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In two thousand and six, a new genetic testing startup came onto the scene.
Twenty three meters was founded about two decades ago on a really tantalizing idea.
That's Bloomberg biotech reporter Jerry Smith.
You could spit into a tube and learn a lot of things about your family history and whether you have any health risks.
That tantalizing idea quickly turned into a lucrative business.
They went public in twenty twenty one, valued at three and a half billion dollars. There's hundreds and hundreds of biotech companies out there, so to have a three and a half billion dollar valuation shows that you have a lot of support from Wall Street.
But the company hasn't turned a profit since it's IPO, and finally, on March twenty third, twenty three and meters filed for bankruptcy. So I called up another Bloomberg reporter, Nathan Randalls, who covers bankruptcy and corporate restructuring. Have you used twenty three in me?
I have not, but my mom has. That was a revelation in the last day or so.
How did you react when she told you.
That I asked your questions about and if she had read the terms of service and whether she was aware that her genetic data like this could be sold, and of course, like the answer was like, no, of course I didn't read the terms of service. That's ridiculous.
As twenty three and meters starts bankruptcy proceedings, more and more customers are starting to come to the same realization because their genetic data is likely the company's most valuable asset, and now that asset is for sale. The big question on everyone's minds right now seems to be what is going to happen to all that data.
All indications are that it will sell to somebody. We don't know exactly who, So it will be pretty fascinating to see how much someone is willing to pay for the genetic information of fifteen million people.
Not everyone is willing to wait around and find out. State attorneys general and privacy experts are urging users to delete their data before it's hoovered up by someone else, because this isn't just any old data.
You hear about data breaks all the time and people's credit card information gets exposed or their passwords gets exposed. Well, you can change your password, and you can change your credit card information, and you can't change your DNA.
I'm Sarah Holder, and this is the big take from Bloomberg News Today. On the show, what twenty three and Me's bankruptcy says about the future of the genetic testing industry and what a possible sale could mean for millions of users' genetic data. When twenty three and meters first launched, it promised to democratize genetic testing.
The idea would be that you take one of these tests and you find out that you know you are have a certain health risk, and you could potentially eat differently, or you could exercise more, or you could find out that you have some genetic disorder and that there's a promising treatment out there that could potentially cure it. You could reconnect with a long lost relative, or maybe find out something about your ancestors where they came from.
Bloomberg Biotech reporter Jerry Smith says, right away, a lot of people were excited about the company's potential.
The company started to take off. You know, famously Oprah, you know, she put twenty three and meat test kits on her list of annual favorite things.
You get a twenty three and meat test twenty.
Three and she and she said that, you know, it's it's the ultimate selfie.
The ultimate selfie, a look inside yourself.
And so the company is starting to gain some traction, but at the same time, it's it's running into some challenges. Doctors are not really embracing these test kits, and you know, for the average person, it's not entirely clear how valuable these tests are.
Sure, it was nice to know more about your genetics, but it was hard to actually use that information in a healthcare setting. Doctors didn't always know what to do with the twenty three and meters results patients were bringing in, and knowing what percent Greek you are was more of a fun fact than a game changer. And then came legal trouble.
Two years ago, they had a pretty large data breach where you know, millions of the customers had their DNA exposed and the company had to end up paying millions of dollars to settle a lawsuit over that. And then last year, the sales are declining and the company is trying to evolve and pivot. One thing it did was started selling subscriptions where you could get blood tests and
DNA tests that it didn't really gain much traction. Another interesting thing that the companies did over the years was do deals with large pharmaceutical companies, and these drug makers would use the data from these DNA samples as a way to find different drug targets and potentially speed up the process of developing treatments. Twenty three of Meters even started to try and invent medicines on their own. Drug
development is a really hard business. It takes many years, it's highly risky, and you know, the company didn't really get a payoff from that. So sales are slowing of the DNA test kits, the company's stock prices starting to decline.
In an effort to save the struggling company, last year, co founder and CEO and Wujitski offered to buy twenty three and meters and take it private.
The company has a special committee. They rejected her offer basically said it wasn't high enough and she didn't have enough financing. And then the board resigns in mass and so the company's losing money and it's really going through this crisis. It's stock price had fallen so much that it was in dayer being delisted on the Nasdaq.
Wijitski made more last ditch efforts to buy the company in early twenty twenty five, including one offer of over seventy million dollars. Those failed, too, Twenty three and Meters was out of options, so in March twenty third, the company filed for bankruptcy and Wijitski resigned. Entering Chapter eleven doesn't mean twenty three in Me's business shutters overnight. The company is continuing to market itself to investors, and it's
hoping to secure a loan to help it refinance. But Bloomberg's bankruptcy reporter Jonathan Randalls says what the filing does mean is that twenty three and meters is starting the process of selling itself off.
Customer information is often sold in Chapter eleven Haitian information. If you're a big hospital chain or a health system that's filed for bankruptcy and you need to find a new operator for your hospital because you can no longer afford to do so, that will necessitate transferring the patient information from a specific medical clinic or hospital.
If a pharmacy chain goes bankrupt, one of its most valuable assets is its customer list with prescription information.
These types of transactions are happening all the time, and there's a chance that some part of your personal information has already transacted into bankruptcy.
But those bankruptcies don't tend to attract the same level of attention as this twenty three and me filing has, And Jonathan says that makes sense.
The difference I think is one, it's huge, Like fifteen million customers is way bigger than like most of the other cases I'm seeing. But also I have never covered a case where it's someone's DNA or genetic information. I can't imagine like something more personal than that, And I think that that is why it's like unsettling to people that this is happening.
Yeah, I mean, it's an obvious question, but like why does it feel so much more unsettling? Why do people pay more attention when it's DNA versus your prescription information?
It's like who you are, Like it's selling you. And not only is it who you are, you are an asset and your information is a valuable asset that can be transacted between companies. Is something that like this has done quite a good job of crystallizing, and I think it's like very surprising to people that their data is this valuable and that a price tag can be attached to it.
Last week, a judge officially granted twenty three and meters permission to try to sell that data in an auction, and markets proved just how valuable it is.
Shares of the.
Company surged as much as one hundred and fifty eight percent. Under bankruptcy rules, the company will need to bring in more than it owes its creditors. That's at least two hundred and fourteen million dollars before anything can be paid
to shareholders. But privacy experts, government officials, and some vocal twenty three and me users are starting to share concerns about what happens if millions of DNA profiles get sold to the highest bidder, the rush to delete data from twenty three and meters, and the process of selling all that remains after the break. After the genetic testing company twenty three and meters filed for bankruptcy, TikTok and Instagram were flooded with video after video sharing one urgent message.
Listen, your DNA could literally be so to the highest bidder unless you take action. You need to delete your data right now.
Come with me to delete my data off of twenty three and me.
It's not just a social media phenomenon, though. The state attorney's General for New York, California, and Connecticut have issued consumer alerts reminding people that they can delete their twenty three and Me data immediately. So I asked Bloomberg's bankruptcy reporter Jonathan Randalls, why all the urgents.
Just based upon the conversations I've had with people who are doing this in our twenty three AMIA customers. There's a lot of concern that despite the fact that the company and its lawyers are saying all the right things, they just don't know who's going to buy it, and they don't know what the motivations are. The purchaser could be someone that you don't want to buy it, and you don't really have that control. The thing you do
control is you can delete your information now. And the company has said that their traffic, their web traffic after the company filed bankruptcy, their servers were overloaded with people who are coming to their site to delete the information.
Jonathan says there are some rules around how a company could use the genetic information it buys from twenty three and meters.
I learned in my reporting that a company cannot use your genetic information for employment related decisions or for healthcare related decisions. So an insurance company can't take your genetic information, you know, find some sort of like troublesome you know, sequence in your genetic code and then jack up your premiums or you know, just make your insurance more expensive.
You're not allowed to do that. But that doesn't apply to life insurance, or disability insurance or all the other types of insurance that you might need.
A life insurance company could be one hypothetical buyer that could raise concerns. Another could be advertisers who could use your genetic data to target their ads, showing people with Celiac more gluten free products, for example. But Jonathan says, the important thing about Chapter eleven is that any data sale will come with an extra degree of oversight.
There almost certainly will be what's called a privacy embodesman. That is a safeguard that Congress put into the Bankruptcy Code in two thousand and five. All that means is a lawyer who's not a affiliated with twenty three and meters and has no other interest but to protect people's private information. The Justice Department, they're involved in every Chapter eleven.
They have a monitor called the US Trustee. But the US Trustee in their first court hearing made it very clear that their primary focus is on the customer information and they're concerns about privacy and the concerns about the company selling it. In the case of genetic information, there's way more oversight in chapter eleven than out of Chapter eleven.
So it gives some leverage to especially like the state and federal authorities who are going to be looking at this to really have a say in, you know, what the buyer is allowed to do and what the terms of the sale finally are.
So a company selling your data during a bankruptcy actually is a much more transparent process perhaps than a company selling your data at any other time.
As far as genetic information, yeah, for sure.
In a bankruptcy court filing, twenty three and Meters said that any potential buyers will have to state in writing that they'd comply with the company's privacy practices.
Twenty three and Meters has put out a number of communications through press release in court. I've seen like a letter that's addressed to customers to really ease concerns about the data. They've said that the Chapter eleven doesn't change at all the way in which they manage your data. It doesn't change the way that they operate. Everything is the status quote.
Though we don't yet know who the bidders are going to be. Bloomberg Biotech reporter Jerry Smith says it's helpful to look at precedent. Last year, a genetic testing company went into bankruptcy and sold itself to lab Corp.
People have heard of that company anytime you've had any sort of blood work done. But they are using it to potentially create new treatments and for healthcare purposes. So there's a lot of different scenarios where this DNA data could be valuable to different parties. But yeah, there is a possibility that one of the original intentions of twenty three and meters, which is to use that DNA data to help people live healthier lives and invent medicines, that could end up happening.
The thing is, when many people signed up for twenty three and meter, they were thinking about finding a long lost sibling or better understanding their heritage. They weren't thinking about who else their data might be valuable to but Jonathan says the company has always acknowledged such a sale was possible.
Twenty three and meters says in the core papers, and their lawyer told the judge that their terms do permit the company in the event of a bankruptcy or through some sort of merger and acquisition or sale. It does allow them to transfer your data that is written within the terms of service.
But famously no one reads the terms of service, not even Jonathan's mom. But Jonathan says, maybe people should start.
As I was reaching out to people and talking to customers of twenty three and me who are trying to delete their information, I found it very relatable to have signed up for something you're very excited about in this case, like oh, you wanted to know who your relatives are or learn a little bit more about you, and of course like not reading the terms and conditions and realizing this could come back in a way that you don't expect.
Maybe this will make people read the terms of service a little bit more closely.
Or maybe it won't. This is the Big Take from Bloomberg News. I'm Sarah Holder. This episode was produced by Rachel Lewis Chrisky and Julia Press. It was edited by Tracy Samuelson, Irene Garcia Perez, and Cynthia Koons special thanks to Steven Church.
It was fact checked.
By Adrian Atapia and mixed and sound designed by Alex Sugiura. Our senior producer is Naomi Shaven. Our senior editor is Elizabeth Ponso. Our deputy executive producer is Julia Weaver. Our executive producer is Nicole Beemster. Bor Sage Bauman is Bloomberg's head of podcasts. If you liked this episode, make sure to subscribe and review The Big Take wherever you listen to podcasts.
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