealth revenues from the recent acquisition of eliminate health and higher subscription revenue.

These increases were partially offset by lower personal genome service or PGS revenue, primarily due to the shift in our promotional channels partners event, which occurred in the.

Second quarter of fiscal 2022, as compared to the third quarter of fiscal 'twenty one.

Steve Shook: Nine-month revenue growth was primarily driven by higher PGS revenue, subscription revenue, and the addition of two months of revenue from the telehealth business. Looking at the composition of our revenue, consumer services revenue represented approximately 81% of total revenue for the three and nine months and December 31st, 2021. Research services revenue, which was substantially all from the GSK collaboration, accounted for approximately 19% of total revenue.

Nine month revenue growth was primarily driven by higher PGS revenue subscription revenue and the addition of two months of revenue from the telehealth business.

Looking at the composition of our revenue consumer services revenue represented approximately 81% of total revenue for the three and nine months ended December 31 2021.

Research services revenue, which was substantially all from the GSK collaboration accounted for approximately 19% of total revenue.

Steve Shook: Our gross profit for the three and nine months ended December 31, 2021 was $27 million and $86 million, respectively, representing a 7% and a 19% increase over the same periods in the prior year. The three and nine-month improvements were driven primarily by revenue increases in telehealth services and subscription services, as well as lower lab processing costs, and, in the case of the nine-month period, increased PGS revenue. Operating expenses for the three and nine months ending December 31, 2021, were $124 million and $271 million, respectively, compared to $71 million and $191 million for the same periods in the prior year.

Our gross profit for the three and nine months ended December 31, 2021 was $27 million $86 million, respectively, representing a 7% and a 19% increase over the same periods in the prior year.

The three and nine month improvements were driven primarily by revenue increases and telehealth services and subscription services as well as lower lab processing cost.

And in the case of the nine month period increased PGS revenue.

The increase in operating expenses was primarily attributable to increased sales and marketing expense consistent with the seasonal promotion activities of the PGM business.

Therapeutics related research and development expenses.

One time transactional costs associated associated with the acquisition of lemonade.

And the incorporation of eliminates ongoing operating expenses as we integrate telehealth into our business.

Looking at the bottom line net loss for the three and nine months ended December 31, 2021 was $89 million and $148 million respectively.

Compared to net losses for the same period in the prior year of $45 million and $117 million respectively.

Sure.

Steve Shook: The increase in the net loss for the three and nine-month periods into December 31, 2021 was primarily driven by higher operating expenses, as noted earlier, and in the case of the nine-month period, offset by changes in fair value of warrant liabilities of $33 million. Now let's look at our adjusted EBITDA. For details on how we find and adjust the diva dot, please see our earnings press release. Total adjusted EBITDA for the three and nine months ended December 31, 2021, was a loss of $64 million and $121 million, respectively.

The increase in the net loss for the three and nine months periods ended December 31, 2021 were primarily driven by higher operating expenses as noted earlier.

And in the case of the nine months period offset by changes in fair value of warrant liabilities of $33 million.

Now, let's look at our adjusted EBITDA.

For details on how we define adjusted EBITDA. Please see our earnings press release.

Steve Shook: Compared to a loss for the same periods in the prior year of $25 million and $65 million, respectively, this increase in total adjusted EBITDA deficit was driven primarily by the increased operating expenses mentioned previously excluding one-time transaction costs.

Total adjusted EBITDA for the three and nine months ended December 31, 2021 was a loss of $64 million and $121 million respectively.

Compared to a loss for the same periods in the prior year of $25 million and $65 million respectively.

This increase in total adjusted EBITDA deficit was driven primarily by the increased operating expenses mentioned previously excluding onetime transaction costs.

Steve Shook: Looking specifically at the EBITDA for the three and nine months into December 31, 2021 for the Consumer and Research Services segment, we saw a loss of $32 million and $33 million, respectively, compared to losses for the same period in the prior year of $2 million and $5 million, respectively. The higher current period adjusted EBITDA deficit in this segment was driven primarily by the previously mentioned increase in sales and marketing expense as well as the impact from the inclusion of Lemona It's important to note the quarterly adjusted EBITDA for the consumer and research services segment will have seasonal variation just as the consumer segment top line does and will be further impacted by the timing of our media spending pattern, which has varied over time.

The higher current period adjusted EBITDA deficit.

In this segment was driven primarily by the previously mentioned increase in sales and marketing expense as well as the impact from inclusion of <unk> eliminates telehealth results.

Steve Shook: For this reason, we focus managerially on our full-year adjusted EBITDA performance. We continue to work towards economically efficient growth for the consumer and research services segment over time. We ended the quarter with a strong balance sheet, including $586 million in cash, which provides us substantial capital for advancing our strategic objectives. In the third quarter, we paid approximately $102 million in cash consideration as a part of the acquisition of Lemonade Health.

For this reason we focused managed you really on our full year adjusted EBITDA performance, we continue to work towards economically efficient growth for the consumer and research services segment overtime.

We ended the quarter with a strong balance sheet, including $586 million in cash, which provides us substantial capital for advancing our strategic objectives.

In the third quarter, we paid approximately $102 million in cash consideration as a part of the acquisition of eliminate health.

Steve Shook: Now let's turn to our updated guide. Our guide will include the impacts that we expect from the inclusion of Lemonade's telehealth business in our results. We are increasing the projected range for full-year revenue for fiscal 2022, which will end on March 31, 2022, from a previous range of 250 to 260 million to a revised range of 268 to 278 million. This increase in projected revenue is primarily due to the addition of telehealth services to our consumer business. We are decreasing the projected range for full-year net loss from a previous range of $210 to $225 million to a revised range of $205 to $220 million.

Now, let's take now, let's turn to our updated guidance.

Our guidance will include the impacts that we expect from the inclusion of eliminates telehealth business into our results.

We are increasing our projected range for full year revenue for fiscal 2022, which will end on March 31, 2022 from a previous range of $250 million to $260 million to a revised range of 268% to $278 million.

This increase in projected revenue is primarily due to the addition of telehealth services to our consumer business.

We are decreasing the projected range for full year net loss from the.

The previous range of $210 million to $225 million.

To a revised range of $205 million to $220 million.

Steve Shook: This decrease in projected net loss is primarily due to the favorable effect of the Warrant Fair Value Adjustment following Warrant Redemption in December, offset by the inclusion of five months of telehealth operations, integration costs, and merger-related transaction costs. We are increasing the projected loss for our Consolidated Full Year Adjusted EBITDA, with the range moving from a previous range of $143 to $158 million to a revised range of 148 to 163 million as we include net losses from our telehealth business, which we expect will be partially offset by other beneficial effects in our. Now I will turn the call over to Kenneth Hillen to provide us an update on our therapeutics program.

We are increasing the projected loss.

For our consolidated full year adjusted EBITDA with the range moving from a previous range of $143 million to $158 million.

To a revised range of 148% to $163 million as we include net losses from our telehealth business, which we expect will be partially offset by other beneficial effects in our operations.

Now I will turn the call over to kind of tell them to provide us an update on our therapeutics progress.

Steve Shook: Thank you, Steve, and I'm pleased to report on the progress we're making on the therapeutics business. The therapeutics business was established with the goal of improving the productivity of drug discovery and development by starting with human genetic information. Research has shown that genetically validated drug targets have at least double the probability of success in becoming medicine.

Thank you, Steve and I'm pleased to report on the progress, we're making on the therapeutics front.

<unk> Therapeutics business was established with the goal of improving the productivity of drug discovery and development.

Starting with human genetic information.

Research has shown that genetically validated drug targets have at least double the probability of success in becoming medicines.

Kenneth Hillen: Our team uses the genetic information from our database to identify drug targets that have the potential to address areas of high unmet medical need and then generates the preclinical data and product candidates for drug discovery and clinical development. We recently advanced 23andMe 6.10, our first wholly owned program, into the clinic. And 6.10 is an exciting example of how we are translating our data into investigational therapeutics. This is an antibody that targets the CD200R1 protein, which is known to be an important regulator of both p-fell and myeloid cell phone.

Our team uses the genetic information from our database.

<unk> identified drug targets that have the potential to address areas of high unmet medical need.

And then generates the preclinical data and the product candidates for drug discovery and clinical development.

We recently advanced 23, and <unk> six turn our first wholly owned program into the clinic 610 is an exciting example of how we are translating our data into an investigational therapeutics.

This is an antibody that targets the CD 200, or one protein, which is known to be an important regulator of both T cells and myeloid cell function.

Kenneth Hillen: CD200R1 was initially identified as a promising immunoncology target from our proprietary genetics. We discussed this program in some detail at the Virtual R&D Day event last month. And if you're interested in learning more about our CD200R1 and 23andMe 610 programs, you can access the presentation on our investor website. Recently, as Anne said, GSK decided to extend the discovery phase of our collaboration by an additional year. This is a testament to the collaboration's productivity and success in identifying and validating new targets for drug discovery and advancing product candidates into development. In less than four years, we have jointly identified over 40 therapeutics programs and have advanced an immuno-oncology antibody targeting CD96 into clinical development.

CB $200. One was initially identified as a promising immuno oncology target from our proprietary genetics immuno oncology signature.

We discussed this program in some detail at the virtual R&D day event last month, and if youre interested in learning more about our CD 200, or 123 and me 610 program you can access the presentation on our Investor website.

Recently, as Anne said GSK decided to extend the discovery phase of our collaboration by an additional year.

This is a testament to the collaboration productivity and success in identifying and validating new targets for drug discovery and advancing product candidates into development.

In less than four years, we have jointly identified over 40 therapeutics programs kind of advance that immuno oncology antibody targeting CD 19, six into clinical development.

<unk> new product candidates based on human genetics.

The <unk> 96 program is a prime example of the potential value of 23 and me brings to drug discovery and.

Drug development.

We were able to genetically validate the CD <unk> six axis, which includes senior 96 with our proprietary database.

Kenneth Hillen: This validation, combined with the Phase 1a data, makes us hopeful that targeting CD96 will have the potential to provide cancer patients with a new medicine in the fight against cancer. Our decision to take a royalty option for the CD96 program was based on several reasons. First, we believe GSK is well positioned to independently move this program forward because of its leading portfolio of antibodies targeting the CD226 axis. Second, this decision allows us to strategically deploy capital and resources as we advance our portfolio of therapeutic programs at 23 and up.

This validation combined with the phase one data makes us hopeful that targeting CD 96, we will have the potential to provide cancer patients with a new medicine in the fight against cancer.

Our decision to take a royalty option for the <unk> 96 program was based on several reasons.

First we believe GSK is well positioned to independently and move this program forward because of its leading portfolio of antibodies targeting the CB 286 axis.

This decision allows us to strategically deploy capital and resources as we advance our portfolio of therapeutic programs at 23 and beyond.

Kenneth Hillen: We believe that the growth of our database combined with our advanced computational and drug discovery capabilities will continue to yield valuable insights and novel therapeutic opportunities. Now, let me turn the call back over to Anne. Thanks, Kenneth.

We believe that the growth of our database combined with our advanced computational and drug discovery capabilities will continue to yield valuable insights and novel therapeutic opportunities now, let me turn the call back over to Ed.

Thanks Kenneth.

Anne Wojcicki: I am excited about the progress we've talked about today and even more excited about what we have coming. As I look forward, I see us rolling out genetics-based primary care that can deliver personalized, prevention-oriented, genetics-based healthcare at scale by integrating telehealth services with our personal genetic services. We also have on the horizon our next generation polygenic risk score report that will incorporate lifestyle factors to improve risk estimates, and we will continue to advance our therapeutics pipeline of over 40 programs addressing targets validated by human genetics.

I am excited about the progress we've talked with you about today and even more excited about what we have coming.

As I look forward Ics rolling out genetics based primary care that can deliver personalized prevention oriented genetics based healthcare at scale by integrating telehealth services with our personal genetic services.

We also have on the horizon, our next generation polygenic risk or report that will incorporate lifestyle factors to improve risk estimate estimate.

We will continue to advance our therapeutic pipeline of over 40 programs addressing targets validated by human genetics.

Now, let's open it up for questions.

Thank you Les.

Ladies and John would you like to ask a question. Please press Star then one on your Touchtone telephone again to ask a question. Please press Star then one.

Our first question comes from Thiago Bob.

Line is open.

Questioner (Tiago Foster): Thank you so much for taking the question and congratulations on the progress. I have a couple of questions for you. So I appreciate you guys including the lemonade impact on the guidance. That kind of gives us a sense of current revenue and contribution. I'm curious if you can comment on the potential growth of that revenue base either relative to comps in the telehealth business or in any other way that can help us get a better sense of the growth trajectory.

Our Thiago here from credit Suisse. Thank you. Thank you so much for taking the question and congrats on the progress.

Questions for me so I.

I appreciate you guys, including the eliminated impact the guidance that kind of gives us a sense for current revenue.

Contribution I'm curious if you can comment on the potential growth of that revenue base, either relative to comps in the telehealth business or in any other way that can help us get a better sense of good growth trajectory.

Questioner (Tiago Foster): And or if there will be any other indicators that VG has made available quarterly so we can kind of track the performance of that. This segment, I understand, is pretty early on, and there's certainly an integration aspect to it. But to the extent that you guys can provide more detail, that would be helpful. And then just one follow-up on the therapeutics, and that's related to the opt-out, and I think folks kind of understand the rationale for opting in for a royalty instead of spending the 50-50 on the R&D side with GSK. It's a hard question to answer probably, but is there a way to kind of estimate the ballpark of the investment you would have to make by having to pay for 50% of development in such Thank you. Yes, so I can take your first question.

To the extent that you guys can provide any detail that would be helpful.

And then just one follow up on the therapeutics and Thats related to the opt out in ASIC folks kind of understand the rationale on opting in for royalty setup.

Spending the 50 50 on the R&D side with GSK.

It's a hard question to answer probably but is there a way to kind of estimate the ballpark.

The investment you would have to make by having to pay for 50% of developer and such a broad program.

And how would that kind of inform your decision going forward is it going to be more.

You are more likely to keep the 50 50 in smaller indication of larger education, how does that kind of play out. Thank you.

Steve Shook: Maybe I'll let Kenneth kick off the second one, and I can chime in if it helps. So on Lemonade, we are, in our disaggregation of revenue, we're going to give you the quarter. And so that's going to be in the 10-Q that we file tomorrow. You'll see that that number is around $7.5 or $8 million. And our guidance... gives you kind of a look at five months of lemonade. So that number I just gave you is for two months in the quarter.

Yes, so I can take your first question and maybe I'll, let kind of kick off the second one and I can chime in.

It helps.

So on eliminated we are in our disaggregation of revenue, we're going to give you the.

The quarter, and so thats going to be in the 10-Q that we filed tomorrow.

You'll see that that number is around <unk>.

Seven $5 million to $8 million.

And our guidance gives you.

Look with five months of eliminated so that that.

Number I just gave you for two months in the quarter and our guidance gives you a sense versus prior guidance of the the uptick we expect.

Steve Shook: And our guidance gives you a sense, versus prior guidance, of the, you know, the uptick we expect, as we said in the script, largely driven by, you know, the addition of lemonade to the revenue base. And I would say, you know, we are growing because that part of the business is growing, you know, we'll be disclosing that as we go along; we won't disaggregate our guidance, you know, into pieces.

As we said in the script largely.

Driven by the.

The addition of eliminated to the.

So the revenue base.

And I would say.

They are growing.

That part of the business is growing.

We'll be disclosing that as we go along we don't disaggregate our guidance.

Into the pieces.

And I would say the other thing is that there is some very fundamental planning going on.

Steve Shook: And I would say the other thing is that there is some very fundamental planning going on that Paul Johnson, who runs a consumer business now, is leading. You know, that's really delving into how this consumer experience is going to evolve and how the genetics business and the digital primary care business are going to come together and, and sort of how that's going to affect a lot of things related to the economics of our business. And so it's, it's something that's just going to play out over time, and we're not, we're not going to disaggregate for now. I kind of start out with the CD 96 decision; there are a lot of capital allocation issues in it, and, and, and others.

Paul Johnson.

Who runs the consumer business now is leading.

That's really delving into how this consumer experience is going to evolve and how the how the genetics business and.

Digital primary care business are going to come together and sort of how that's going to.

Affect a lot of things.

Related to the economics of our business and so it's it's something that's just going to play out over time and we're not we're just not going to.

Disaggregate for now.

I'll, let tenants start out with the CD 96 decision there are a lot of capital allocation issues and others. So I'll, let kind of take that.

Yes, no thanks, Steven Segal.

Kenneth Hillen: So I'll let kind of take that. You know, no thanks to even Diego, maybe just to kind of re-emphasize what I said during the call earlier is that, you know, I think in the first place, this is a place where we put a lot of confidence in GFK being, you know, well-enabled to move this program forward and, you know, college. The second thing is that we're working with a portfolio and we're looking to maximize the return on investment, and how we make those decisions and choices today will change and evolve over time.

Can you maybe just to reemphasize, what I said during the call earlier.

In the first place this is a place where we've got a lot of confidence.

<unk> is well enabled to move this program forward as an immuno oncology.

The second thing is that we.

It really is we're working with a portfolio and we're looking to maximize the return on investment.

And how we make those decisions and choices to date I think will change and evolve over time for example, as our cost of capital hopefully drops over time, we may be prepared to invest in more programs as we move into the clinic.

I don't think its about is it going to be just smaller indications are big indications. If we really felt there is incredible opportunity to maximize return on investment we would definitely want to continue investing in our programming and working with GSK, but it will really be on a program by program, we'll make those decisions, but it will be in the context of an overall.

Kenneth Hillen: If we really felt there was an incredible opportunity to maximize return on investment, we would definitely want to continue investing in the program and working with GSK. But it will really be program by program; we'll make those decisions, but it will be in the context of an overall portfolio where our goal is to maximize that return on investment. Steve, I don't think we've got anything to add. No, no, that's good.

Portfolio, where our goal is to maximize that return on investment.

Steve I don't know if you've got anything to add.

No no that's good that's good got it.

Questioner (Tiago Foster): Got it. Yeah, that makes perfect sense. Thanks again for the question. Thank you. Our next question comes from Daniel Rose, Light of City, things on the come here. Realizing that you won't actually book most of the revenue until the fourth quarter, can you comment on how KIT sales this holiday season compared to last year's and perhaps a more normalized holiday season, specifically a rather number of KIT sales and the ASPs this holiday season versus prior years?

Perfect. Thanks, again for taking my questions.

Thank you. Our next question comes from Daniel <unk> of Citi.

Things on the come here.

Realizing that you wont actually book most of the revenue until the fourth quarter can you comment on how kit sales. This holiday season compared to last years, and perhaps some more normalized holiday season, specifically.

Around the number of kit sales and the Asps this holiday season versus prior years.

Questioner (Daniel Rose): Yeah, I wouldn't say that we're going to get into any of that detail specifically. What I would take first and foremost is the way that the year is playing out from, you know, from a kid sales point of view, relative to the guidance we've been giving and how all of those kid sales will, you know, make their way into revenue and deliver that guidance. I would say we're pretty much exactly where we wanted to be, and so it's playing out. You know, pretty much according to that.

Yes, I wouldn't say that.

To get into any of that detail, specifically, what I would say first and foremost is that the way that the year is playing out from.

A kit sales point of view.

Relative to the guidance, we've been giving and how all of those kit sales.

Make their way into revenue and deliver that guidance I would say, we're pretty much exactly where we wanted to be thought we would be and so it's playing out pretty.

Pretty much according to that.

Steve Shook: You know, that plan that we started out guidance with this year. So, you know, as it, you know, as you look at the guidance and you look at, particularly when you look at the second quarter of guidance before we had eliminated in there you you know you could see that they're you know we expected there to be growth versus prior year and and and now with lemonade that's you know that's gone up to I think 10 to 14% when you do the map and and within that I'd say we're we're about right where we thought we would be based on the plan that's behind that guidance and that's about you know about what we can say I would say the way we went about the, The promotion activities in the holiday season, you know, had a lot of similarities to last year. We kind of went about it much the same way.

Plan that.

We started out guidance with this year so.

As it as you look at the guidance and you look at.

Particularly when you look at the second quarter guidance before we had eliminated and there you could see that there than we expected there to be growth versus prior year.

And now with Lemonade, that's that's good.

Up to.

10% to 14% when you do the math.

And within that I'd say, we're about right, where we thought we would be based on the plan that's behind our guidance and Thats about about what we can say I would say the way we went about the.

The promotion activities in the holiday season.

A lot of.

A lot of <unk>.

Similarities to last year, we kind of went about it much the same way.

Questioner (Daniel Rose): And so, you know, nothing radically has changed in the way that we've executed the year, and the results are, you know, given us about what we expected. OK, have you seen more adoption of the health? Aspect of the kids versus ancestry, if we were to look just at a breakdown of percent from Jess Andrew's ancestry versus health plus ancestry, are those trending more towards health plus ancestry? And then can you comment on that...

And so.

Nothing radically radically has changed in the way that we've executed the year and the results are given us about what we expected.

Okay have you seen more adoption of the health.

Aspect of the kits versus ancestry. If we were to look just at our breakdown of percent from just answered ancestry versus plus ancestry have those trended more towards health plus an ancestry.

And then can you comment on the.

Steve Shook: Subscription Attachment Rakes You're Saying VG Acquisition Yeah, I would say we're on the ladder. We're pleased with, you know, how customers, you know, incoming customers are taking the subscription and so on. As we noted in the script, the subscription is starting to really matter to gross margin. It's kind of moving the needle a little bit on an all-in revenue basis against our big base. It's not that material, but I think we're happy with it and probably have more to say at year-end about where that's come from in the year in totality, but I would say we're really happy with the growth that that has. See, you know, as to mix, we don't, yeah, we don't really talk about mix. We lean, as you know, everything we do emotionally leans into the health side, And I would say there's nothing, you know, radically different about mix as we've gone through time; it's in a fairly stable range.

Subscription attachment rates you're seeing.

Yes, I would say on the latter.

We're pleased with.

Now customers incoming customers are are taking their subscription.

And so we're.

As we noted in the.

Script.

The subscription is starting to.

<unk> really matter too.

Gross margin, it's kind of moving the needle a little bit.

On a.

All in revenue basis against a big base, it's not.

It's not that material.

But I think we're happy with it.

And we probably have more to say at year end about kind of where thats come in the year.

And.

In totality, but I would say, we're really happy with the growth that <unk> seen.

As to mix, we don't we don't really talk about mix, we lean as you know everything we do promotional leans into the health side and we continue to push that.

And I would say there is nothing.

Radically different about mix as we've gone through time either.

And a fairly stable range.

Questioner (Daniel Rose): Okay, and then we'll go into that lemonade acquisition. I appreciate you breaking out that revenue for us. Can you break out the EBITDA contribution this quarter for lemonade? And then it looks like if I just annualize the change in EBITDA for the five months that you have lemonade this year, it gets me to a full year lemonade number of around negative 12 million in EBITDA. Is that kind of where it's at right now?

Got it Okay, and then go into that eliminate acquisition I. Appreciate you breaking out that revenue for us can.

Can you breakout the EBITDA contribution.

This quarter four four lemonade and then it looks like if I, if I just annualize it.

Change in EBITDA for the five months that you have.

Eliminating this year. It gets me to a full year eliminate a number of around negative $12 million in EBITDA is that kind of wear.

It's at right now.

<unk>.

Questioner (Daniel Rose): Yeah, we'll be providing you a little bit of information on Lemonade in the 10-Q, in addition to the revenue that we've given you. We'll share the... We'll share the net loss associated with it, which I believe was about $1.5 million, and uh... So that's in the 10-Q. Okay, that's helpful. And then, just on the therapeutic side, understand that you have.

Yes.

We will be providing you.

Little bit of.

Information on.

And eliminated in the 10-Q.

In addition to the revenue that we've given you will have we will share the.

We will share the net loss associated with it which I believe was about $8 5 million.

<unk>.

And.

And so thats and that'll be in the 10-Q.

Okay. That's helpful. And then last one just on the therapeutic side.

Understand that you have.

Questioner (Daniel Rose): On the therapeutic side, I understand that you evaluate each project based on ROI, but can you give us a sense if you're really going to cut back on R&D spend in the near term, meaning the next 12 to 18 months because you no longer have to shoulder 50% of the CD96 program, or will you just be reallocating some of that spend to other programs in the near term? I would answer that yes, no, we won't.

Sorry, what you're saying.

Go ahead, sorry, sorry.

On the therapeutic side I understand that you.

Evaluate each project based on ROI, but can you give us a sense, if youre really going to cut back on R&D spend in the near term, meaning the next 12 to 18 months because you no longer have to shoulder, 50% of the CD 96 program.

Or will you just be reallocating some of that spend to other programs in the near term.

I would answer that yes, we will.

Yes.

Questioner (Daniel Rose): I mean, maybe, you know, I think one of the reasons that we, you know, we looked at the amount that we could capture with the royalty in terms of the total value of the CD96 program, and we felt good about that without having the capital exposure of, you know, large, long, complex trials moving forward in combination with multiple molecules. But, you know, we really are excited about the P006 program; it's fully owned, so it's a great example of exactly where we want to be investing our capital at 23andMe in terms of therapeutics programs.

I mean, maybe I think one of the reasons.

We looked at the amount that we could capture with the royalty in terms of the total value of this evening 96 program and we felt good about that without having the capital exposure of the large loan complex Charles moving forwards in combination with multiple molecules.

But we really are excited about Peter was there were six program. It's wholly owned so it's a great example of exactly where we want to be investing our capital at 23 EMEA in terms of Therapeutics program.

Questioner (Daniel Rose): So, we're very fortunate and blessed that we have many opportunities with which to deploy capital. So, we definitely see significant long-term value and upside over time and continue to make those investments. So, Steve, feel free to chip in.

We're very fortunate and blessed that we have many opportunities with which to deploy capital. So we're we definitely see significant long term value and upside over time.

And continue to make those investments are starting to see to chip in.

Steve Shook: Yeah, and I think we give you all the time, and we'll do the same thing this time in the 10th year. We give you kind of the composition of R and D between the consumer business and R and D, and what you'll see if you've been following that along is that the rate of growth of spending on the therapeutic side of R and D has been, you know, noticeably much higher than the average of that total line. So more and more and more of that R and D line is being accounted for by therapeutics, and that's very intentional on our part, and, you know, we see it as just a major driver of building value in future revenues.

Yes.

And we give you all the time and we'll do the same thing. This time in the 10-Q, we give you kind of the composition of R&D between the consumer business and R&D and what Youll see if <unk> been following that along.

The rate of growth of spending on the therapeutic side of R&D has been.

It has been noticeably much higher than the average of that total line, so more and more and more of that.

R&D line is being accounted for biotherapeutics and that's very intentional on our part and we see it as a just a major driver of <unk>.

Steve Shook: So you can expect that to continue to happen, and redeployment of that stream of spend when we decide to, you know, take the royalty option of something like CD96 would be a natural thing for us to do. As you know, we have tens of programs that we can potentially put money into, so there's no lack of alternatives.

Building value and future revenue. So you can expect that to continue to happen and redeployment of that.

That stream of spend when we decided to take the royalty option on something like <unk> 96 would be a natural thing for us to do.

As you know we have tens of programs that we can potentially put money into so there is no lack of alternatives.

Yep got it thank you.

Thank you.

Operator: Thank you. Thank you. I'm showing no further questions in the queue.

I'm showing no further questions in the queue I'll turn the call back over to Wade Walke for any further questions.

Wade Waltz: I'll turn the call back over to Wade Walt for any further questions. Thank you very much. We have some retail questions that have come in from our Q&A and want to take the time to answer some of those top questions today. The first question is, what plans do you have for the massive amounts of data collected and how do we translate that into shareholder value? I can take that.

Thank you very much we have some retail questions have come in from Q.

Q&A platform and when it takes time to answer some of those questions today.

The first question.

Is what plans do you have for the massive amounts of data collected and how do we translate that into shareholder value.

I can take that.

That's a great question and something that we have been thinking about for since we since we started the company.

Theres really two elements with it and I look at it on the consumer side as well as on the therapeutic side. There is a real opportunity for us to continue to deliver valuable health and ambulatory information back to our customers.

And we've seen that over the years at our customers.

They appreciate the value windfall for them, while delivering that information back to them on their health.

Something that we will absolutely be able to continue to be better and better and we've made that commitment.

Wade Waltz: And we've made the commitment that we are looking at how we're going to use our data and integrating these additional data sets like wearables, to be better and better at risk prediction. On the therapeutic side, the more data we have, the better we actually have insights and we're able to develop novel therapeutic targets. So as our data grows, there's a tremendous opportunity on therapeutics of what we've seen with GSK and our over 40 programs, and we are enthused with the fifth year extension with GSK, but also quite enthused is the post-GSK world where we will be able to be independent and we spend a fair amount of time thinking about what are all those different ways that we will be able to really make sure that we are maximizing value from all of that data that ultimately will benefit our customers in the world at large. Great.

And that we are looking at how we're going to use our data and integrating these additional datasets like wearables.

To be better and better at risk prediction.

On the therapeutic side the more data we have the better we actually have insight and we are able to develop novel therapeutic targets. So as our data grows.

Tremendous opportunity on therapeutics, and what we've seen with GSK and are over 40 programs.

And we are enthused with the fifth year extension with GSK, but also quite enthused as the post JFK world, where we will be able to be independent and we spend a fair amount of time thinking about what are all those different ways that we will be able to really make sure that we're maximizing value from all of that data that ultimately will.

Benefit our customers in the world at large.

Yes.

Okay.

Great.

Question is actually a compilation of about three questions that were related to same topic.

And it is what are your plans for future growth product expansion and expanding research and development efforts into new products.

Growth is.

The Lemonade acquisition was a key component of.

How.

How we're thinking about growth in the future and we see that our customers are engaged with the genetic information they wanted but they really want to better understand how to apply it to their life. So we are big believers that there is an opportunity to pioneer a new type of health care World, which is.

Anne Wojcicki: So we are big believers that there is an opportunity to pioneer a new type of healthcare world, which is based on your genetics and really focused on prevention. And so, Lemonade is a key component of how we're starting to think about growth in the future. And I just also want to call out the pharmacogenetics opportunity, which is, you know, leveraging the reports that we have today that have gone through the FDA that can help our customers understand what their genetic risk or their genetic variant is and how that impacts various medications they might take and be able to integrate that into the Lemonade pharmacy. What was the second part, Wade?

Based on your genetics and really focus on prevention and so laminate is a key component of how we are starting to think about growth in the future and I. Just also wanted to callout, the pharmacogenetics opportunity, which is leveraging the reports that we have today that have gone through the FDA that can help our customers understand what is that.

Genetic risk or their genetic variant and how that impacts various medications, they might take and be able to integrate that in with eliminate pharmacy.

What was the second part weight.

Anne Wojcicki: The second part was expanding research and development efforts into new products. Yeah, that goes along with some of the things I was talking about before in terms of starting to look at all of this data we have. And there's an incredible opportunity with all the new types of data collection that is happening. So, whether it's your heart rate variability or your steps or EKGs that are coming from various devices, there's a lot of opportunity for us to start to incorporate this into our reports.

The second part was.

Expanding our research and development efforts into new products.

Yes back that goes along with some of the things I was talking about before in terms of starting to look at all of this data we have and there's a there's an incredible opportunity with all the new types of data collection that is happening so whether it's your heart rate variability or your steps or.

Ek genes that are coming on various devices, there's a lot of opportunity for us to start to incorporate that into <unk>.

Anne Wojcicki: So, what we really think about, just to high-level summarize it, is being the best at risk prediction and really being able to be the best people that can look at a number of different datasets or aggregate all this data into one where we can actually give you the best risk prediction.

Reports, so what we really think about just to the high level summarize it as being the best at risk prediction.

And really being able to be the best people that can look at a number of different datasets are our math all that data into one where we can actually give me that best risk prediction. So that's really where we're highly focused on on the consumer side.

Steve Shook: So that's really where we're highly focused on the consumer side. The next couple of questions are more on the financial side. The first one is, what are the two or three long-term revenue drivers that the team is most excited about? Sorry, was Steve going to take that? Can you say that one again? Sure, but what are the two or three long-term revenue drivers that the team is most excited about? Sorry, I had you on mute. I was starting to talk, and I didn't have the mute on.

Great next couple of questions are more on the financial side.

The first one is what are the two or three long term revenue drivers, but the team is most excited about.

So Stephen I'll take that so can you say that one again.

Sure.

What are the two or three long term revenue drivers, but the team is most excited about.

Sorry, I had you on mute I was starting to panic.

Yes, Steve do you want to take that or you want me to yes, I'll take that yes, it's pretty straightforward.

Wade Waltz: Yeah, Steve, do you want to take that, or do you want me to? Yeah, I'll take that. Pretty straightforward.

Steve Shook: You know, we're talking a lot about lemonade and where that's fitting into the future of the consumer product. And I think, you know, the way to think about that is the addressable market that we're going to be accessing as we move from just the prime, you know, the personal genetics business and research services which drive revenue so far. You know, going into the primary care world, and its addressable market is enormous relative to our earlier addressable market. So that's a big driver.

We're talking a lot about lemonade and.

And where that's fitting into the future of the consumer product and I think.

The way to think about that is that the addressable market that we're going to be accessing as we moved from just the prime.

Personal genetics business and research services, which drive our revenue so far.

Going into the primary care world and its addressable market is enormous.

Relative to our earlier addressable market. So that's a big driver.

Steve Shook: And on that therapeutic side, you know, we're putting all this investment in the therapeutic side, and we fully anticipate that that will, you know, drive future revenue as those programs move into becoming products, and either we take our profit, or we take royalties on those. So that's a really profound opportunity as we move those things along. So, you know, those are going to be the primary things, and then I think the other thing Anne talked about at the core is that there are other ways, you know, we talk about our mission of benefiting from the human genome, that this data platform probably has other ways that we could work with partners, not only earn some return for ourselves on the investment in the platform but, you know, bring those insights out and bring those to customers to help them live a better life And so I think there are other ways that we're going to find to do that.

And on the therapeutic side and we're putting all of this investment on the therapeutic side and we.

We fully anticipate that that will drive future revenue.

As those programs move into becoming products in either.

Either we're taking are.

Profit.

Participation in those that were taking royalties in those so.

That's a really profound opportunity as we move those along so those are going to be the primary thing and then I think the other thing <unk> talked about it before as there are other ways. When we talk about our mission of benefiting from the human genome that this data platform probably has other ways that we could.

Work with partners.

Not only earn some some return for ourselves on the investment in the <unk>.

The platform, but.

Bring those insights out and bring those two.

To customers to help them live a better life and so I think there are other ways that we're going to find to do that.

Steve Shook: And the next question is, what are you doing to make 23andMe profitable? Yeah, and this goes back to a little bit of our more recent history.

Great and the next question is what are you doing to make 'twenty through new profitable.

Yes.

And this goes back to a little bit of our more recent history, we started to bear down on the current portfolio of revenue earning businesses.

We began to bear down on getting that towards cash flow breakeven then and as you know if you follow our.

Follow our filings when we moved from fiscal 2019 through through the end of fiscal 'twenty one.

We moved the consumer business, which is where we really put that focus from from from around an $85 million.

Adjusted EBITDA position to about breakeven.

12 or $13 million to the positive last year.

As we bring this big new piece of business into our midst and we begin to go through that again, we're going to focus on customer level economics like we did before.

Steve Shook: As we bring this big new piece of business into our midst and we begin to go through that again, we're going to focus on customer-level economics like we did before, but we're going to increasingly look at lifetime value relative to acquiring those customers. That business of digital primary care and associated pharmacy, etc., gives us a much better platform for recurring revenue, and so that's going to be a big part of it. And then I think the other way to think about efficiency here, and Paul talks about this a lot, is this would be a very much a product-led plan that we put together, not relying as much on marketing and more leaning on investing in product innovation and Both of those things will, I'm convinced, do their magic over time as we get going.

We're going to increasingly look at lifetime value.

Relative to acquiring those customers.

<unk> business of <unk>.

Digital primary care and associated pharmacy et cetera give us.

Much better platform for recurring revenue.

And so that's going to be a big part of it and then I think the other thing the other way to think about efficiency here and Paul talks about this a lot is.

I'm convinced do their magic over time, as we get going.

Okay.

Steve Shook: Thanks, Steve. The next question is, do you see a merger with a pharmaceutical company as part of your vision? We are always evaluating options; we do not have anything top of mind that we are strategically thinking about, but we are always, as a responsibility to shareholders, evaluating options that do come our way, but it is not part of my strategic vision. The next one is, are there any plans for partnering with healthcare providers and insurance companies? Also, a great question.

Thanks, Steve.

The next question is do you see a merger with a pharmaceutical company part of your vision.

Okay.

We don't we're always evaluating options, we do not have anything top of mind.

We're strategically thinking about but we're always.

As our responsibility to shareholders, we're always evaluating options that do come our way.

But it is not part of my strategic vision.

Okay.

The next one is are there any plans in partnering with health care providers and insurance companies.

Also a great question.

We always look at that then I think.

It's something that obviously most companies in healthcare are working with health care providers and insurance companies and more traditional system part of what is very unique and different about 23 and me is that we are direct to consumer and because of that our incentives are really aligned with our end customer.

For that reason, we are not actively exploring any.

Insurance relationships right now or.

More traditional types of partnerships.

We're always evaluating a meeting, but not something that I really look at because I think it would deviate us from our mission of being direct to consumer and really how it is doing right by our customer.

Okay.

Anne Wojcicki: Thanks. And our next question is, do you have any plans to expand to Europe? We do actually sell in a number of European countries. We have health and ancestry in some, and ancestry alone in many. Our samples are processed in the U.S., and we are not in every country in Europe, largely because there are different language requirements or different regulatory requirements. But we do have health and ancestry in a number of countries, as well as ancestry only, and even more.

And our next question is do you have any plans to expand to Europe .

We do actually sell in a number of European countries, we have health and ancestry and some in ancestry alone in many our samples are processed in the U S and.

We are not.

In every country in Europe , largely because there is different language requirements are different regulatory requirements, but we do have health and ancestry and a number of country as well as ancestry.

Ancestry, only and even more.

Anne Wojcicki: Thanks, Anne. I think with that, we'll wrap up the Q&A session, and I'll turn it back over to you, Anne, to wrap up the call. Great. Thank you. Well, I appreciate everyone participating. We appreciate the questions that come in, and we look forward to engaging with you on our next call. Thank you so much. Thank you. Ladies and gentlemen, this set includes today's conference. Thank you all for participating. You may now disconnect. Have a great day!

Thanks, Dan I think with that we'll wrap up the Q&A session and I'll turn it back over to you add to that with the call.

Great. Thank you well I appreciate everyone participating we appreciate the questions that come in and we look forward to engaging with you at our next call.

Thank you so much.

Yes.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.

Q3 2022 23andMe Holding Co. Earnings Call

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