Genetic-Testing Firm 23andMe Board Resigns as CEO Seeks to Take It Private

Genetic-Testing Firm 23andMe Board Resigns as CEO Seeks to Take It Private

There have been some interesting developments in the world of private genetic testing.

The directors of genetic testing firm 23andMe have resigned from the company’s board after not receiving a satisfactory take-private offer from CEO Anne Wojcicki.

Wojcicki, who has been trying to take the company private since April, proposed to acquire all outstanding shares of 23andMe not owned by her or her affiliates for $0.40 per share, in July.

“After months of work, we have yet to receive from you a fully financed, fully diligenced, actionable proposal that is in the best interests of the non-affiliated shareholders,” said the seven directors in a letter to the company’s co-founder and CEO.

A special committee formed by the company rejected Wojcicki’s previous proposal, deeming it insufficient and not in the best interest of the non-affiliated shareholders.

“That we have not seen any notable progress over the last 5 months leads us to believe no such proposal is forthcoming,” the directors added.

They also said the special committee is unwilling to consider further extensions, and that the company’s board agrees with it.

This move likely was an attempt by Wojcicki to shield the company from the public market’s pressures in the wake of dropping stock prices. Earlier this year, its Nasdaq listing was threatened.

Despite the firm’s initial popularity, the former tech unicorn’s funds have dried up and its value has dropped a stunning 96% since its peak share price of $17.65 in February 2021.

Shares of 23andMe are now priced at about $0.70, and in November the company was informed that it was in violation of Nasdaq rules that require a company to maintain a stock price above $1. That means it has about three months to bring the price up or risk being delisted.

As of today, the company’s shares are worth $0.32.

Interestingly, 23andMe has been sharing its databases with pharmaceutical giant GSK last year.

Under terms of the new data license, 23andMe will provide GSK with access to de-identified, summary data from global genome- and phenome-wide analysis of the 23andMe database, for a 12-month period, and offer its research services for analyses of the data over that same period. Any new drug discovery programs that GSK chooses to initiate during the agreement will be owned and advanced solely by GSK.

23andMe may be eligible for downstream royalties under certain uses of the database by GSK. As part of the amendment, 23andMe is taking the royalty option on three programs previously initiated by the two companies, which GSK will independently advance, with 23andMe retaining certain rights to downstream royalties. 23andMe and GSK both retain royalties on a number of active programs developed under the initial collaboration.

The move certainly lends itself to targeted drug discovery for genetic conditions. 23andMe hoped that this would be a pathway to profits. However, after the COVID-19 vaccines were rolled out and mandated, many potential users are now concerned about how pharmaceutical giants could use their genetic information.  This may be impacting the number of test kits sold.

The firm’s fiscal troubles can also be tied to a $30 million fine and court orders to provide three years of security monitoring to settle a lawsuit accusing the genetics testing company of failing to protect the privacy of 6.9 million customers whose personal information was exposed in a 2023 data breach. As a reminder, the hack targeted customers with Chinese and Ashkenazi Jewish ancestry.

The accord also resolves accusations that 23andMe did not tell customers with Chinese and Ashkenazi Jewish ancestry that the hacker appeared to have specifically targeted them, and posted their information for sale on the dark web.

A preliminary settlement of the proposed class action was filed late Thursday night in federal court in San Francisco, and requires a judge’s approval.

It includes cash payments for customers whose data was compromised, and lets customers enroll for three years in a program known as Privacy & Medical Shield + Genetic Monitoring.

Despite the initial promising start, 23&Me has never turned a profit, and its trajectory shows a further decline.

In fiscal 2024, the company reported $219.6 million in revenue, down nearly 27% from fiscal 2023. Its stock price has fallen accordingly. Last November, the Nasdaq put 23andMe on notice that it risked losing compliance with listing requirements due to a stock price that had fallen below the $1 per share threshold.

Wojcicki’s ownership stake in 23andMe is more than 20%. But thanks to a dual class structure in which certain shares have more voting power, Wojcicki’s combined stake gives her 49% of the voting power of the company’s total outstanding shares.

Wojcicki’s next steps will likely be to gather a new board and extend her company’s databank appeal to other pharmaceutical firms.

23andMe is on the right path, said Wojcicki. “The vision and where we’re going is solid, but the path to get there is more turbulent.”

Wojcicki is certain that genetic sequencing will transform healthcare and drug discovery, and that 23andMe is in a position to take full advantage of that when it happens.

But drug discovery is a very long process and it can be anywhere from 10 to 15 years on average from target discovery to an FDA-approved drug.

The question is whether investors are willing to wait that long.

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