The personal genomics company 23andMe is further cutting costs: It will lay off 40% of its workforce and shut down all clinical research programs. These measures are expected to save the company $35 million annually as it explores strategic options, including a partial sale of the business. Following this news, 23andMe shares rose nearly 3%.
Details
As part of a business restructuring, 23andMe will cut 40% of its workforce and close all clinical and preclinical research programs, the company announced on Monday, November 11. Two of its oncology projects are in the earliest phases of clinical trials, with others in animal testing.
These cost-cutting measures are expected to reduce operating expenses by about $35 million. 23andMe will now focus on its core consumer business and research partnerships, explained CEO and cofounder Anne Wojcicki. The company is evaluating all strategic options to maximize the value of its therapeutics programs, including licensing agreements, asset sales, and other transactions.
On Monday, 23andMe stock rose almost 3% to $4.60 per share, with further gains in premarket trading today, Tuesday, November 12. According to MarketWatch, the company is covered by a single analyst, who has a “buy” recommendation at a target price of $8.40 per share, for upside of almost 83%.
Context
Anne Wojcicki and Linda Avey founded 23andMe in 2006. The startup’s first investor was Google cofounder (and Wojcicki’s then-husband) Sergey Brin, with later investments from Yuri Milner and Google Ventures. The company initially sold direct-to-consumer genetic tests that allow users to trace their ancestry, find lost relatives, and get health recommendations based on their genetic profiles. However, 23andMe’s growth failed to live up to expectations. Early challenges included the high test price of $399 per unit and run-ins with the FDA. Nevertheless, Wojcicki took the company public in 2021, with its valuation peaking at $6 billion. Faced with ongoing losses, she sought to expand the business: 23andMe acquired telehealth company Lemonaid Health and granted exclusive access to its genetic database first to pharmaceutical giant GSK and later to other partners. The company also ventured into drug development, focusing on oncology and immunology, the very programs it is now shuttering.
Despite these efforts at diversifying the business, losses continued to mount, and the company’s market capitalization fell drastically, now standing at just $111 million. To save 23andMe, Wojcicki initiated three rounds of layoffs last year and sold a subsidiary. Reuters reports that since April, she has unsuccessfully tried to take the company private. In September, all independent directors resigned from the board over Wojcicki’s buyout plan.
