Regeneron acquires bankrupt DNA testing startup 23andMe and its data for $256 million

Regeneron Pharmaceuticals announced Monday that it’s buying “substantially all” of 23andMe’s assets for $256 million. The deal comes just weeks after the once buzzy DNA testing startup, once valued near $6 billion, filed for Chapter 11 bankruptcy.

According to Regeneron, the acquisition will include 23andMe’s Personal Genome Service, Total Health, and Research Services business lines. The pharma giant secured the deal after participating in a bankruptcy auction.

“We believe we can help 23andMe deliver and build upon its mission to help people learn about their own DNA and how to improve their personal health, while furthering Regeneron’s efforts to improve the health and wellness of many,” Dr. George Yancopoulos, president of Regeneron said.

According to the new release, the deal does not include Lemonaid Health, 23andMe’s telehealth unit that it picked up for around $400 million in 2021. That business is being shut down, though Regeneron said it plans to offer jobs to all employees tied to the business units it’s acquiring.

The acquisition still needs approval from the U.S. Bankruptcy Court for the Eastern District of Missouri. If greenlit, it’s expected to close sometime in Q3 of this year.

23andMe made a splash in its early years with mail-in DNA kits that helped customers trace ancestry and identify genetic traits. It went public in 2021 through a SPAC deal and was briefly worth billions. But its momentum didn’t last.

After going public, the company struggled to build steady revenue and expand into research and therapeutics. The situation worsened when a data breach in 2023 exposed information from nearly 7 million customers. The fallout triggered serious privacy concerns, especially since some of the affected accounts reportedly belonged to wealthy individuals in the U.S. and Europe.

As part of the bankruptcy process, 23andMe required bidders to stick to its privacy rules. A court-appointed Consumer Privacy Ombudsman will review the deal and is expected to file a report by June 10. Regulators, including the Federal Trade Commission, have raised concerns about the fate of customer data during the sale.

“Several lawmakers and officials, including the Federal Trade Commission, had expressed concerns about the safety of consumers’ genetic data through 23andMe’s sale process,” CNBC reported.

“We are pleased to have reached a transaction that maximizes the value of the business and enables the mission of 23andMe to live on, while maintaining critical protections around customer privacy, choice, and consent with respect to their genetic data,” said Mark Jensen, 23andMe’s board chair.

23andMe: A Quick Fall From Grace

The bankruptcy didn’t come out of nowhere. Last year, we reported on 23andMe’s dramatic collapse from Silicon Valley darling to penny stock. Once trading at nearly $18 a share, its value has dropped by 96%. As of Monday, the company’s market cap had shrunk to around $25 million.

The 2023 data breach also stirred fresh criticism. While 23andMe initially claimed that only 14,000 customers were directly affected, further disclosures revealed the stolen data included nearly 7 million users and, reportedly, high-profile individuals.

Founded in 2006 by Linda Avey, Paul Cusenza, and Anne Wojcicki, 23andMe was a trailblazer in the personal DNA testing market, offering consumers genetic insights into their ancestry and health. Despite its initial success, the company has struggled with profitability. Its business model, which relied on customers taking a one-time test, forced 23andMe to continuously seek new revenue streams, including unsuccessful ventures into subscription services and drug development.

What started as a pioneering consumer health tech company has ended up in the hands of Big Pharma, along with millions of genetic profiles. Now the question is: What happens next?