23andMe Files for Bankruptcy After Years of Losses, Data Breach

Gene testing company 23andMe has filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, marking a significant turn in its journey. The company, which went public in 2021, has never achieved profitability. The decision to file for bankruptcy comes after years of unsuccessful attempts to find a sustainable business model. The company's chief financial officer, Joe Selsa, will take over as interim CEO, replacing Anne Wojcicki, who has resigned but will remain on the board.

In a statement announcing the bankruptcy, 23andMe cited the need to maximize the value of its business through a court-supervised sale process. The company's board of directors, after evaluating various strategic options, concluded that this path was the best way forward. This move follows a series of challenges, including significant layoffs and the cessation of all therapeutic research and development efforts as part of a restructuring plan announced at the end of last year. The company had planned to lay off approximately 40% of its workforce, or around 200 employees, and halt all therapeutic research and development.

23andMe's core product is a home DNA testing kit that offers personalized genetic insights, claiming to identify potential health risks such as the likelihood of developing Alzheimer's disease or certain cancers. The company had aimed to convert one-time buyers into subscribers by providing continuous feedback and personalized health plans. However, this strategy did not yield the desired results, contributing to the company's financial struggles. The company's financial situation has been deteriorating, with a cumulative net loss of $458 million for the first three quarters of the 2024 fiscal year, an 85% increase compared to the previous year. Despite raising substantial funds, high operating costs and declining sales have made it difficult for the company to achieve profitability.

In November 2023, the company faced a major data breach, with nearly 7 million users' data, including genetic information, being stolen by hackers. This incident raised concerns about data security and damaged the company's reputation, leading to potential legal actions from affected users. Additionally, the competitive landscape in the gene testing market has become increasingly crowded, with rivals offering similar services at lower prices, making it challenging for 23andMe to maintain its market share. The company has also faced regulatory scrutiny, including a temporary halt on its health-related genetic reports by the U.S. Food and Drug Administration (FDA) in 2013, which, although later lifted, caused significant reputational damage.

The future of 23andMe remains uncertain as it navigates through this challenging period. The company has secured approximately $35 million in debtor-in-possession (DIP) financing commitments, which will support its operations during the sale process. The outcome of this bankruptcy filing will determine the fate of one of the pioneering companies in the direct-to-consumer genetic testing market.