23andMe, the popular genetic testing firm, has announced significant layoffs affecting roughly 40% of its workforce as it struggles with mounting financial pressures and operational upheaval. This decision will see more than 200 employees losing their jobs, part of the company's broader strategy to streamline operations and cut costs significantly. Alongside these layoffs, the company is also shuttering its therapeutics division, ceasing all drug development programs as it focuses on stabilizing its core business of consumer genetics and ancestry solutions.
The announcement, made by CEO Anne Wojcicki, signifies the magnitude of the challenges 23andMe is currently facing. The CEO described these steps as "difficult but necessary actions" aimed at positioning the company for future success. The restructuring is expected to save the company more than $35 million annually, even as it anticipates incurring about $12 million to cover severance and transition costs.
This restructuring’s urgency is underscored by the company's financial history, where it recorded substantial losses over the past year. Last year alone, 23andMe reported net losses reaching $667 million, more than double its previous year's losses of $312 million. Recent quarterly earnings showed continued downward trends, with the firm reporting $44 million revenue for the second quarter of its fiscal year, down from $50 million the year prior, emphasizing decreased sales from its testing kits.
Adding to the turmoil, the company faced a major data breach last October, which compromised the data of close to 7 million users and culminated in legal actions against it. Even before these developments, the company's stock price had dropped dramatically since going public via SPAC merger at a valuation of $3.5 billion back in 2021. Its share price had slipped below $1, threatening its Nasdaq listing.
The aftermath of the data breach led to the resignation of all seven independent directors from the board, indicating internal disagreements and challenges clashing with Wojcicki's vision for the company’s future. The board had deemed the transaction proposals inadequate, leading to their bold decision to step down. Wojcicki, still holding the reins of the company, expressed disappointment over the mass resignations but maintained her belief in taking the company private to distance it from public market pressures.
Since its inception, 23andMe has sold over 12 million DNA kits, allowing users to send saliva samples for analysis, which offers insights about ancestry and personal genetics. The closure of the therapeutics division marks the end of 23andMe's foray_into the pharmaceutical industry, where it had aimed to leverage genetic information to develop impactful therapies, including potential cancer treatments.
Despite the company's reassurances about the security of customers’ genetic data, uncertainties loom large. A spokesperson recently declined to comment on how these layoffs would affect user data security, highlighting the possible ramifications of the company’s instability on its users’ personal information.
Patients and customers are likely concerned, especially considering the previous data breaches. With the Federal Trade Commission overseeing direct-to-consumer genetic testing companies, 23andMe needs to be transparent about how it handles consumer data moving forward. Consumers have little recourse if the company revises its privacy policies or data usage conditions since the protections under HIPAA do not apply to these types of companies.
To sum it up, 23andMe faces uncertain times marked by significant layoffs and serious strategic re-evaluations. The closure of its therapeutics division points to the company's struggle not just to remain viable but also to provide adequate data protection for its customers.
