Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: In two thousand and six, a new genetic testing startup
Speaker 2: came onto the scene.
Speaker 3: Twenty three meters was founded about two decades ago on
Speaker 3: a really tantalizing idea.
Speaker 2: That's Bloomberg biotech reporter Jerry Smith.
Speaker 3: You could spit into a tube and learn a lot
Speaker 3: of things about your family history and whether you have
Speaker 3: any health risks.
Speaker 2: That tantalizing idea quickly turned into a lucrative business.
Speaker 3: They went public in twenty twenty one, valued at three
Speaker 3: and a half billion dollars. There's hundreds and hundreds of
Speaker 3: biotech companies out there, so to have a three and
Speaker 3: a half billion dollar valuation shows that you have a
Speaker 3: lot of support from Wall Street.
Speaker 2: But the company hasn't turned a profit since it's IPO,
Speaker 2: and finally, on March twenty third, twenty three and meters
Speaker 2: filed for bankruptcy. So I called up another Bloomberg reporter,
Speaker 2: Nathan Randalls, who covers bankruptcy and corporate restructuring. Have you
Speaker 2: used twenty three in me?
Speaker 1: I have not, but my mom has. That was a
Speaker 1: revelation in the last day or so.
Speaker 4: How did you react when she told you.
Speaker 1: That I asked your questions about and if she had
Speaker 1: read the terms of service and whether she was aware
Speaker 1: that her genetic data like this could be sold, and
Speaker 1: of course, like the answer was like, no, of course
Speaker 1: I didn't read the terms of service. That's ridiculous.
Speaker 2: As twenty three and meters starts bankruptcy proceedings, more and
Speaker 2: more customers are starting to come to the same realization
Speaker 2: because their genetic data is likely the company's most valuable asset,
Speaker 2: and now that asset is for sale. The big question
Speaker 2: on everyone's minds right now seems to be what is
Speaker 2: going to happen to all that data.
Speaker 1: All indications are that it will sell to somebody. We
Speaker 1: don't know exactly who, So it will be pretty fascinating
Speaker 1: to see how much someone is willing to pay for
Speaker 1: the genetic information of fifteen million people.
Speaker 2: Not everyone is willing to wait around and find out.
Speaker 2: State attorneys general and privacy experts are urging users to
Speaker 2: delete their data before it's hoovered up by someone else,
Speaker 2: because this isn't just any old data.
Speaker 3: You hear about data breaks all the time and people's
Speaker 3: credit card information gets exposed or their passwords gets exposed. Well,
Speaker 3: you can change your password, and you can change your
Speaker 3: credit card information, and you can't change your DNA.
Speaker 2: I'm Sarah Holder, and this is the big take from
Speaker 2: Bloomberg News Today. On the show, what twenty three and
Speaker 2: Me's bankruptcy says about the future of the genetic testing
Speaker 2: industry and what a possible sale could mean for millions
Speaker 2: of users' genetic data. When twenty three and meters first launched,
Speaker 2: it promised to democratize genetic testing.
Speaker 3: The idea would be that you take one of these
Speaker 3: tests and you find out that you know you are
Speaker 3: have a certain health risk, and you could potentially eat differently,
Speaker 3: or you could exercise more, or you could find out
Speaker 3: that you have some genetic disorder and that there's a
Speaker 3: promising treatment out there that could potentially cure it. You
Speaker 3: could reconnect with a long lost relative, or maybe find
Speaker 3: out something about your ancestors where they came from.
Speaker 2: Bloomberg Biotech reporter Jerry Smith says, right away, a lot
Speaker 2: of people were excited about the company's potential.
Speaker 3: The company started to take off. You know, famously Oprah,
Speaker 3: you know, she put twenty three and meat test kits
Speaker 3: on her list of annual favorite things.
Speaker 2: You get a twenty three and meat test twenty.
Speaker 3: Three and she and she said that, you know, it's
Speaker 3: it's the ultimate selfie.
Speaker 2: The ultimate selfie, a look inside yourself.
Speaker 3: And so the company is starting to gain some traction,
Speaker 3: but at the same time, it's it's running into some challenges.
Speaker 3: Doctors are not really embracing these test kits, and you know,
Speaker 3: for the average person, it's not entirely clear how valuable
Speaker 3: these tests are.
Speaker 2: Sure, it was nice to know more about your genetics,
Speaker 2: but it was hard to actually use that information in
Speaker 2: a healthcare setting. Doctors didn't always know what to do
Speaker 2: with the twenty three and meters results patients were bringing in,
Speaker 2: and knowing what percent Greek you are was more of
Speaker 2: a fun fact than a game changer. And then came
Speaker 2: legal trouble.
Speaker 3: Two years ago, they had a pretty large data breach
Speaker 3: where you know, millions of the customers had their DNA
Speaker 3: exposed and the company had to end up paying millions
Speaker 3: of dollars to settle a lawsuit over that. And then
Speaker 3: last year, the sales are declining and the company is
Speaker 3: trying to evolve and pivot. One thing it did was
Speaker 3: started selling subscriptions where you could get blood tests and
Speaker 3: DNA tests that it didn't really gain much traction. Another
Speaker 3: interesting thing that the companies did over the years was
Speaker 3: do deals with large pharmaceutical companies, and these drug makers
Speaker 3: would use the data from these DNA samples as a
Speaker 3: way to find different drug targets and potentially speed up
Speaker 3: the process of developing treatments. Twenty three of Meters even
Speaker 3: started to try and invent medicines on their own. Drug
Speaker 3: development is a really hard business. It takes many years,
Speaker 3: it's highly risky, and you know, the company didn't really
Speaker 3: get a payoff from that. So sales are slowing of
Speaker 3: the DNA test kits, the company's stock prices starting to decline.
Speaker 2: In an effort to save the struggling company, last year,
Speaker 2: co founder and CEO and Wujitski offered to buy twenty
Speaker 2: three and meters and take it private.
Speaker 3: The company has a special committee. They rejected her offer
Speaker 3: basically said it wasn't high enough and she didn't have
Speaker 3: enough financing. And then the board resigns in mass and
Speaker 3: so the company's losing money and it's really going through
Speaker 3: this crisis. It's stock price had fallen so much that
Speaker 3: it was in dayer being delisted on the Nasdaq.
Speaker 2: Wijitski made more last ditch efforts to buy the company
Speaker 2: in early twenty twenty five, including one offer of over
Speaker 2: seventy million dollars. Those failed, too, Twenty three and Meters
Speaker 2: was out of options, so in March twenty third, the
Speaker 2: company filed for bankruptcy and Wijitski resigned. Entering Chapter eleven
Speaker 2: doesn't mean twenty three in Me's business shutters overnight. The
Speaker 2: company is continuing to market itself to investors, and it's
Speaker 2: hoping to secure a loan to help it refinance. But
Speaker 2: Bloomberg's bankruptcy reporter Jonathan Randalls says what the filing does
Speaker 2: mean is that twenty three and meters is starting the
Speaker 2: process of selling itself off.
Speaker 1: Customer information is often sold in Chapter eleven Haitian information.
Speaker 1: If you're a big hospital chain or a health system
Speaker 1: that's filed for bankruptcy and you need to find a
Speaker 1: new operator for your hospital because you can no longer
Speaker 1: afford to do so, that will necessitate transferring the patient
Speaker 1: information from a specific medical clinic or hospital.
Speaker 2: If a pharmacy chain goes bankrupt, one of its most
Speaker 2: valuable assets is its customer list with prescription information.
Speaker 1: These types of transactions are happening all the time, and
Speaker 1: there's a chance that some part of your personal information
Speaker 1: has already transacted into bankruptcy.
Speaker 2: But those bankruptcies don't tend to attract the same level
Speaker 2: of attention as this twenty three and me filing has,
Speaker 2: And Jonathan says that makes sense.
Speaker 1: The difference I think is one, it's huge, Like fifteen
Speaker 1: million customers is way bigger than like most of the
Speaker 1: other cases I'm seeing. But also I have never covered
Speaker 1: a case where it's someone's DNA or genetic information. I
Speaker 1: can't imagine like something more personal than that, And I
Speaker 1: think that that is why it's like unsettling to people
Speaker 1: that this is happening.
Speaker 2: Yeah, I mean, it's an obvious question, but like why
Speaker 2: does it feel so much more unsettling? Why do people
Speaker 2: pay more attention when it's DNA versus your prescription information?
Speaker 1: It's like who you are, Like it's selling you. And
Speaker 1: not only is it who you are, you are an
Speaker 1: asset and your information is a valuable asset that can
Speaker 1: be transacted between companies. Is something that like this has
Speaker 1: done quite a good job of crystallizing, and I think
Speaker 1: it's like very surprising to people that their data is
Speaker 1: this valuable and that a price tag can be attached
Speaker 1: to it.
Speaker 2: Last week, a judge officially granted twenty three and meters
Speaker 2: permission to try to sell that data in an auction,
Speaker 2: and markets proved just how valuable it is.
Speaker 4: Shares of the.
Speaker 2: Company surged as much as one hundred and fifty eight percent.
Speaker 2: Under bankruptcy rules, the company will need to bring in
Speaker 2: more than it owes its creditors. That's at least two
Speaker 2: hundred and fourteen million dollars before anything can be paid
Speaker 2: to shareholders. But privacy experts, government officials, and some vocal
Speaker 2: twenty three and me users are starting to share concerns
Speaker 2: about what happens if millions of DNA profiles get sold
Speaker 2: to the highest bidder, the rush to delete data from
Speaker 2: twenty three and meters, and the process of selling all
Speaker 2: that remains after the break. After the genetic testing company
Speaker 2: twenty three and meters filed for bankruptcy, TikTok and Instagram
Speaker 2: were flooded with video after video sharing one urgent message.
Speaker 4: Listen, your DNA could literally be so to the highest
Speaker 4: bidder unless you take action. You need to delete your
Speaker 4: data right now.
Speaker 1: Come with me to delete my data off of twenty
Speaker 1: three and me.
Speaker 2: It's not just a social media phenomenon, though. The state
Speaker 2: attorney's General for New York, California, and Connecticut have issued
Speaker 2: consumer alerts reminding people that they can delete their twenty
Speaker 2: three and Me data immediately. So I asked Bloomberg's bankruptcy
Speaker 2: reporter Jonathan Randalls, why all the urgents.
Speaker 1: Just based upon the conversations I've had with people who
Speaker 1: are doing this in our twenty three AMIA customers. There's
Speaker 1: a lot of concern that despite the fact that the
Speaker 1: company and its lawyers are saying all the right things,
Speaker 1: they just don't know who's going to buy it, and
Speaker 1: they don't know what the motivations are. The purchaser could
Speaker 1: be someone that you don't want to buy it, and
Speaker 1: you don't really have that control. The thing you do
Speaker 1: control is you can delete your information now. And the
Speaker 1: company has said that their traffic, their web traffic after
Speaker 1: the company filed bankruptcy, their servers were overloaded with people
Speaker 1: who are coming to their site to delete the information.
Speaker 2: Jonathan says there are some rules around how a company
Speaker 2: could use the genetic information it buys from twenty three
Speaker 2: and meters.
Speaker 1: I learned in my reporting that a company cannot use
Speaker 1: your genetic information for employment related decisions or for healthcare
Speaker 1: related decisions. So an insurance company can't take your genetic information,
Speaker 1: you know, find some sort of like troublesome you know,
Speaker 1: sequence in your genetic code and then jack up your
Speaker 1: premiums or you know, just make your insurance more expensive.
Speaker 1: You're not allowed to do that. But that doesn't apply
Speaker 1: to life insurance, or disability insurance or all the other
Speaker 1: types of insurance that you might need.
Speaker 2: A life insurance company could be one hypothetical buyer that
Speaker 2: could raise concerns. Another could be advertisers who could use
Speaker 2: your genetic data to target their ads, showing people with
Speaker 2: Celiac more gluten free products, for example. But Jonathan says,
Speaker 2: the important thing about Chapter eleven is that any data
Speaker 2: sale will come with an extra degree of oversight.
Speaker 1: There almost certainly will be what's called a privacy embodesman.
Speaker 1: That is a safeguard that Congress put into the Bankruptcy
Speaker 1: Code in two thousand and five. All that means is
Speaker 1: a lawyer who's not a affiliated with twenty three and
Speaker 1: meters and has no other interest but to protect people's
Speaker 1: private information. The Justice Department, they're involved in every Chapter eleven.
Speaker 1: They have a monitor called the US Trustee. But the
Speaker 1: US Trustee in their first court hearing made it very
Speaker 1: clear that their primary focus is on the customer information
Speaker 1: and they're concerns about privacy and the concerns about the
Speaker 1: company selling it. In the case of genetic information, there's
Speaker 1: way more oversight in chapter eleven than out of Chapter eleven.
Speaker 1: So it gives some leverage to especially like the state
Speaker 1: and federal authorities who are going to be looking at
Speaker 1: this to really have a say in, you know, what
Speaker 1: the buyer is allowed to do and what the terms
Speaker 1: of the sale finally are.
Speaker 2: So a company selling your data during a bankruptcy actually
Speaker 2: is a much more transparent process perhaps than a company
Speaker 2: selling your data at any other time.
Speaker 1: As far as genetic information, yeah, for sure.
Speaker 2: In a bankruptcy court filing, twenty three and Meters said
Speaker 2: that any potential buyers will have to state in writing
Speaker 2: that they'd comply with the company's privacy practices.
Speaker 1: Twenty three and Meters has put out a number of
Speaker 1: communications through press release in court. I've seen like a
Speaker 1: letter that's addressed to customers to really ease concerns about
Speaker 1: the data. They've said that the Chapter eleven doesn't change
Speaker 1: at all the way in which they manage your data.
Speaker 1: It doesn't change the way that they operate. Everything is
Speaker 1: the status quote.
Speaker 2: Though we don't yet know who the bidders are going
Speaker 2: to be. Bloomberg Biotech reporter Jerry Smith says it's helpful
Speaker 2: to look at precedent. Last year, a genetic testing company
Speaker 2: went into bankruptcy and sold itself to lab Corp.
Speaker 3: People have heard of that company anytime you've had any
Speaker 3: sort of blood work done. But they are using it
Speaker 3: to potentially create new treatments and for healthcare purposes. So
Speaker 3: there's a lot of different scenarios where this DNA data
Speaker 3: could be valuable to different parties. But yeah, there is
Speaker 3: a possibility that one of the original intentions of twenty
Speaker 3: three and meters, which is to use that DNA data
Speaker 3: to help people live healthier lives and invent medicines, that
Speaker 3: could end up happening.
Speaker 2: The thing is, when many people signed up for twenty
Speaker 2: three and meter, they were thinking about finding a long
Speaker 2: lost sibling or better understanding their heritage. They weren't thinking
Speaker 2: about who else their data might be valuable to but
Speaker 2: Jonathan says the company has always acknowledged such a sale
Speaker 2: was possible.
Speaker 1: Twenty three and meters says in the core papers, and
Speaker 1: their lawyer told the judge that their terms do permit
Speaker 1: the company in the event of a bankruptcy or through
Speaker 1: some sort of merger and acquisition or sale. It does
Speaker 1: allow them to transfer your data that is written within
Speaker 1: the terms of service.
Speaker 2: But famously no one reads the terms of service, not
Speaker 2: even Jonathan's mom. But Jonathan says, maybe people should start.
Speaker 1: As I was reaching out to people and talking to
Speaker 1: customers of twenty three and me who are trying to
Speaker 1: delete their information, I found it very relatable to have
Speaker 1: signed up for something you're very excited about in this case,
Speaker 1: like oh, you wanted to know who your relatives are
Speaker 1: or learn a little bit more about you, and of
Speaker 1: course like not reading the terms and conditions and realizing
Speaker 1: this could come back in a way that you don't expect.
Speaker 1: Maybe this will make people read the terms of service
Speaker 1: a little bit more closely.
Speaker 2: Or maybe it won't. This is the Big Take from
Speaker 2: Bloomberg News. I'm Sarah Holder. This episode was produced by
Speaker 2: Rachel Lewis Chrisky and Julia Press. It was edited by
Speaker 2: Tracy Samuelson, Irene Garcia Perez, and Cynthia Koons special thanks
Speaker 2: to Steven Church.
Speaker 4: It was fact checked.
Speaker 2: By Adrian Atapia and mixed and sound designed by Alex Sugiura.
Speaker 2: Our senior producer is Naomi Shaven. Our senior editor is
Speaker 2: Elizabeth Ponso. Our deputy executive producer is Julia Weaver. Our
Speaker 2: executive producer is Nicole Beemster. Bor Sage Bauman is Bloomberg's
Speaker 2: head of podcasts. If you liked this episode, make sure
Speaker 2: to subscribe and review The Big Take wherever you listen
Speaker 2: to podcasts.
Speaker 4: It helps people find the show. Thanks for listening. We'll
Speaker 4: be back next week.