23andMe Files for Bankruptcy as Demand Cools for DNA Kits

DNA testing company 23andMe filed for bankruptcy in the US, Reuters reports, following struggles with waning demand for its ancestry kits and a damaging data breach in 2023.

The company's shares plunged 50% to 88 cents on Monday after co-founder Anne Wojcicki resigned as CEO following multiple unsuccessful takeover bids. 23andMe secured $35 million in financing over the weekend to sustain operations during the sale process, though it remains unclear whether other potential buyers exist.

Wojcicki's departure comes amidst scrutiny from authorities, including California Attorney General Rob Bonta, who expressed concerns about the fate of customer genetic data collected by 23andMe. While the company's privacy policies state that data could be sold to other firms, it insists that the bankruptcy proceedings will not affect its data storage, management, or protection practices.

23andMe's valuation peaked at nearly $6 billion in 2021, driven by surging interest in DNA testing kits. However, demand has since softened, impacting not only 23andMe but also its Blackstone-owned competitor, AncestryDNA.

Sales of consumer kits typically spike during the holiday season, but 23andMe has struggled to retain customers due to the one-time nature of the tests. Bernstein analysts suggest that the market for ancestry testing kits may be nearing saturation.

The company's reputation took a further hit in 2023 when hackers compromised the personal data of nearly 7 million customers over a five-month period. This breach raised serious concerns among customers about their privacy and the handling of their DNA data by testing firms.

23andMe reached a $30 million settlement in a lawsuit related to the breach late last year. The San Francisco-based firm has also implemented significant restructuring measures, including laying off 200 employees and halting the development of all therapies.

Wojcicki has been pursuing a buyout since last April but has been repeatedly rebuffed by 23andMe's board. She reportedly used her connections, including ex-husband and Google co-founder Sergey Brin, to secure initial investments. She will be replaced on an interim basis by Chief Financial Officer Joe Selsavage.

In a post on X, Wojcicki indicated her intention to submit another bid, though details remain undisclosed. Her previous offer of 41 cents per share valued 23andMe at approximately $11 million.

23andMe has disclosed estimated assets and liabilities ranging from $100 million to $500 million.

The company has entered into at least 30 agreements with pharmaceutical and biotech companies, including British drugmaker GSK, granting them access to its database. However, the majority of these agreements remain confidential.

"How the data is used is really the privacy policy that anybody who has used 23andMe clicks through and then accepts," said Anya Prince, a professor of law at the University of Iowa, to Reuters. "But as we know, most people don't read the privacy policies."

Following 23andMe's financial struggles, California Attorney General Bonta urged customers to delete their genetic data, highlighting concerns about data security. Prince suggests that deleting one's account can help mitigate future risks but does not guarantee complete data removal.