Three years ago, 23andMe was a booming success, with a share price even higher than Apple’s. Millions of people were sending in saliva samples to learn about their ancestry, family connections, and genetic makeup.
However, the company now finds itself struggling for survival. Its share price has plummeted, narrowly escaping a stock market delisting this week.
The company holds highly sensitive data about its customers, raising concerns about the future of its valuable DNA database. Despite these challenges, 23andMe remains optimistic about its prospects, reaffirming its commitment to safeguarding customer data and prioritizing privacy.
The company’s decline
Since its peak valuation of $6 billion in 2021, 23andMe’s share price has plunged by 99%. This dramatic fall stems from several factors, including a struggle to turn one-time customers into recurring subscribers.
In a significant restructuring move, 23andMe has announced plans to cut 40% of its workforce, affecting approximately 200 employees. This decision comes as the company faces financial difficulties, including a 70% drop in its share price over the past year and the aftermath of a major data breach.
CEO Anne Wojcicki stated that the layoffs are necessary to refocus on the company’s core DNA testing services and research partnerships. The restructuring aims to save around $35 million annually, despite incurring one-time costs of $12 million.
These developments underscore the ongoing challenges and transformations in both the energy and biotechnology sectors, reflecting broader trends towards sustainability and financial stability.
Key challenges faced by 23andMe
23andMe’s struggles mainly stem from two issues: a lack of a sustainable business model and privacy concerns.
Business Model
The company generates most of its revenue by selling DNA testing kits. Customers purchase a kit, send in their saliva sample, and receive detailed insights about their ancestry and genetic traits. However, this model doesn’t encourage repeat purchases.
Without a subscription model, the company lacks a steady revenue stream, making long-term financial stability and growth difficult.
23andMe tried to monetize its extensive genetic database by collaborating with pharmaceutical companies for drug research. While promising, drug development requires significant time and investment, delaying any financial returns and impacting the company’s short-term revenue.
As the consumer DNA testing market has matured, growth has slowed. Most people interested in genetic testing have already purchased kits, resulting in market saturation and making new customer acquisition costly.
Privacy concerns
Privacy concerns about genetic data use and protection have also affected customer trust. High-profile data breaches in 2023 heightened these fears, making it tougher for 23andMe to attract and retain customers.
One breach led to a $30 million class-action lawsuit settlement and damaged the company’s reputation.
Handling genetic data responsibly remains a significant privacy issue. Although 23andMe claims it anonymizes data, concerns persist about its use, especially with pharmaceutical partnerships like GlaxoSmithKline’s.
Leadership Turmoil
Recently, the entire board of directors resigned following a dispute with CEO Anne Wojcicki over the company’s strategic direction. This leadership crisis has added to the uncertainty surrounding the company’s future.
Risk of Bankruptcy
Analysts have speculated that 23andMe could face bankruptcy if it fails to stabilize its finances. This risk brings concerns about the future of the genetic data it holds for millions of customers.
These challenges underscore broader obstacles faced by biotech companies, especially those dealing with sensitive personal data and relying on one-time purchase business models.
