DNA-testing company 23andMe (Nasdaq: ME), once an industry leader that attracted millions of customers, including rapper Snoop Dogg and investor Warren Buffett, has announced significant cuts to its operations, with plans to lay off 200 employees, or roughly 40% of its workforce. The company also said it will discontinue development of its therapeutic programs. Here’s what to know about the latest development and what led up to it:
Board exodus
The latest move comes as the company looks to stabilize after facing significant challenges, including the resignation of all seven independent directors in October.
Data breach
Last year, 23andMe suffered a massive data breach when hackers accessed the personal information of 6.9 million users. The incident led to a class-action lawsuit, which 23andMe agreed in September to settle for $30 million.
The problem with SPACs
In 2021, 23andMe went public through a merger with a special purpose acquisition company, or SPAC. It later expanded into drug discovery and weight loss sectors. However, as DNA test kit sales declined, so did its financial health. By fiscal 2023, it reported a $312 million net loss, with its stock down 98% since going public, currently at about $4 after a reverse stock split in October 2024.
Separate reports have found that things have often not ended well for companies that took advantage of the pandemic-era SPAC boom, which led to billions in losses for investors and a number of bankruptcies for companies.
What’s next for 23andMe and its employees?
The layoffs are expected to result in $12 million in severance, termination, and transition-related costs and are part of a broader plan to streamline the business and achieve annual cost savings of $35 million.
The company says it is exploring various strategic options for its therapeutic programs, including potential licensing agreements and the sale of assets in its development pipeline.
“We are taking these difficult but necessary actions as we restructure 23andMe and focus on the long-term success of our core consumer business and research partnerships,” said Anne Wojcicki, CEO, cofounder, and chair of the board, in a statement.
Shares of 23andMe were up almost 6% to $4.87 on the news, which was announced late yesterday. The stock is down more than 73% year to date.