23andMe seeks new bids after $305 million offer from its co-founder

23andMe is seeking court approval to reopen bidding on its assets, including customer genetic data, after receiving a $305 million offer from co-founder Anne Wojcicki's TTAM Research Institute, surpassing Regeneron Pharmaceuticals' initial $256 million bid; Regeneron, while still interested, is requesting a $10 million breakup fee should Wojcicki's bid prevail, citing unfairness in reopening the auction process following 23andMe's bankruptcy filing triggered by declining demand and a significant data breach.

Analysis

Bankrupt genetic testing firm 23andMe (ME) is seeking judicial approval to reopen bidding for its assets, which notably include over 15 million customer DNA profiles, after receiving a $305 million offer from TTAM Research Institute, a nonprofit founded by 23andMe's co-founder Anne Wojcicki. This new bid significantly surpasses Regeneron Pharmaceuticals' (REGN) $256 million lead offer selected after a May bankruptcy auction and is a substantial increase from TTAM's earlier backup bid valued at $146 million. Regeneron has indicated a willingness to re-bid but is also requesting a $10 million breakup fee should Wojcicki’s offer prevail, citing the unfairness of revisiting a concluded auction. 23andMe's March bankruptcy filing stemmed from declining consumer demand and a 2023 data breach that compromised millions of customers' sensitive information, leading to U.S. lawmaker scrutiny over the potential sale of the genetic data. The unfolding situation, reflected in negative sentiment for ME (-0.7) and mildly negative for REGN (-0.2), highlights the complexities and high stakes involved in valuing and transacting substantial, sensitive data assets within a distressed M&A context, especially with active co-founder participation and heightened data privacy concerns.

Key Decisions for Investors

• Investors should monitor the bankruptcy court's decision regarding the reopening of bids for 23andMe's assets, as the final sale price and buyer will be critical for creditor recoveries and may set a precedent for valuing large genetic data sets in distressed M&A scenarios.
• The significant markup in the co-founder's offer to $305 million from an initial $146 million, against Regeneron's $256 million bid, suggests a potentially undervalued asset class but also underscores the heightened risks associated with data privacy and regulatory oversight, which could impact the transaction's ultimate terms and feasibility.
• For companies involved or considering involvement in acquiring data-rich distressed assets like Regeneron, it is crucial to weigh the strategic value against potential bidding wars, increased acquisition costs, and the reputational risks associated with handling sensitive data, including the implications of breakup fees if an initial bid is superseded.