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Genetic testing company 23andMe has filed for Chapter 11 bankruptcy due to a significant drop in demand for its ancestry kits.

The company has also struggled to recover from a 2023 data breach that severely impacted its reputation.

Once valued at nearly $6 billion 23andMe has faced ongoing financial challenges. In the first nine months of its current fiscal year, the company reported a 7% decline in revenue and $174 million in losses.

The company voluntarily filed for bankruptcy in Missouri, seeking court approval to sell most of its assets. It stated that this step is intended to “facilitate a sale process to maximize the value of its business.”

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Leadership Changes 

Alongside its bankruptcy filing, 23andMe’s co-founder and CEO, Anne Wojcicki, announced her resignation, effective immediately.

Wojcicki attempted to take the company private but was unsuccessful. She will, however, remain on the board of directors.

During this transition, Joe Selsavage, the company’s Chief Financial Officer (CFO), will serve as interim CEO. Despite the bankruptcy filing, the company intends to continue operations throughout the sale process.

What Is 23andMe?

Founded in San Francisco, 23andMe Holding Co. is a personal genomics company with over 15 million customers worldwide. It went public in 2021.

The company offers direct-to-consumer genetic testing kits, allowing customers to submit a saliva sample for DNA analysis. These tests provide insights into:

• Ancestry and family heritage
• Inherited traits
• Potential health risks

However, interest in genetic testing kits has declined, contributing to the company's financial struggles.

Mark Jensen of 23andMe emphasized the company’s commitment to user privacy despite its challenges, “We are committed to continuing to safeguard customer data and being transparent about the management of user data going forward, and data privacy will be an important consideration in any potential transaction.”

HIPAA Privacy Concerns

One major issue surrounding 23andMe’s business model is that it is not subject to HIPAA regulations.

The Health Insurance Portability and Accountability Act (HIPAA) protects private health information when handled by hospitals, doctors, and health insurance companies. However, because 23andMe operates outside of the healthcare system, customers are treated as consumers rather than patients.

This legal distinction means that, unless explicitly prohibited in 23andMe’s terms of service, the company can:

• Use customer genetic data for research
  
• Sell or share data with third parties
  

Genetic privacy expert James Hazel told Consumer Reports “That means that as long as their terms of service don’t specifically prohibit it, these companies can conduct research on your genetic data, sell it, or share it with third parties.”

How to Delete Your 23andMe Data

California Attorney General Rob Bonta issued a consumer alert on Friday, urging 23andMe users to take control of their genetic data.