TL/DR: Richard Branson’s SPAC is rumored to be merging with 23andMe. 23andMe has a useful set of over 10 million human DNA sequences which are used to create ground-breaking medication. Cathie Wooden is VERY bullish on genomics, ARKG shopping for is extremely probably. Starting so as to add commons within the $13s; will add extra as soon as rumor is confirmed.

You in all probability find out about 23andMe, the favored Christmas present the place you spit in a tube and so they let you know ancestors are from. A current Bloomberg rumor has mentioned that VG Acquisition Corp (VGAC) is in talks to take them public. If confirmed, I imagine that this deal has a confirmed administration group and each brief time period and long run catalysts, together with a probable stake from Cathie Wooden and ARK of their ARKG fund.

VGAC Background

Dimension in belief – $480M

Commons – $13.46

Warrants* – $3.28

*Warrants are 1 for 1 and may be redeemed on a cashless foundation

VG Acquisition Corp ($VGAC) is a SPAC led by the Virgin Group and its well-known billionaire founder, Sir Richard Branson. They IPO’ed on October 2nd with $480M in belief.

It’s possible you’ll do not forget that Branson was concerned within the deal that arguably helped kick off the SPAC motion when he took Virgin Galactic public on the finish of 2019 with Chamath’s first SPAC, IPOA. SPCE turned the primary publicly traded area firm and has fared effectively because it’s public debut, at present buying and selling at $48.50 with a 52 week excessive of practically $60.

Virgin already has a foothold within the healthcare area via Virgin Care, which companions with the NHS and has rapidly turn into the UK’s largest healthcare supplier. As of 2018 they had been already worthwhile and pulling in over $300M in revenues. Its secure to say they perceive the healthcare area already and the way 23andMe can match into it.

Branson and the Virgin identify will naturally deliver a whole lot of hype to VGAC. Virgin has earlier expertise with profitable and wide-ranging companies and a number of massive mergers, together with:

  • Virgin Cellular being acquired by Dash

  • Virgin Media being acquired by Liberty World

  • Virgin American being acquired by Alaska Airways

Branson and Virgin are innovators, savvy traders, and take early stakes in difficult industries like area journey, aerospace, telecom, and media. The person actually acquired knighted due to his “companies to entrepreneurship”. If recognized 23andMe in solely Four months, clearly its a enterprise they’re extremely interested by and see a whole lot of potential for the business.

23andMe

23andMe was based in 2006 by present CEO Anne Wojcicki as a direct to client genetic testing company (for what it is price, Wojcicki can also be on the the star-studded AJAX SPAC search group). They had been most not too long ago valued at $2.5B in 2020 once they raised an $800M funding spherical.

They turned well-liked for his or her ancestry platform, offering customers with their ancestral background info. In addition they expanded to offer testing for an array of genetic ailments or pre-dispositions, together with; late onset Alzheimers, Parkinson’s, Kind 2 Diabetes and Celiac Illness.

Whereas the DNA check is their client flagship product, the true alternative is within the knowledge. 23andMe has the world’s second largest genetic dataset with over 10 million exams carried out (behind their competitor Ancestry at 16 million).

They’re at present and can proceed to make the most of this large genetic knowledge, with a devoted therapeutics group. Wojcicki mentioned not too long ago in a 60 minutes interview that “100% of revenues are going into our therapeutics”. This isn’t a direct to client testing product, it is a drug firm that has a MASSIVE quantity of genetic knowledge. The therapeutics group is rising quickly, displaying 16 open positions in therapeutics analysis at 23andMe, simply essentially the most on the firm.

They’ve already had some success on the therapeutics entrance. Final 12 months they used their genetic knowledge to create a protein that is ready to block autoimmune ailments, this one focused to psoriasis. They then had been in a position to license this drug to Spanish drug firm Almirall.

Extra importantly, in addition they secured a $300M funding and Four 12 months partnership with large pharmaceutical firm GlaxoSmithKline (GSK) to make use of genetic knowledge to develop new medication, specifically for Parkinson’s illness. GSK now has a serious fairness stake within the firm and has the dimensions and experience to make the most of this knowledge set.

In 2009, 23andMe began the world’s largest Parkinson’s trial with over 11,000 members utilizing their DNA.

The sort of analysis is groundbreaking for genetically pre-disposed ailments that had been beforehand troublesome or unimaginable to deal with. Their predominant focus on the time is Parkinson’s illness and bi-polar an main depressive dysfunction.

Buyers and Companions

Their worth hasn’t gone unnoticed. As talked about they had been final valued at $2.5B in 2020. Their main traders embody Sequoia Capital ($250M), GlaxoSmithKline ($300M), Constancy, and the Nationwide Institute of Well being. In addition they have key partnerships with Pfizer, Biogen, Stanford College, College of Chicago, and Parkinson’s foundations together with Michael J Fox basis, Nationwide Parkinson Basis, and Parkinson’s Institute and Scientific Heart.

For a reference on their valuation, Blackstone purchased a majority stake of their competitor Ancestry for $4.7B final 12 months. Word that Ancestry isn’t targeted on on therapeutics analysis the best way that 23andMe is, so whereas they compete on the DTC DNA testing entrance, they do not appear to compete on a therapeutics entrance.

Momma Cathie

Cathie Wooden of ARK has been clear in a number of interviews and articles not too long ago that she is VERY bullish on genomics because the business with essentially the most room for development within the subsequent 10 years, much more so than electrical autos and Tesla. Cathie immediately tweeted about 23andMe again in 2015 once they solely had 850,000 samples collected, so I am certain she’s much more excited now that they are over 10 million.

ARKG already has a variety of direct DNA sequencing and therapeutics corporations in its high holdings like Twist Bioscience, Pacific Biosciences, and Crispr Therapeutics. Cathie additionally incessantly talks about how the businesses with the most effective and earliest knowledge set have a large benefit (i.e Tesla autonomous driving as a result of they’ve essentially the most knowledge on miles pushed). She’s going to view the huge mine of DNA knowledge as a gold mine for the genomics revolution.

ARK has not shied away from SPACs previously, with investments in OPEN, LGVW, DMYD and OAC all being pushed greater with ARK investments in them. For my part, 23andMe is a shoe-in for an ARKG funding as soon as DA is confirmed and can ship the inventory greater and provides it an “ARK” flooring wherever they enter at.

Threat components

There are dangers related to VGAC as with each inventory and SPAC.

First, the preliminary response to this was muted. It popped from $12.90 to $13.90 on the rumor, and is now within the low $13s. It is potential that 23andMe merely does not generate a whole lot of investor consideration as a goal. I really feel that this truly offers us with a shopping for alternative that’s being missed. With affirmation of a deal and a hopeful ARK purchase, traders will start to see the worth of the information they’ve and it will run up just like different SPACs have.

23andMe was extremely well-liked in 2018, however their DTC DNA product has suffered not too long ago with gross sales struggling in 2019 and so they had been compelled to do layoffs in 2020. Ancestry additionally needed to do layoffs in addition to the entire at-home testing market was down.

Additionally essential to notice that in 2018 they had been in a position to do practically $500M in income (most up-to-date income quantity I may discover), however are not but worthwhile as of 2020.

Privateness stays a predominant concern as effectively if you’re coping with tens of millions of individuals’s genetic code. When pressed on this within the 60 minutes interview, she states that customers have to “opt-in” to share their knowledge for this analysis and that nothing is ever used with out consent. 80% of their customers opt-in to share their knowledge, which is about eight million samples which are usable…nonetheless a really sizable genetic database to analysis from. Whether or not there shall be laws round how this knowledge can be utilized is but to be seen.

One other danger stems from the best way wherein they accumulate genome knowledge. They use genotyping which is cheaper however much less correct than subsequent gen sequencing expertise.

Final, it’s over 30% above NAV and is barely a rumor. Bloomberg has typically been correct on these rumors, however its essential to notice this isn’t an official announcement.

My Play

I at present have a starter place in VGAC commons right here within the $13s. It might hover within the 13s or decrease between now and the time rumor is confirmed, and I will be including closely if it drops. On LOI and investor presentation, I will probably add extra and I conservatively anticipate this to hit $18-$20 pre-merger, greater with an ARK buy.

u/HowDoesIStonks additionally supplied a terrific DD right here 5 days in the past

Disclaimer: I’ve a starter place in VGAC commons at $13.50. I’ll look so as to add extra on any dips and can doubtlessly add extra as soon as construction of deal is understood. This isn’t monetary recommendation.

Edit 1: Added a danger issue and Cathie Wooden tweet

Edit 2: Thanks everybody for all of the suggestions and commentary on this! I’ve discovered quite a bit from the feedback.

I nonetheless strongly stand by my bull case and imagine that there’s loads of upside right here, each for brief time period swing merchants and long run traders. Nevertheless I feel it’s essential to replace if I study one thing new. After studying this text and studying concerning the various kinds of genetic exams, I’ll change my stance on ARKG from “probably” shopping for to “probably” shopping for. 10 million+ DNA exams is spectacular and I think about ARK will definitely contemplate a place, but it surely’s essential to know the variations between genotyping completed by 23andMe vs NGS testing which is extra thorough and what ARK prefers.

Good luck everybody!

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