23andMe says 15% of customers asked to delete their genetic data since bankruptcy

23andMe's interim CEO testified before Congress that 1.9 million customers, roughly 15% of its user base, have requested data deletion since the company filed for bankruptcy in March, raising concerns about data privacy amid a proposed sale to Regeneron for $256 million. The bankruptcy follows a data breach affecting 6.9 million customers, and over two dozen states have sued to block the sale of customer data without explicit consent, arguing the company cannot sell the data of its 15 million customers without their explicit permission.

Analysis

23andMe is navigating severe operational and legal turbulence following its March bankruptcy filing, as highlighted by its interim CEO's disclosure that 1.9 million customers, approximately 15% of its user base, have requested data deletion. This mass exodus is compounded by lawsuits from over two dozen states, including Florida, New York, and Pennsylvania, which challenge the company's right to sell its 15 million customers' data without explicit consent. These issues arise in the shadow of a significant data breach that exposed 6.9 million customers' data, for which 23andMe controversially attributed blame to users. Regeneron Pharmaceuticals Inc. (REGN) has emerged as the winning bidder in a court-approved auction, offering $256 million for 23andMe, intending to utilize its customer DNA and genetic data for drug discovery, while committing to maintain existing privacy practices. However, this acquisition, pending a federal bankruptcy court's consideration later in June, is fraught with substantial risks for Regeneron. The continuous deletion of data directly erodes the value of the primary asset being acquired, and the multi-state litigation could block the data transfer or impose stringent operational restrictions, potentially undermining the strategic rationale and financial viability of Regeneron's investment despite its privacy commitments.

Key Decisions for Investors

• Investors in Regeneron (REGN) should closely monitor the federal bankruptcy court's decision in June regarding the $256 million acquisition of 23andMe, as well as the progression and potential outcomes of lawsuits from over two dozen states which could materially impede or devalue the transaction.
• The ongoing deletion of genetic data by 15% of 23andMe's customer base represents a significant risk to the core asset Regeneron is acquiring; REGN investors should track this metric as it directly impacts the potential for drug discovery and the overall value proposition of the deal.
• Consider the potential for heightened regulatory scrutiny, substantial legal costs, and reputational damage for Regeneron stemming from acquiring a company with a recent history of a major data breach affecting 6.9 million users and facing widespread customer privacy concerns and litigation.