DNA-testing company 23andMe has announced it is cutting approximately 40 percent of its workforce, impacting over 200 employees.
The layoffs are part of a major restructuring plan led by CEO Anne Wojcicki as the company grapples with mounting financial losses.
Key Changes: Closing Drug Development Business
As part of the restructuring, 23andMe will shut down its drug development division. This has been conducting human trials for two advanced drug candidates.
The company plans to wind down these trials and seek potential buyers for the drug prospects. The move marks a significant shift for 23andMe. Drug development was once a central part of its strategy to leverage consumer genetics data for profit.
The company initially positioned its drug development unit as a way to capitalize on the vast genetic data collected from its DNA testing services.
The company’s previous exclusive drug development deal with pharmaceutical giant GSK ended, and 23andMe has struggled to secure new partners since then.
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Layoffs and Financial Impact
This latest round of layoffs is the fifth since the beginning of 2023.
The company had over 800 employees at the start of the year; after these cuts, the headcount will drop to roughly 300. The restructuring is expected to save the firm $35 million annually.
Despite these cost-saving measures, 23andMe’s financial outlook remains bleak.
The company’s market capitalization has fallen below the $170 million in cash reported on its June balance sheet, and its stock continues to hit new lows.
Wojcicki said:
“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.”
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Core Business Challenges and Strategic Shift
23andMe’s core consumer DNA-testing business has struggled with profitability.
One of the main challenges is customers typically only need to take a DNA test once, limiting repeat business.
In response, the company has attempted to pivot towards subscription services. It offers ongoing updates and health insights based on genetic data. However, this strategy has faced hurdles as well:
- Declining Subscriptions: The number of paying subscribers fell earlier this year compared to the previous year, highlighting the difficulty in sustaining growth through subscriptions alone.
- Pivot from Drug Development: With the closure of its drug discovery units, 23andMe aims to focus more on licensing its genetics data to pharmaceutical companies rather than developing its drug candidates.
Board Resignations and Wojcicki’s Control
The restructuring comes amid significant leadership changes. Wojcicki, who controls nearly half of the company’s voting power, has faced criticism over her efforts to take the company private.
In September, all seven independent directors resigned, citing disappointment that Wojcicki had not presented a fully-financed buyout deal.
- Leadership Shakeup: Following the mass resignation of the independent directors, Wojcicki was left as the sole board member. The company recently appointed three new directors to the board, signalling an attempt to stabilize governance.
Future Outlook: Focus on Core Business and Partnerships
As 23andMe pivots away from drug development, its future hinges on the success of its core consumer DNA-testing service and its ability to form new research partnerships with pharmaceutical companies.
The company’s attempt to license its genetics data to aid drug development remains a critical component of its strategy, but securing new deals has proven challenging.
Key questions moving forward include:
- Can 23andMe revive its core business and attract new subscribers?
- Will the company successfully secure new licensing deals to monetize its genetic data?
- How will the leadership changes and restructuring impact the company’s long-term stability?
With significant layoffs and the shutdown of its drug development division, 23andMe faces an uphill battle to regain profitability and investor confidence.
The company’s shift in strategy could either mark a turning point or further deepen its financial troubles, depending on the execution of its revised business plan.
