In 23andMe case, a fight brews over who can sell your genetic code

23andMe's bankruptcy proceedings are facing scrutiny from state attorneys general and Congress over the potential sale of its genetic data trove, with lawsuits arguing that customers have a right to control their genetic information and that 23andMe lacks the right to transfer it without explicit consent. The suits come as 23andMe is set to receive final bids from TTAM Research Institute and Regeneron Pharmaceuticals, raising concerns about the privacy implications of transferring sensitive genetic data that cannot be replaced if stolen. Lawmakers have questioned 23andMe's justification for selling the data, highlighting discrepancies between the company's privacy policy and its actions, potentially leading to new regulations around the handling of genetic data.

Analysis

The bankruptcy of 23andMe and the proposed sale of its genetic database, encompassing data from over 15 million customers, are mired in significant legal and ethical controversies, reflecting a 'strongly negative' sentiment and 'critical' tone surrounding the situation. State attorneys general and U.S. Congressional bodies are scrutinizing the company's right to sell this uniquely sensitive and immutable personal data, with lawsuits arguing that customers retain control over their genetic information and did not provide explicit consent for such a transfer, particularly in a bankruptcy auction. This legal pushback, which challenges 23andMe's assertion that existing privacy policies permit the sale, comes as final bids are anticipated from TTAM Research Institute (offering $305 million) and Regeneron Pharmaceuticals (REGN, offering $256 million), the latter intending to use the data for drug development. The gravity of customer concern is underscored by the 1.9 million data deletion requests received since 23andMe's March bankruptcy filing. The case, involving a company that once held a $6 billion market valuation, highlights a potential watershed moment for genetic data privacy, with experts suggesting it could spur new regulations governing the handling and sale of such information, irrespective of varying state laws. The discrepancy between 23andMe's past privacy assurances and its current actions in bankruptcy court is a central point of contention, raising profound questions about data ownership and consent.

Key Decisions for Investors

• Investors evaluating Regeneron Pharmaceuticals (REGN) should incorporate the substantial legal, regulatory, and reputational risks associated with its bid for 23andMe's data assets, as an unfavorable outcome in the ongoing lawsuits could materially impact the data's utility and impose significant compliance costs, despite the neutral per-ticker sentiment.
• The intense scrutiny and legal challenges surrounding 23andMe's data sale signal a heightened risk environment for companies handling sensitive personal and genetic information; investors should factor in the potential for increased regulatory oversight and stricter consent requirements across the biotech and data-driven healthcare sectors.
• Given the 'strongly negative' sentiment, ongoing litigation, and the 1.9 million customer data deletion requests, the ultimate value realized from 23andMe's asset sale may be diminished, warranting caution for any stakeholders exposed to 23andMe's securities or involved in the bankruptcy proceedings.