Accessible genetic testing has been one of the most interesting developments of the last decade. It seems like everyone has taken the chance to discover where they come from, trace family trees and find long lost relatives, and 23andMe might be the best known company to come out of this genetic finding craze.
Regrettably, the company seems to be under water and have officially filed for Chapter 11 bankruptcy protection. Additionally, co-founder and CEO Anne Wojcicki has stepped down from her leadership role, though she will remain on the company’s board, adding to the feeling of insecurity that both employees and clients are feeling.
The announcement cane on Sunday, when the San Francisco-based company shared that they intend to sell off “substantially all of its assets” as part of a court-approved restructuring plan. Wojcicki’s resignation comes shortly after a board committee dismissed her proposal to take 23andMe private but despite no longer being CEO she still plans to bid for the company during its bankruptcy sale as an “independent bidder.”
In a statement following the announcement she expressed “There is no doubt that the challenges faced by 23andMe through an evolving business model have been real, but my belief in the company and its future is unwavering.”
The problems 23andMe is facing
Most of the company’s financial issues seem to have started after going public in 2021. The profitability of their business model was hard to sustain, and the difficulty was increased by a significant data breach in 2023, which scared the nearly seven million customers the company stored data for.
The bankruptcy announcement is the latest in a series of major setbacks as just months ago, in September, all of the company’s independent directors resigned following acquisition discussions with Wojcicki. Then, mass layoff followed in November, with 23andMe cutting 40% of its workforce, which amounted to more than 200 employees, and then shutting down its therapeutics division. In January, a special committee on the board began exploring various strategic options, including a potential sale.
All of these issues have caused the financial situation of the company to be deemed as precarious, the company’s stock has lost nearly all its value since last year and dropped even further following the bankruptcy news, with shares being traded for less than $1.
According to Sunday’s Chapter 11 filing, 23andMe reported debts exceeding $214.7 million by the end of 2023, while its assets were valued at over $277.4 million. Board Chair Mark Jensen described the move as “the best path forward” and said the process should help cut costs while resolving legal and lease-related liabilities, and one of the ways to cut costs includes pulling back on real estate. The company has already filed motions to cancel lease agreements for its offices in San Francisco and Sunnyvale, California, both quite expensive locations.
Despite the bankruptcy filing, 23andMe insists that operations will continue. The company has secured $35 million in financing from JMB Capital Partners to support business activities during the restructuring and they have also made claims that customer data security will remain a top priority. Jensen reassured the public that “data privacy will be an important consideration” in any future sale.
However, concerns about data security persist as any potential buyer of 23andMe will be subject to regulatory scrutiny to ensure that genetic information does not fall into the wrong hands. John Bringardner of Debtwire highlighted this risk, particularly given the company’s history. “Personal data collected by 23andMe has always been at risk,” he wrote, referencing the 2023 data breach. He also noted in his statement that legal disputes arising from the incident contributed significantly to the company’s financial struggles.
He is not the only one concerned, privacy advocates have urged customers to consider deleting their genetic data, and just days before the bankruptcy announcement, California Attorney General Rob Bonta issued a warning. He reminded 23andMe users of their rights under state law and encouraged them to take action, citing the company’s financial instability and the vast amount of sensitive consumer data it holds.