In a significant development, genetic testing firm 23andMe has filed for Chapter 11 bankruptcy protection, as efforts to slash expenses continue. The San Francisco-based company, renowned for its DNA testing kits, announced its intention to sell “substantially all of its assets” through a court-facilitated reorganization strategy. Effective immediately, the company’s co-founder, Anne Wojcicki, has stepped down from her role as CEO, although she will retain her position on the board. This transition occurs shortly after a board committee turned down Wojcicki’s nonbinding proposal to acquire the company and take it private. Remaining committed to the company’s future, Wojcicki plans to make another bid as the company progresses with its asset sale amidst the bankruptcy proceedings.
Challenges have been mounting for 23andMe, including difficulties in crafting a profitable business model following its public debut in 2021, and the handling of customer genetic data privacy following a significant data breach in 2023. The company initially promised a transformative approach to genetics and healthcare through its saliva-based testing kits, which gained popularity for revealing ancestral and health-related insights. However, the journey has not been smooth.
The road to bankruptcy has been fraught with obstacles, highlighted last September by the resignation of all independent directors. Following that, 23andMe announced massive layoffs impacting 40% of its workforce, equivalent to over 200 jobs, and eliminated its therapeutics wing. A strategic reevaluation by a special board committee, contemplating various paths including a potential sale, was disclosed in January. The rocky trajectory has taken a toll on the company’s stock value, which dipped dramatically post-bankruptcy announcement, cratering to below $1 as of midday Monday.
The Chapter 11 filing revealed the company’s liabilities exceeding $214.7 million by the end of last year, countered by assets totaling over $277.4 million. According to Board Chair Mark Jensen, this legal move is anticipated to ease the asset sale process while managing costs, legal challenges, and property commitments. Among the cost-cutting efforts is requesting court approval to cancel certain lease agreements in California. Operations are set to continue, supported by $35 million in debtor-in-possession financing secured from JMB Capital Partners.
For apprehensive 23andMe customers, concerns have been sparked regarding the security of their genetic data amidst these corporate restructures. The firm reassures that privacy practices won’t falter during bankruptcy, emphasizing its commitment to data protection while guaranteeing compliance with future ownership transitions. Still, the shadow of prior data vulnerabilities, particularly the 2023 breach impacting nearly 7 million customers, looms. Litigation following this incident significantly contributed to liabilities, manifesting in the current bankruptcy status.
Last year, 23andMe resolved a legal battle involving claims of inadequate data protection by agreeing to a $30 million settlement. Integrating this resolution into the bankruptcy proceedings is part of the company’s strategy to address lingering legal liabilities. Compounding the issue, recent advisories have encouraged 23andMe users to consider data deletion due to the company’s precarious situation.
Prior to the bankruptcy filing, California Attorney General Rob Bonta issued a consumer rights reminder, urging 23andMe customers to reassess their data storage considering the firm’s financial instability and vast data repositories. With the future owner yet undefined, the stakes concerning data privacy remain high.
