In a significant restructuring effort aimed at navigating through its financial turmoil, the well-known DNA testing company 23andMe has announced that it will be laying off approximately 40% of its workforce. This decision translates to around 200 job cuts, which come as the company grapples with challenges to remain viable in a competitive market and recover from recent setbacks. Alongside the layoffs, 23andMe will also halt its research and development endeavors concerning various therapies, signaling a pivot back toward its core business of genetic testing and consumer services.
The struggles faced by 23andMe are exacerbated by recent incidents of data breaches. Last year, the company disclosed that hackers had successfully infiltrated its systems, gaining unauthorized access to personal data belonging to millions of its users. This breach not only raised concerns about the safety and privacy of sensitive genetic information but also severely impacted the company’s reputation and trust among its customer base.
Financially, 23andMe’s share price has plummeted over 70% in the current year alone, highlighting the monumental challenges faced by the company. Under the leadership of co-founder and CEO Anne Wojcicki, efforts are being made to turn the tides, but the financial situation remains precarious. Recently released earnings data revealed a drop in revenue to $44 million for the three months spanning July to September, compared to $50 million during the same period the previous year. Although losses decreased from $75 million to $59 million, the outlook remains bleak.
On October 3rd, 2023, during a conference call with investors, 23andMe articulated a need for considerable changes within the organization, stating there was “substantial doubt” regarding its ability to maintain operations moving forward. The implications of the layoffs are not insignificant; the company anticipates that these cuts will result in one-time costs of around $12 million, attributed to severance packages, but will ultimately yield savings of approximately $35 million in an effort to stabilize the business.
In light of these changes, Ms. Wojcicki expressed the motivations behind the drastic decisions, emphasizing that the restructuring is imperative to ensure the long-term success of 23andMe’s primary consumer business and its research affiliations. The company is also exploring options for their in-development therapies, including potential licensing or sales, as it refocuses its efforts on its primary revenue-generating activities.
23andMe originally gained fame as a pioneer in the expanding ancestor-tracing market, providing customers with detailed insights into their genetic backgrounds and health. Its offerings appeal to a wide range of users, including high-profile individuals like rapper Snoop Dogg and billionaire investor Warren Buffett. When it went public on the Nasdaq in 2021, the company’s valuation soared to approximately $3.5 billion, with its stock peaking at $17.65. However, the stock has since substantially depreciated, currently trading at less than $5 per share, reflecting the adverse conditions it faces.
The data breach incident last December significantly compounded the company’s challenges, as personal information from approximately 6.9 million users was compromised. While the company firmly stated that no genetic data was accessed, the breach involved sensitive information such as family trees, birth years, and geographical locations. The breach resulted in investigations from regulatory bodies in both the UK and Canada, notably raising questions about the trustworthiness of a company that handles particularly sensitive personal data.
In a further twist to the company’s ongoing saga, the firm faced internal turmoil when seven out of its eight board members resigned in September, objecting to the lack of a satisfactory buyout proposal from Ms. Wojcicki. This sequence of events underscores not only the external challenges posed by market forces but also the internal struggles that the management faces in re-establishing credibility and direction in an era marked by both innovation and adversity in the genetic testing sector.
