In 2008, before direct-to-consumer genetic testing became more accessible, celebrities sat around spitting into test tubes for DNA testing offered by 23andMe. The gatherings were known as “spit parties.”
23andMe is a personal genomics and biotechnology company. Founded in 2006 by Anne Wojcicki, Linda Avey and Paul Cusenza, it’s popularly known for its detailed ancestry analysis. Using its products, people can discover their ethnic backgrounds, trace their lineage and even find genetic relatives.
“Five years ago, 23andMe was one of the hottest startups in the world,” according to The Wall Street Journal. In 2021, the private company went public, offering its shares for sale to the general public through a stock exchange, and at one point, 23andMe reached a value of $6 billion.
However, “23andMe’s valuation has crashed 98% from its peak, and Nasdaq has threatened to delist its sub-$1 stock,” WSJ added. “Wojcicki reduced staff by a quarter last year through three rounds of layoffs and a subsidiary sale. The company has never made a profit and is burning cash so quickly it could run out by 2025.”
Its stock value has fallen below one dollar, sitting at $0.7438, per MarketWatch.
Data breaches and lawsuits
In early October of last year, 23andMe sent out an email to users saying that the company had experienced a security breach. Two months later, an updated email confirmed just how much information was taken from the threat actor.
Out of the company’s 14 million customers, the hacker was only able to access around 14,000 profiles, but some 6.9 million 23andMe users had their information stolen and posted online to be sold after the company was hacked.
That’s because “many users choose to share information with people they’re genetically related to — which can include distant cousins they have never met, in addition to direct family members — in order to learn more about their own genetics and build out their family trees,” according to Time. “So through those 14,000 accounts, the hacker was able to access information about millions more. A much smaller subset of customers had health data accessed.”
In the U.S., health information is generally safeguarded under the Health Insurance Portability and Accountability Act, commonly referred to as HIPAA. However, these protections are usually limited to health care providers, so people are often cautioned when sharing personal health information with companies outside of that scope.
Following the data breach, lawsuits have piled up on 23andMe’s doorstep.
Attorneys representing 23andMe were set to meet on Wednesday with about 20 lawyers who have initiated class-action lawsuits against the company, aiming to negotiate a comprehensive settlement.
“There are currently three dozen class-action suits tied to last year’s hack — and 23andMe has asked a judge to consolidate those into a single trial,” per Fast Company. “A ruling on that isn’t expected until March, but one of the plaintiff’s attorneys from that collection is asking to be appointed lead litigator now (before the cases are consolidated, if they eventually are at all), in hopes of heading off a preemptive settlement.”
According to Reuters, 23andMe is hoping for a preemptive global settlement, meaning the company wants to come to an agreement that would settle all the related lawsuits collectively and prevent further legal action on these issues.
“This is not a case that should ever be settled in a race to the bottom,” Jay Edelson, a lawyer representing the plaintiffs, told Reuters. “Class-action lawsuits are meant to be vehicles of accountability, not to act as lifeboats for companies to escape the consequences of their misconduct.”
The plaintiffs filing the lawsuit are requesting a trial by jury and pursuing an undetermined amount of compensatory, punitive and various other damages.
How 23andMe is trying to generate income
“At the center of 23andMe’s DNA-testing business are two fundamental challenges,” per The Wall Street Journal. “Customers only need to take the test once, and few test-takers get life-altering health results.”
Last October, 23andMe launched a product that works as an annual service to keep customers.
From being solely a consumer DNA-testing company providing people with not necessarily practical information about their genetics, 23andMe is trying to evolve into a health care company that both diagnoses and provides treatment to patients.
“We’ve heard from our customers for over a decade that they get their genetic information and they hit a wall,” Wojcicki told Bloomberg. “There’s this huge gap in the health care system for prevention.”
According to 23andMe's website, the new product, Total Health, costs $99 per month or $1,188 annually. The product offers biannual blood testing, exome sequencing and genetics-based clinical care.