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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: In two thousand and six, a new genetic testing startup

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Speaker 2: came onto the scene.

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Speaker 3: Twenty three meters was founded about two decades ago on

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Speaker 3: a really tantalizing idea.

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Speaker 2: That's Bloomberg biotech reporter Jerry Smith.

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Speaker 3: You could spit into a tube and learn a lot

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Speaker 3: of things about your family history and whether you have

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Speaker 3: any health risks.

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Speaker 2: That tantalizing idea quickly turned into a lucrative business.

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Speaker 3: They went public in twenty twenty one, valued at three

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Speaker 3: and a half billion dollars. There's hundreds and hundreds of

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Speaker 3: biotech companies out there, so to have a three and

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Speaker 3: a half billion dollar valuation shows that you have a

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Speaker 3: lot of support from Wall Street.

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Speaker 2: But the company hasn't turned a profit since it's IPO,

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Speaker 2: and finally, on March twenty third, twenty three and meters

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Speaker 2: filed for bankruptcy. So I called up another Bloomberg reporter,

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Speaker 2: Nathan Randalls, who covers bankruptcy and corporate restructuring. Have you

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Speaker 2: used twenty three in me?

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Speaker 1: I have not, but my mom has. That was a

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Speaker 1: revelation in the last day or so.

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Speaker 4: How did you react when she told you.

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Speaker 1: That I asked your questions about and if she had

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Speaker 1: read the terms of service and whether she was aware

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Speaker 1: that her genetic data like this could be sold, and

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Speaker 1: of course, like the answer was like, no, of course

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Speaker 1: I didn't read the terms of service. That's ridiculous.

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Speaker 2: As twenty three and meters starts bankruptcy proceedings, more and

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Speaker 2: more customers are starting to come to the same realization

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Speaker 2: because their genetic data is likely the company's most valuable asset,

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Speaker 2: and now that asset is for sale. The big question

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Speaker 2: on everyone's minds right now seems to be what is

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Speaker 2: going to happen to all that data.

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Speaker 1: All indications are that it will sell to somebody. We

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Speaker 1: don't know exactly who, So it will be pretty fascinating

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Speaker 1: to see how much someone is willing to pay for

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Speaker 1: the genetic information of fifteen million people.

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Speaker 2: Not everyone is willing to wait around and find out.

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Speaker 2: State attorneys general and privacy experts are urging users to

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Speaker 2: delete their data before it's hoovered up by someone else,

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Speaker 2: because this isn't just any old data.

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Speaker 3: You hear about data breaks all the time and people's

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Speaker 3: credit card information gets exposed or their passwords gets exposed. Well,

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Speaker 3: you can change your password, and you can change your

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Speaker 3: credit card information, and you can't change your DNA.

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Speaker 2: I'm Sarah Holder, and this is the big take from

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Speaker 2: Bloomberg News Today. On the show, what twenty three and

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Speaker 2: Me's bankruptcy says about the future of the genetic testing

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Speaker 2: industry and what a possible sale could mean for millions

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Speaker 2: of users' genetic data. When twenty three and meters first launched,

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Speaker 2: it promised to democratize genetic testing.

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Speaker 3: The idea would be that you take one of these

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Speaker 3: tests and you find out that you know you are

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Speaker 3: have a certain health risk, and you could potentially eat differently,

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Speaker 3: or you could exercise more, or you could find out

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Speaker 3: that you have some genetic disorder and that there's a

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Speaker 3: promising treatment out there that could potentially cure it. You

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Speaker 3: could reconnect with a long lost relative, or maybe find

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Speaker 3: out something about your ancestors where they came from.

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Speaker 2: Bloomberg Biotech reporter Jerry Smith says, right away, a lot

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Speaker 2: of people were excited about the company's potential.

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Speaker 3: The company started to take off. You know, famously Oprah,

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Speaker 3: you know, she put twenty three and meat test kits

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Speaker 3: on her list of annual favorite things.

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Speaker 2: You get a twenty three and meat test twenty.

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Speaker 3: Three and she and she said that, you know, it's

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Speaker 3: it's the ultimate selfie.

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Speaker 2: The ultimate selfie, a look inside yourself.

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Speaker 3: And so the company is starting to gain some traction,

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Speaker 3: but at the same time, it's it's running into some challenges.

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Speaker 3: Doctors are not really embracing these test kits, and you know,

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Speaker 3: for the average person, it's not entirely clear how valuable

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Speaker 3: these tests are.

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Speaker 2: Sure, it was nice to know more about your genetics,

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Speaker 2: but it was hard to actually use that information in

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Speaker 2: a healthcare setting. Doctors didn't always know what to do

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Speaker 2: with the twenty three and meters results patients were bringing in,

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Speaker 2: and knowing what percent Greek you are was more of

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Speaker 2: a fun fact than a game changer. And then came

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Speaker 2: legal trouble.

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Speaker 3: Two years ago, they had a pretty large data breach

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Speaker 3: where you know, millions of the customers had their DNA

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Speaker 3: exposed and the company had to end up paying millions

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Speaker 3: of dollars to settle a lawsuit over that. And then

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Speaker 3: last year, the sales are declining and the company is

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Speaker 3: trying to evolve and pivot. One thing it did was

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Speaker 3: started selling subscriptions where you could get blood tests and

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Speaker 3: DNA tests that it didn't really gain much traction. Another

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Speaker 3: interesting thing that the companies did over the years was

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Speaker 3: do deals with large pharmaceutical companies, and these drug makers

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Speaker 3: would use the data from these DNA samples as a

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Speaker 3: way to find different drug targets and potentially speed up

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Speaker 3: the process of developing treatments. Twenty three of Meters even

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Speaker 3: started to try and invent medicines on their own. Drug

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Speaker 3: development is a really hard business. It takes many years,

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Speaker 3: it's highly risky, and you know, the company didn't really

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Speaker 3: get a payoff from that. So sales are slowing of

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Speaker 3: the DNA test kits, the company's stock prices starting to decline.

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Speaker 2: In an effort to save the struggling company, last year,

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Speaker 2: co founder and CEO and Wujitski offered to buy twenty

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Speaker 2: three and meters and take it private.

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Speaker 3: The company has a special committee. They rejected her offer

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Speaker 3: basically said it wasn't high enough and she didn't have

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Speaker 3: enough financing. And then the board resigns in mass and

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Speaker 3: so the company's losing money and it's really going through

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Speaker 3: this crisis. It's stock price had fallen so much that

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Speaker 3: it was in dayer being delisted on the Nasdaq.

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Speaker 2: Wijitski made more last ditch efforts to buy the company

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Speaker 2: in early twenty twenty five, including one offer of over

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Speaker 2: seventy million dollars. Those failed, too, Twenty three and Meters

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Speaker 2: was out of options, so in March twenty third, the

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Speaker 2: company filed for bankruptcy and Wijitski resigned. Entering Chapter eleven

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Speaker 2: doesn't mean twenty three in Me's business shutters overnight. The

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Speaker 2: company is continuing to market itself to investors, and it's

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Speaker 2: hoping to secure a loan to help it refinance. But

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Speaker 2: Bloomberg's bankruptcy reporter Jonathan Randalls says what the filing does

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Speaker 2: mean is that twenty three and meters is starting the

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Speaker 2: process of selling itself off.

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Speaker 1: Customer information is often sold in Chapter eleven Haitian information.

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Speaker 1: If you're a big hospital chain or a health system

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Speaker 1: that's filed for bankruptcy and you need to find a

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Speaker 1: new operator for your hospital because you can no longer

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Speaker 1: afford to do so, that will necessitate transferring the patient

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Speaker 1: information from a specific medical clinic or hospital.

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Speaker 2: If a pharmacy chain goes bankrupt, one of its most

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Speaker 2: valuable assets is its customer list with prescription information.

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Speaker 1: These types of transactions are happening all the time, and

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Speaker 1: there's a chance that some part of your personal information

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Speaker 1: has already transacted into bankruptcy.

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Speaker 2: But those bankruptcies don't tend to attract the same level

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Speaker 2: of attention as this twenty three and me filing has,

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Speaker 2: And Jonathan says that makes sense.

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Speaker 1: The difference I think is one, it's huge, Like fifteen

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Speaker 1: million customers is way bigger than like most of the

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Speaker 1: other cases I'm seeing. But also I have never covered

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Speaker 1: a case where it's someone's DNA or genetic information. I

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Speaker 1: can't imagine like something more personal than that, And I

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Speaker 1: think that that is why it's like unsettling to people

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Speaker 1: that this is happening.

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Speaker 2: Yeah, I mean, it's an obvious question, but like why

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Speaker 2: does it feel so much more unsettling? Why do people

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Speaker 2: pay more attention when it's DNA versus your prescription information?

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Speaker 1: It's like who you are, Like it's selling you. And

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Speaker 1: not only is it who you are, you are an

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Speaker 1: asset and your information is a valuable asset that can

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Speaker 1: be transacted between companies. Is something that like this has

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Speaker 1: done quite a good job of crystallizing, and I think

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Speaker 1: it's like very surprising to people that their data is

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Speaker 1: this valuable and that a price tag can be attached

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Speaker 1: to it.

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Speaker 2: Last week, a judge officially granted twenty three and meters

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Speaker 2: permission to try to sell that data in an auction,

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Speaker 2: and markets proved just how valuable it is.

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Speaker 4: Shares of the.

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Speaker 2: Company surged as much as one hundred and fifty eight percent.

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Speaker 2: Under bankruptcy rules, the company will need to bring in

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Speaker 2: more than it owes its creditors. That's at least two

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Speaker 2: hundred and fourteen million dollars before anything can be paid

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Speaker 2: to shareholders. But privacy experts, government officials, and some vocal

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Speaker 2: twenty three and me users are starting to share concerns

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Speaker 2: about what happens if millions of DNA profiles get sold

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Speaker 2: to the highest bidder, the rush to delete data from

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Speaker 2: twenty three and meters, and the process of selling all

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Speaker 2: that remains after the break. After the genetic testing company

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Speaker 2: twenty three and meters filed for bankruptcy, TikTok and Instagram

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Speaker 2: were flooded with video after video sharing one urgent message.

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Speaker 4: Listen, your DNA could literally be so to the highest

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Speaker 4: bidder unless you take action. You need to delete your

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Speaker 4: data right now.

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Speaker 1: Come with me to delete my data off of twenty

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Speaker 1: three and me.

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Speaker 2: It's not just a social media phenomenon, though. The state

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Speaker 2: attorney's General for New York, California, and Connecticut have issued

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Speaker 2: consumer alerts reminding people that they can delete their twenty

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Speaker 2: three and Me data immediately. So I asked Bloomberg's bankruptcy

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Speaker 2: reporter Jonathan Randalls, why all the urgents.

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Speaker 1: Just based upon the conversations I've had with people who

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Speaker 1: are doing this in our twenty three AMIA customers. There's

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Speaker 1: a lot of concern that despite the fact that the

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Speaker 1: company and its lawyers are saying all the right things,

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Speaker 1: they just don't know who's going to buy it, and

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Speaker 1: they don't know what the motivations are. The purchaser could

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Speaker 1: be someone that you don't want to buy it, and

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Speaker 1: you don't really have that control. The thing you do

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Speaker 1: control is you can delete your information now. And the

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Speaker 1: company has said that their traffic, their web traffic after

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Speaker 1: the company filed bankruptcy, their servers were overloaded with people

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Speaker 1: who are coming to their site to delete the information.

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Speaker 2: Jonathan says there are some rules around how a company

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Speaker 2: could use the genetic information it buys from twenty three

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Speaker 2: and meters.

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Speaker 1: I learned in my reporting that a company cannot use

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Speaker 1: your genetic information for employment related decisions or for healthcare

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Speaker 1: related decisions. So an insurance company can't take your genetic information,

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Speaker 1: you know, find some sort of like troublesome you know,

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Speaker 1: sequence in your genetic code and then jack up your

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Speaker 1: premiums or you know, just make your insurance more expensive.

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Speaker 1: You're not allowed to do that. But that doesn't apply

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Speaker 1: to life insurance, or disability insurance or all the other

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Speaker 1: types of insurance that you might need.

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Speaker 2: A life insurance company could be one hypothetical buyer that

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Speaker 2: could raise concerns. Another could be advertisers who could use

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Speaker 2: your genetic data to target their ads, showing people with

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Speaker 2: Celiac more gluten free products, for example. But Jonathan says,

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Speaker 2: the important thing about Chapter eleven is that any data

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Speaker 2: sale will come with an extra degree of oversight.

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Speaker 1: There almost certainly will be what's called a privacy embodesman.

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Speaker 1: That is a safeguard that Congress put into the Bankruptcy

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Speaker 1: Code in two thousand and five. All that means is

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Speaker 1: a lawyer who's not a affiliated with twenty three and

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Speaker 1: meters and has no other interest but to protect people's

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Speaker 1: private information. The Justice Department, they're involved in every Chapter eleven.

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Speaker 1: They have a monitor called the US Trustee. But the

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Speaker 1: US Trustee in their first court hearing made it very

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Speaker 1: clear that their primary focus is on the customer information

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Speaker 1: and they're concerns about privacy and the concerns about the

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Speaker 1: company selling it. In the case of genetic information, there's

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Speaker 1: way more oversight in chapter eleven than out of Chapter eleven.

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Speaker 1: So it gives some leverage to especially like the state

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Speaker 1: and federal authorities who are going to be looking at

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Speaker 1: this to really have a say in, you know, what

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Speaker 1: the buyer is allowed to do and what the terms

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Speaker 1: of the sale finally are.

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Speaker 2: So a company selling your data during a bankruptcy actually

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Speaker 2: is a much more transparent process perhaps than a company

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Speaker 2: selling your data at any other time.

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Speaker 1: As far as genetic information, yeah, for sure.

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Speaker 2: In a bankruptcy court filing, twenty three and Meters said

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Speaker 2: that any potential buyers will have to state in writing

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Speaker 2: that they'd comply with the company's privacy practices.

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Speaker 1: Twenty three and Meters has put out a number of

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Speaker 1: communications through press release in court. I've seen like a

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Speaker 1: letter that's addressed to customers to really ease concerns about

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Speaker 1: the data. They've said that the Chapter eleven doesn't change

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Speaker 1: at all the way in which they manage your data.

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Speaker 1: It doesn't change the way that they operate. Everything is

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Speaker 1: the status quote.

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Speaker 2: Though we don't yet know who the bidders are going

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Speaker 2: to be. Bloomberg Biotech reporter Jerry Smith says it's helpful

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Speaker 2: to look at precedent. Last year, a genetic testing company

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Speaker 2: went into bankruptcy and sold itself to lab Corp.

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Speaker 3: People have heard of that company anytime you've had any

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Speaker 3: sort of blood work done. But they are using it

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Speaker 3: to potentially create new treatments and for healthcare purposes. So

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Speaker 3: there's a lot of different scenarios where this DNA data

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Speaker 3: could be valuable to different parties. But yeah, there is

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Speaker 3: a possibility that one of the original intentions of twenty

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Speaker 3: three and meters, which is to use that DNA data

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Speaker 3: to help people live healthier lives and invent medicines, that

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Speaker 3: could end up happening.

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Speaker 2: The thing is, when many people signed up for twenty

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Speaker 2: three and meter, they were thinking about finding a long

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Speaker 2: lost sibling or better understanding their heritage. They weren't thinking

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Speaker 2: about who else their data might be valuable to but

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Speaker 2: Jonathan says the company has always acknowledged such a sale

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Speaker 2: was possible.

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Speaker 1: Twenty three and meters says in the core papers, and

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Speaker 1: their lawyer told the judge that their terms do permit

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Speaker 1: the company in the event of a bankruptcy or through

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Speaker 1: some sort of merger and acquisition or sale. It does

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Speaker 1: allow them to transfer your data that is written within

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Speaker 1: the terms of service.

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Speaker 2: But famously no one reads the terms of service, not

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Speaker 2: even Jonathan's mom. But Jonathan says, maybe people should start.

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Speaker 1: As I was reaching out to people and talking to

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Speaker 1: customers of twenty three and me who are trying to

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Speaker 1: delete their information, I found it very relatable to have

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Speaker 1: signed up for something you're very excited about in this case,

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Speaker 1: like oh, you wanted to know who your relatives are

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Speaker 1: or learn a little bit more about you, and of

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Speaker 1: course like not reading the terms and conditions and realizing

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Speaker 1: this could come back in a way that you don't expect.

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Speaker 1: Maybe this will make people read the terms of service

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Speaker 1: a little bit more closely.

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Speaker 2: Or maybe it won't. This is the Big Take from

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Speaker 2: Bloomberg News. I'm Sarah Holder. This episode was produced by

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Speaker 2: Rachel Lewis Chrisky and Julia Press. It was edited by

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Speaker 2: Tracy Samuelson, Irene Garcia Perez, and Cynthia Koons special thanks

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Speaker 2: to Steven Church.

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Speaker 4: It was fact checked.

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Speaker 2: By Adrian Atapia and mixed and sound designed by Alex Sugiura.

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Speaker 2: Our senior producer is Naomi Shaven. Our senior editor is

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Speaker 2: Elizabeth Ponso. Our deputy executive producer is Julia Weaver. Our

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Speaker 2: executive producer is Nicole Beemster. Bor Sage Bauman is Bloomberg's

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Speaker 4: be back next week.