US biotech 23andMe hits new lows as Sequoia Capital sells down stake
Former investors and board members reduce holdings in the once much-hyped genetics-testing group
Genetics-testing company 23andMe has lost almost a third of its value over the past week as former investors and board members, including Sequoia Capital, sold shares in the once much-hyped Silicon Valley group.
The California-based group has been fighting for survival amid doubts over its business model, disputes with investors and growing concern over who owns its vast database of genetic data. Its entire board of independent directors, including Sequoia chief Roelof Botha, resigned in September.
Sequoia, which led 23andMe’s $250mn private funding round in 2017, said in filings on Friday that it planned to sell more than 300,000 of the company’s shares, a stake now worth just over $1mn.
Sequoia’s holdings, which were worth tens of millions of dollars three years ago, have plunged in value as 23andMe’s shares have dropped more than 98 per cent since the company went public via a merger with a blank-cheque company in June 2021.
Peter Taylor, one of the board members who resigned in September, also filed to sell about 18,800 shares. Taylor, who joined the company in June 2021, was president of the non-profit ECMC Foundation until last year.
The share sales come after 23andMe warned last week that there was “substantial doubt” over its continued survival unless it raises new funds.
The warning came as the struggling group reported a seventh consecutive year-on-year decline in quarterly revenues amid slowing demand for its DNA test “spit kits”. 23andMe has never reported a net profit, and has plunged in value from a peak of $5.8bn in 2021 to less than $100mn.
Founder and chief executive Anne Wojcicki has been racing to rescue the company. Last week 23andMe announced plans to cut 40 per cent of its workforce as part of an aggressive restructuring plan intended to deliver annualised cost savings of $35mn.
The group will also halt all efforts to develop new medicines — ending Wojcicki’s long-held ambition to turn the business into a drug development company. It will instead focus exclusively on selling genetic tests to consumers and marketing the resulting data to external drug developers.
Wojcicki has been trying to take the company private at just 40 cents per share, a fraction of the $10-a-share price it floated at in 2021 — a move that helped trigger the board resignations in September.
In their resignation letter, the former directors said Wojcicki had been unable to make a “fully financed proposal” and said her “concentrated voting power” left them with few other options.
23andMe had to rush to appoint new directors in late October to meet the governance requirements of its listing.
The company last month completed a reverse stock split — in effect boosting the price of individual shares by reducing the number in issue — in order to push its shares above the Nasdaq’s $1 minimum price and retain its listing. It risks violating these requirements again if its shares, which have almost halved since the stock split in October, continue to fall.
While insiders have sold shares as the company’s valuation plummets, Zentree Investments, a small fund based in Singapore, last week disclosed in filings that it had built a 5 per cent stake in 23andMe.
Richard Magides, the fund’s director, said he supported “an aggressive restructuring” of 23andMe and welcomed the announcement it was shutting its “notoriously expensive” drug discovery business.
“There is no doubt in our minds that the core business does offer value to both customers and data users,” said Magides. “With a much leaner, focused business model it could chart a path to profitability and organic growth.”