By Bhanvi Satija, Anusha Shah and Surbhi Misra
(Reuters) -23andMe on Sunday filed for bankruptcy in the U.S. after struggling with weak demand for its ancestry testing kits and a 2023 data breach that damaged its reputation.
The company’s shares fell 50% to 88 cents in Monday trading after co-founder Anne Wojcicki, who made multiple failed takeover bids, resigned as CEO. 23andMe did not say whether there are other interested bidders. It will continue to operate during the sale process, having secured $35 million in financing over the weekend.
Officials, including California Attorney General Rob Bonta, had questioned what would happen to the genetic data collected by 23andMe, though the company’s privacy policies say that the data could be sold to other firms. The company said the bankruptcy process will not affect how it stores, manages or protects customer data.
23andMe garnered lots of attention from investors when it was first taken public via a special-purpose acquisition vehicle (SPAC) run by billionaire Richard Branson at a $3.5 billion valuation in 2021. Its market value peaked later that year at nearly $6 billion due to booming interest in DNA testing kits but demand has waned since, hurting 23andMe and its Blackstone-owned rival AncestryDNA.
Sales of the consumer kits frequently picked up during the holiday season, but 23andMe has struggled to retain customers mainly because people would use the kits once and see little reason to order another one. Bernstein analysts have said that the market for ancestry testing kits might be close to tapped out.
In 2023, hackers exposed the personal data of nearly 7 million 23andMe customers over a five-month period, dealing a major blow to the company’s reputation and compounding its growth problems. The breach raised alarm among customers concerned about their privacy and how DNA-testing firms handle their data.
23andMe eventually agreed late last year to a $30 million settlement in a lawsuit related to the breach.
The San Francisco-based firm has also laid off 200 employees and stopped the development of all therapies as part of what will be a major overhaul.
Wojcicki has been pushing for a buyout since last April, but has been rebuffed by 23andMe’s board. She reportedly used her contacts, including ex-husband and Google co-founder Sergey Brin, to help drive initial investments. She will be replaced by Chief Financial Officer Joe Selsavage on an interim basis.
Wojcicki said, in a post on X on Monday, that she intends to make another bid, without giving details. Her last offer of 41 cents per share valued 23andMe at about $11 million.
On Sunday, the company listed assets and estimated liabilities between $100 million and $500 million.
WHAT HAPPENS TO CUSTOMERS’ DATA?
23andMe said any buyer will be required to comply with applicable law about how customer data is treated, it said. The company made at least 30 deals with pharmaceutical and biotech companies such as British drugmaker GSK giving it access to its database. Most of its agreements remain undisclosed.
“How the data is used is really the privacy policy that anybody who has used 23andMe clicks through and then accepts. But as we know, most people don’t read the privacy policies,” said Anya Prince, a professor of law at the University of Iowa.
On Friday, California’s Bonta urged customers to delete their genetic data, citing 23andMe’s financial distress. Social media posts laid out how users can delete their data. Prince said deleting one’s account can help minimize future risks, though it does not guarantee that everything is removed.
“Once that data is out there, then, even if you requested your account to be deleted, they can’t find your information because it no longer has your name attached. So for most people that might be fine as long as their names (are) not attached,” Prince added.
(Reporting by Anusha Shah, Shubham Kalia, Surbhi Misra and Bhanvi Satija in Bengaluru and Christine Soares in New York; Editing by Mrigank Dhaniwala, Savio D’Souza, Shounak Dasgupta and Alan Barona)
