Good morning. The fortunes of genetic-testing company 23andMe have gone from bad to worse, and now the company is heading to full-blown bankruptcy.
The company announced on Sunday that it voluntarily filed for Chapter 11 proceedings in the U.S. Bankruptcy Court for the Eastern District of Missouri, with the goal of finding a buyer that can maximize what's left of its business. CEO Anne Wojcicki has resigned, in a mutual agreement with the company, and will continue to serve as a member of 23andMe’s board.
It now falls to the company's chief financial and accounting officer, Joe Selsavage, to take on the role of interim CEO. Selsavage joined 23andMe in November 2021 through the acquisition of Lemonaid Health, where he was also CFO. He has over 25 years of experience in accounting and finance across multiple organizations.
As temporary CEO, the mess he inherits includes the fallout from a massive data breach, and corporate upheaval stemming from September when every one of 23andMe's independent board members quit on the same day. This came after Wojcicki sought to buy the public company and take it private, and the seven independent directors disagreed. Roelof Botha, a managing partner of Sequoia Capital, and Neal Mohan, CEO of YouTube, are among the notable executives who stepped down.
The bankruptcy of 23andMe, once a $6 billion unicorn, going public in 2021, wasn’t entirely a surprise due to the turmoil at the cash-strapped firm, Fortune’s Lila MacLellan writes. You can read a timeline of events that shaped 23andMe's trajectory here.
Credible communication
Prior to her departure, Wojcicki sought to rely on CFOs to help her guide the firm out of trouble. In October, the company announced three new independent directors—all former finance chiefs. And now as the new interim CEO, Selsavage will need to tap into his CFO skills as the company intends to “continue operating its business in the ordinary course throughout the sale process,” according to Sunday’s announcement.
“As interim chief executive, Joe Selsavage will be responsible for effectively communicating to investors the progress of finding a buyer,” Rick Warne, professor of accounting at the University of San Diego’s Knauss School of Business, told me.
When companies file for bankruptcy protection, they have to develop a plan to emerge successfully, Warne said. Typically, the choices are restructuring debt or seeking out a buyer, the path 23andMe has chosen, he said. Selsavage's extensive financial background should prove beneficial in the process by “credibly communicating the company's asset and liability values to potential buyers,” he said.
There is, however, another headwind that 23andMe must confront: The California attorney general has issued a consumer alert urging users of the biotech company to ask 23andMe to delete their data and destroy any samples of genetic material.
“We are committed to continuing to safeguard customer data and being transparent about the management of user data going forward, and data privacy will be an important consideration in any potential transaction,” Mark Jensen, chair of 23andMe’s board, said in a statement.
It’s an interesting conflict of interest for 23andMe, Sandra Matz, associate professor of business at Columbia Business School, told me. “The company is presumably only worth as much as the data they can sell on to a buyer,” Matz said.
She added, "If they truly want to protect their user’s privacy, they would have to change the default to ‘your data is being deleted until we hear back from you to keep it.'" Matz is the author of the book, "Mindmasters: The Data-Driven Science of Predicting and Changing Human Behavior."
The 23andMe data breach from 2023 caused tremendous damage to its reputation and financial status, Warne said, adding that Selsavage must communicate clearly that customers' data is secure—and that, if he does not, an already tough job will be even harder.
Sheryl Estrada
sheryl.estrada@fortune.com
