23andMe cuts workforce by 40%, ends therapeutics division in drastic cost-saving measure

In a shocking turn of events, genetic testing powerhouse 23andMe announced it will slash 40% of its workforce, or roughly 200 employees, in a bid to curb costs amid intensifying financial challenges. The company, once celebrated for democratizing DNA testing, has decided to shut down its ambitious therapeutics development program as part of a sweeping restructuring effort. This drastic shift will refocus 23andMe on its core business of consumer genetic testing and strategic research partnerships, as its leadership pivots away from ventures that have seen soaring expenses and limited returns.

CEO Anne Wojcicki revealed that these significant cuts aim to stabilize 23andMe’s financial foundation, addressing mounting losses that have cast doubt on the company’s sustainability. The layoffs, coupled with the decision to discontinue drug development, are projected to save over $35 million annually. Company insiders noted that the restructuring reflects a fundamental realignment, with 23andMe planning to explore potential licensing or sale options for its existing therapeutic assets.

A Troubled Year for 23andMe

The decision to streamline operations and halt the therapeutics division comes amid a series of financial blows for 23andMe, underscoring a difficult year. For the fiscal year ending March 31, 2024, 23andMe reported a staggering net loss of $667 million, more than double the previous year’s loss of $312 million. Despite ambitious efforts to diversify and expand, the company has been unable to offset the mounting costs associated with its therapeutic ventures, leading to an unsustainable financial trajectory.

Analysts observe that the company’s profitability challenges are exacerbated by the nature of biotech development. Therapeutic research, a notoriously capital-intensive endeavor, often requires substantial investment without guaranteeing near-term returns. With its latest earnings report underscoring these struggles, 23andMe has opted to cut its losses, concentrating instead on its consumer-based services and valuable partnerships.

Governance Shake-Up and Growing Scrutiny

Adding fuel to the fire, 23andMe faced significant turmoil at the executive level this year. In a move that raised eyebrows across the industry, all seven independent directors resigned from the company’s board in September 2024. Their departure, reportedly sparked by a lack of faith in CEO Wojcicki’s proposal to take the company private, left her as the only remaining board member, intensifying scrutiny over 23andMe’s governance practices. This series of high-profile resignations has left the company vulnerable to further criticism and prompted concern among investors about its long-term governance and strategic stability.

Data Breach Adds to Woes

Another shadow over 23andMe’s recent history is a 2023 data breach that exposed sensitive information on nearly 7 million users. This breach led to a costly $30 million settlement after a class-action lawsuit alleged the company failed to protect customers’ personal data adequately. The incident tarnished the company’s reputation and raised further questions regarding data privacy in the increasingly competitive genetic testing sector.

Market Turmoil and Stock Decline

The company’s challenges have been mirrored in its stock performance, which has seen a rapid decline since 23andMe went public in 2021. Now trading at around $0.35 per share, down from its initial offering price, the stock’s drop reflects broader concerns regarding the company’s trajectory. This steep decline has led many investors to question whether 23andMe’s foundational business model, combined with its foray into therapeutics, was sustainable. With its shares trading at a fraction of their debut value, the company faces substantial pressure to demonstrate a viable path forward to regain investor confidence.

Expert Perspective: A Cautionary Biotech Tale

Industry experts view 23andMe’s trajectory as a cautionary lesson in the risks of expansion beyond core competencies. Analysts highlight that the company’s decision to embark on costly drug development efforts, a pivot from its proven consumer-focused model, ultimately drained resources and hindered profitability. They noted that the ongoing restructuring reflects a back-to-basics approach, with a renewed focus on consumer genetic testing and partnerships likely to strengthen the company’s financial position if executed successfully.

According to market experts, while the layoffs and shutdowns are difficult, these actions may help 23andMe recover some of its former stability by narrowing its focus. In the opinion of Dr. Alex Johnson, a genetic research analyst, the decision to concentrate on consumer genetics and data partnerships aligns with areas where 23andMe has shown strength historically, and could provide a solid foundation for recovery.

Outlook: Can 23andMe Regain Momentum?

As 23andMe navigates this tumultuous period, the future remains uncertain. Its core genetic testing business, known for giving consumers insights into their ancestry and health predispositions, still enjoys a strong market presence. However, as competitors rise and the company works to regain investor trust, its leadership will need to deliver on promises of improved financial discipline and operational focus. While the layoffs and restructuring may bring immediate financial relief, whether this pivot can stabilize 23andMe in the long run is a question only time will answer.