Consumer genetics company 23andMe announced Friday it has signed a definitive agreement to acquire telehealth and online prescription platform Lemonaid Health for $400 million. 

The price tag, subject to downward adjustments, will be made up of 25% in cash and 75% in stock. The companies expect the acquisition to close by the end of the year.

“We believe that by combining Lemonaid Health’s telemedicine platform, including its online team of medical professionals and its pharmacy services, with our consumer business, we are taking an important step in transforming the traditional primary care experience and making personalized healthcare a reality,” Anne Wojcicki, CEO and cofounder of 23andMe, said in a statement.

“By starting with genetics as the foundation, we will give patients and healthcare providers better information about health risks and treatments, opening up the door to prevent, as well as better manage, disease. Lemonaid Health’s focus on the patient and its philosophy of delivering individualized care [fit] perfectly with our mission of empowering people to take control of their health.”

WHY IT MATTERS

23andMe is pitching the acquisition as a step into the primary care space in order to offer genetic testing as a way to promote preventive and personalized medicine.

“Our current healthcare system is based on reactive care, but we have the opportunity to change the paradigm for customers,” Wojcicki said in a call with investors. “Starting with genetics as the foundation of primary care gives individuals and healthcare providers greater knowledge of potential health risks.

"Personalized healthcare means healthcare based on the combination of your genes, your environment and your lifestyle, with recommendations and plans that are specific to you.”

The time is also ripe for a move into telehealth, Wojcicki said. The COVID-19 pandemic accelerated the use of virtual care as patients and providers avoided unnecessary in-person contact. 

Though telehealth utilization has been slowing in 2021, many hospitals and health systems are planning to increase their investment over the next couple of years. A survey of providers found most viewed telemedicine as necessary to maintaining access to primary care during the pandemic, though some have cut back on its use due to reimbursement issues. 

THE LARGER TREND

23andMe announced plans to go public through a merger with a special purpose acquisition company in February, and began trading in June. 

In January, just before the SPAC announcement, the consumer genetic testing company raised $82.5 million, coming in after a difficult year where it laid off 100 employees and faced a lawsuit from a former business partner. 

Meanwhile, in July 2020, Lemonaid announced a $33 million Series B financing round aimed at expanding its services for asthma, hypertension, Type 2 diabetes and mental healthcare.

Primary care is a busy space in the digital health market. Other players offering virtual primary options include Teladoc Health, the recently launched Marley Medical and hybrid provider One Medical.