Keep in mind when everybody was discovering they have been 12% Scandinavian and posting colourful pie charts of their genetic heritage on social media? These glory days of DNA testing have come to a shocking finish with Monday’s announcement that pharmaceutical large Regeneron will purchase 23andMe for simply $256 million in a chapter public sale—a fraction of the corporate’s former $6 billion valuation.
The deal marks a dramatic conclusion to what was as soon as heralded as a revolutionary client well being firm. From Oprah’s “favourite issues” listing to partnerships with main analysis establishments, 23andMe appeared destined for greatness. So what precisely occurred? How did an organization that had us all willingly sending our most private organic data by means of the mail find yourself promoting itself for pennies on the greenback?
When the ancestry testing growth went bust
The primary main crack in 23andMe’s basis got here from an sudden supply: market saturation. The corporate’s preliminary progress was explosive, as curious shoppers eagerly bought DNA kits to find their ancestral backgrounds and potential well being predispositions. However it turns on the market’s a pure ceiling to this market—when you’ve examined your DNA, you usually don’t have to do it once more.
By 2019, trade experiences confirmed important slowdowns in new buyer acquisition throughout all DNA testing firms. Merely put, most individuals thinking about genetic testing had already bought a equipment. 23andMe discovered itself going through the basic progress firm nightmare: a plateauing buyer base and shareholders anticipating continued enlargement.
The pandemic additional dampened curiosity in ancestry testing. When individuals have been fearful about quick well being issues and financial uncertainty, discovering distant cousins immediately appeared much less interesting. Vacation present gross sales—a serious driver of DNA testing kits—plummeted as household gatherings have been canceled and discretionary spending tightened.
With out a regular stream of recent clients, 23andMe’s direct-to-consumer enterprise mannequin confronted critical challenges. The corporate tried to pivot towards subscription companies and extra well being experiences, however these efforts did not generate the income wanted to switch the declining gross sales of testing kits.
When your online business mannequin wants a DNA transplant
As their client enterprise struggled, 23andMe more and more appeared towards their different main asset: the large genetic database that they had amassed from tens of millions of shoppers. The corporate had at all times maintained twin income streams—promoting testing kits to shoppers whereas concurrently leveraging anonymized genetic information for medical analysis and pharmaceutical partnerships.
This pivot turned extra pronounced in 2018 when 23andMe introduced a $300 million cope with pharmaceutical firm GlaxoSmithKline, giving the drug large entry to the corporate’s genetic database for drug improvement functions. Whereas this deal supplied a much-needed money infusion, it additionally signaled a basic shift in 23andMe’s enterprise focus.
The corporate started pouring sources into its personal drug improvement division, hoping to rework from a client testing firm right into a pharmaceutical developer that would create medicines based mostly on insights from its genetic database. This transformation required important capital funding with unsure returns, stretching the corporate’s funds throughout an already difficult interval.
In the meantime, rivals like Ancestry.com started consuming into 23andMe’s client market share with aggressive advertising and marketing and expanded choices. The once-innovative firm discovered itself caught between two enterprise fashions—neither of which was producing enough income to maintain its operations and justify its lofty valuation.
When your most beneficial asset turns into your largest legal responsibility
Maybe essentially the most damaging blow to 23andMe got here in October 2023, when the corporate disclosed a devastating information breach. Hackers accessed the non-public data of roughly 6.9 million clients—almost half of the corporate’s consumer base. Whereas the corporate insisted that genetic data wasn’t compromised, the breach included entry to non-public particulars and ancestry data for tens of millions of affected customers.
The timing couldn’t have been worse. With client belief already fragile concerning genetic privateness, the info breach created a public relations nightmare and accelerated the corporate’s already declining gross sales. New clients turned more and more reluctant to share their genetic data with an organization that had demonstrated safety vulnerabilities.
The breach additionally uncovered 23andMe to important authorized legal responsibility. A number of class-action lawsuits have been shortly filed, claiming negligence in defending delicate buyer data. These authorized challenges added additional monetary strain to an organization already combating declining income and elevated operational prices.
Past the quick monetary influence, the info breach severely broken 23andMe’s model popularity. An organization constructed on the premise that clients might belief it with their most intimate organic data now confronted basic questions on its safety practices and dedication to privateness.
When the cash lastly runs out
By early 2024, these mixed pressures had created an untenable monetary state of affairs. Regardless of a number of rounds of layoffs and cost-cutting measures, 23andMe discovered itself unable to fulfill its monetary obligations. In March, the corporate filed for chapter safety, establishing the public sale course of that might in the end result in Regeneron’s acquisition.
The chapter submitting revealed simply how dire the corporate’s state of affairs had turn into. As soon as flush with investor money and valued at billions, 23andMe now struggled with mounting money owed, authorized liabilities, and inadequate income to cowl its operational prices. The corporate that had pioneered an trade was now preventing for survival.
The chapter proceedings instantly triggered issues in regards to the destiny of the corporate’s most beneficial asset: the genetic information of roughly 15 million clients who had trusted 23andMe with their DNA samples. Lawmakers and privateness advocates warned that this delicate data might doubtlessly be offered to unscrupulous patrons with out satisfactory safety for shoppers.
In response to those issues, 23andMe agreed final month to permit a court-appointed overseer to watch the corporate’s dealing with of buyer genetic data and safety insurance policies all through the chapter course of. This uncommon step acknowledged the distinctive sensitivity of the property concerned on this specific company failure.
When a pharmaceutical large sees alternative in your demise
Enter Regeneron Prescription drugs, an organization with a really totally different perspective on 23andMe’s worth. The place traders noticed a failing client enterprise, Regeneron acknowledged an unprecedented alternative to accumulate a large genetic database with huge potential for drug discovery and improvement.
Regeneron’s curiosity in 23andMe wasn’t shocking to trade observers. The 2 firms had already established a partnership in 2020 to collaborate on drug improvement utilizing genetic insights from 23andMe’s database. This current relationship gave Regeneron insider information in regards to the potential worth of 23andMe’s genetic data for pharmaceutical analysis.
For Regeneron, the $256 million buy worth represents a cut price for entry to fifteen million genetic profiles—information that might be terribly costly and time-consuming to gather by means of conventional analysis strategies. When damaged down per buyer, Regeneron is paying roughly $17 for every genetic profile, a minuscule quantity contemplating the potential worth for drug improvement.
The acquisition aligns completely with Regeneron’s enterprise mannequin, which focuses on creating medicines for situations starting from eye illnesses to most cancers to coronary heart situations. Entry to 23andMe’s various genetic database offers them with an unprecedented useful resource for figuring out potential drug targets and understanding genetic components in illness improvement.
When your DNA turns into another person’s asset
The phrases of the deal reveal a lot about Regeneron’s priorities. The pharmaceutical firm will purchase all items of 23andMe besides its telehealth service Lemonaid Well being, which the genetic testing agency plans to wind down. This selective acquisition suggests Regeneron values the genetic information and testing infrastructure way over 23andMe’s client well being companies.
After the transaction completes, anticipated within the third quarter of this 12 months, 23andMe will proceed to function as an entirely owned unit of Regeneron. This construction permits Regeneron to take care of the consumer-facing model whereas gaining direct entry to the precious genetic data it incorporates.
Recognizing the sensitivity of the info concerned, Regeneron has publicly dedicated to complying with 23andMe’s current privateness insurance policies and relevant legal guidelines concerning buyer information use. The corporate has additionally said its willingness to element its supposed makes use of of the info to the court-appointed overseer monitoring the chapter proceedings.
These assurances try to deal with the numerous privateness issues raised all through the chapter course of. Nonetheless, additionally they spotlight the basic actuality of the state of affairs: genetic information supplied by shoppers for private insights will now be owned by a pharmaceutical firm with very totally different goals than the unique recipient of that data.
When one firm’s failure modifications a whole trade
The autumn of 23andMe and its acquisition by Regeneron represents greater than only one firm’s enterprise failure—it doubtlessly alerts a basic shift within the direct-to-consumer genetic testing trade. The spectacular rise and fall of the trade pioneer raises questions in regards to the viability of comparable enterprise fashions and the final word destiny of genetic data collected by these firms.
For shoppers, the 23andMe saga gives a cautionary story in regards to the long-term implications of sharing genetic data with non-public firms. The chapter demonstrates how shortly an organization’s circumstances can change, doubtlessly placing extremely delicate private data in danger regardless of preliminary guarantees of privateness and management.
For the broader genetic testing trade, 23andMe’s chapter means that the direct-to-consumer mannequin alone could not present sustainable progress as soon as preliminary market curiosity is glad. Future firms on this area will possible want to determine clearer secondary income streams from the outset, doubtlessly making the pharmaceutical functions of genetic information extra central to their enterprise fashions fairly than an add-on function.
The acquisition additionally highlights the growing overlap between client well being expertise and conventional pharmaceutical firms. As extra client firms acquire helpful well being information, they turn into enticing acquisition targets for established healthcare gamers trying to achieve aggressive benefits in drug improvement and personalised medication.
In the end, the 23andMe story reveals the advanced challenges of constructing companies round extremely private buyer information. When your online business asset can also be another person’s most intimate organic data, the usual guidelines of company acquisitions, bankruptcies, and pivots tackle fully new dimensions of moral and privateness concerns.
The $256 million sale worth could resolve 23andMe’s quick monetary issues, however the broader questions on genetic privateness, client rights, and the commodification of organic data will proceed lengthy after this specific company transaction is full.