23andMe Files for Bankruptcy as Company Faces Financial Challenges

23andMe plans to sell most of its assets through a process overseen by the court.

Attendees visit the 23andMe booth at the RootsTech annual genealogical event in Salt Lake City, Utah, on Feb. 28, 2019. George Frey/Reuters

23andMe, a company that offers genetic testing services, announced Sunday that it has filed for bankruptcy protection. According to a March 23 press release, this move is part of a plan to sell its assets and restructure the business while continuing to operate, as the company faces financial difficulties.

“After a thorough evaluation of strategic alternatives, we have determined that a court-supervised sale process is the best path forward to maximize the value of the business,” said Mark Jensen, chair and member of the Special Committee of the Board of Directors.

He said that the company is committed to supporting its team members as well as protecting the privacy of customer data through this process.

“We want to thank our employees for their dedication to 23andMe’s mission. We are committed to supporting them as we move through the process. In addition, we are committed to continuing to safeguard customer data and being transparent about the management of user data going forward, and data privacy will be an important consideration in any potential transaction,” Jensen stated.

What This Means for the Company

23andMe plans to sell most of its assets through a process overseen by the court, which will involve soliciting bids from potential buyers over a period of 45 days. If multiple bids are received, an auction will be held to ensure the company gets the best possible deal. Any buyer will need to follow laws protecting customer data and obtain necessary regulatory approvals.

To keep the business running during this time, 23andMe has secured temporary financing of up to $35 million from JMB Capital Partners, which combined with money from ongoing operations, will keep the company afloat during the bankruptcy process.

Leadership Changes

As part of these changes, Anne Wojcicki, the co-founder and former CEO of 23andMe, has stepped down from her role but will remain on the company’s board. Joe Selsavage has taken over as Interim CEO, while Matt Kvarda will serve as Chief Restructuring Officer. Thomas Walper has joined as an independent director, and Jensen is now the chair of the board.

The company is also seeking permission to reject certain contracts, including leases for its offices in Sunnyvale and San Francisco, to reduce costs.

Concerns Over Data Privacy

The bankruptcy filing has raised concerns about how 23andMe will protect the sensitive genetic data it holds. California Attorney General Rob Bonta recently issued a warning to consumers, reminding them of their rights under state privacy laws. Such laws allow people to request that companies like 23andMe delete their genetic data or destroy any biological samples they have stored.

“California has robust privacy laws that allow consumers to take control and request that a company delete their genetic data,” Bonta said. “Given 23andMe’s reported financial distress, I remind Californians to consider invoking their rights and directing 23andMe to delete their data and destroy any samples of genetic material held by the company”.

Consumers can manage their data by logging into their 23andMe accounts and using the settings to request the deletion or destruction of samples.

The bankruptcy filing comes after the company rejected a proposal from Wojcicki and her affiliates to acquire the business. The proposal was disclosed earlier this month.

23andMe is working with several advisors including law firms Paul, Weiss, Rifkind, Wharton & Garrison LLP and Morgan, Lewis & Bockius LLP, as well as restructuring and investment banking firms Alvarez & Marsal and Moelis & Company.

From NTD News