On Friday, days before 23andMe’s bankruptcy filing, California Attorney General Rob Bonta issued an urgent alert reminding 23andMe customers of their legal rights under state law — and called on them to consider deleting and destroying any genetic data held by the company. Bonta’s office pointed to 23andMe’s ongoing financial distress and “trove of sensitive consumer data” the company has amassed.
Months of turmoil
23andMe was founded in 2006, with a promise to revolutionise the future of genetics and health care. The company became known for its saliva-based DNA testing kits — purchased by millions of customers eager to learn more about their ancestry — and later dived further into health research and drug development.
But recent years have been far from smooth sailing for 23andMe. And the voluntary bankruptcy filing caps months of turmoil.
Last September, all of its independent directors resigned in a rare move following acquisition negotiations with Wojcicki.
The company then announced in November that it would lay off 40 per cent of its workforce, or more than 200 employees, and discontinue its therapeutics division. And in January, the board’s special committee said it was exploring strategic alternatives, including a possible sale.
In recent securities filings, 23andMe continued to warn about its “ability to continue as a going concern” — which is accounting-speak for having the resources needed to operate and stay in business.
23andMe has faced an uncertain future for some time.Credit: Bloomberg
The Chapter 11 filing from 23andMe reported total debts of more than $US214.7 million as of the end of last year. Assets, meanwhile, amounted to over $US277.4 million.
What is next?
23andMe says that filing for Chapter 11 bankruptcy protection will help facilitate a sale of the company, meaning that it’s seeking new ownership.
In a statement, Board chair Mark Jensen said that this court-supervised process was “the best path forward.” He added they also expect it to help 23andMe’s efforts to cut costs as well as resolve legal and leasehold liabilities.
23andMe is looking to pull back from its real estate footprint. Among motions filed on Sunday, the company is seeking court approval to reject lease contracts in San Francisco and Sunnyvale, California, for example, in efforts to help cut down on expenses.
Otherwise, 23andMe says it plans to continue operating. The company says it’s received $US35 million in debtor-in-possession financing from JMB Capital Partners to help support its business throughout the bankruptcy process.
23andMe says its bankruptcy filing won’t change the way it stores or protects data. Jensen, the board chair, said Sunday that 23andMe is “committed to continuing to safeguard customer data” and that data privacy will be “an important consideration” in any future sale.
John Bringardner of Debtwire notes that any new buyer of 23andMe will have to comply with regulatory approvals that ensure “customer data won’t end up in unscrupulous hands.”
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Still, who will end up owning 23andMe down the road is unknown. And experts note that risks remain.
“Personal data collected by 23andme has always been at risk,” Bringardner wrote in emailed commentary on Monday — pointing particularly to a 2023 data breach that compromised ancestral information for nearly 7 million 23andMe customers. He adds that litigation spanning from the aftermath of this breach helped drive up liabilities that eventually contributed to the current bankruptcy filing.
Last year, 23andMe agreed to pay $US30 million in cash to settle a class-action lawsuit accusing the company of failing to protect customers whose personal information was exposed in this breach. On Sunday, the company said that it plans to use bankruptcy proceedings to “resolve all outstanding legal liabilities” stemming from the October 2023 incident.
Beyond this data breach, uncertainty about the company’s future overall has also led some to recently urge 23andMe customers to delete their data.
AP, Bloomberg
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