DNA Testing Giant 23andMe Files for Bankruptcy

• The DNA testing company 23andMe, which inherited an astronomical fortune, declared insolvency for Chapter 11 proceedings even as the company’s CEO, Anne Wojcicki, resigned immediately. 
• Amidst the uproar over a previous data breach and the safety of their customers’ genetic data, owing to the company’s falling financial performance, it might be worth negligible amounts.

Pioneer genetic testing behemoth 23andMe—one which was once upon a time valued at a staggering $6B ($4.6 billion) —has now filed for Chapter 11 as it heads to sell itself under court supervision. This change comes following years of financial struggles, leadership revamps, and mounting legal issues. Along with this, one major shakeup was a move in which co-founder and CEO Anne Wojcicki stepped down with immediate effect but will retain her position as a board member of the company.

From Market Leader to Financial Struggler

23andMe was launched in 2006 and quickly became a pioneer in the field of in-home DNA testing, offering individuals an opportunity to learn about their ancestry or potential illness risk–all in personalised ways. With the preview of the service, the masses quickly converted into paying customers. In May 2021, 23andMe went public to witness a significant spike in company valuation up to $6 billion in just a few short hours, resulting in Wojcicki, who holds 49% of the company, becoming an overnight billionaire!

But 23andMe never managed to make any money, notwithstanding its big success early on. As consumer DNA testing waned in popularity, the company faced customer retention issues. This endeavour to switch one-time buyers into subscribers with a scope of personalised wellness plans never really took off. The separate one to develop drugs, using its huge genetic database to find new molecular therapies, didn’t initiate anything good either.

Layoffs, Exodus of Leadership, and Lost Trust

Financial troubles at the company intensified last year when it laid off 200 employees—nearly 40% of its workforce—and ceased all of its drug development programmes.  This marked a last-ditch effort to restructure the company.

But the strife didn’t stop at that. In September, all seven directors of 23andMe frontiered together to resign. Disheartened by Wojcicki’s refusal to contemplate third-party buyouts, the directors walked away, leaving a company whose foundations were severely shaken.

A Data Breach Redefining Trust 

With all the financial disarray taking over the company, 23andMe had no time to think about a major data breach in 2023. Hackers from black markets, indeed exploiting weak customer passwords, accessed the private information of nearly seven million users. The company released no records of DNA compromise, but there was a deep fear that it was prone to compromise. Background details such as family trees, birth years, and locations had been revealed; for people all over the world, this was a privacy fear. 

The regulator only cracked the whip. The UK Information Commissioner’s Office (ICO) slapped a fine of ₤4.59 million on 23andMe for mishandling customer data. Canada’s privacy watchdog has also embarked on an investigation to review how the organisation protects sensitive genetic information. 

But even after declaring bankruptcy, the ICO warned 23andMe that it is still subject to UK GDPR law and must continue protecting customer data.

Customers Towing the Line about Their DNA Data

The bankruptcy filing had many customers rethinking the fate of their genetic information. The California Attorney General issued a consumer warning in light of the financial instability at 23andMe, urging people to think about their data located in the company’s database and to consider having it removed from the platform altogether. 

Privacy experts express their concerns about individuals sharing with the company the most intimate data about their genealogy. Such sharing also implies family health risks and hence privacy, since it might involuntarily affect those who opt out of disclosing their DNA.

What Happens Next for 23andMe?

With the restructuring, Chief Financial Officer Joe Selsavage is set to serve as interim chief executive officer for 23andMe. The board has assured customers that the sale process does not affect its operational activities, while privacy protections of genetic information will remain intact.

Despite legal wrangling, an uncertain market of potential buyers cracks the future of 23andMe for uncertainty, especially with a decline of trust in the brand.