A federal bankruptcy judge has approved the sale of genetic-testing company 23andMe to a non-profit founded by the company's co-founder, overcoming objections from multiple states concerned about the privacy implications of transferring sensitive genetic data.
In a 38-page ruling issued Friday, U.S. Bankruptcy Judge Christopher J. Sontchi of the Eastern District of Missouri authorized 23andMe to sell substantially all its assets to TTAM Research Institute for $305 million. TTAM is a non-profit corporation headed by Anne Wojcicki, 23andMe's co-founder and former chief executive officer.
"If we cut through the formalities, this transaction will result in Ms. Wojcicki's repurchase of a business that she co-founded and ran for years," Judge Sontchi wrote. "To make that happen, she will pay a very large sum of money that may be sufficient to compensate all of the company's creditors, including customers who were harmed by a data breach."
The ruling concludes a contentious sale process that began after 23andMe filed for Chapter 11 bankruptcy protection earlier this year. The company cited inflation, rising competition, and legal liabilities from a 2023 data breach that affected approximately 7 million customers as reasons for its financial distress.
The approved transaction employs what the court referred to as an "Equity Toggle" structure, in which 23andMe will first transfer its assets—including genetic data from approximately 13 million customers—to a newly formed subsidiary ("Newco"), which will then be sold to TTAM. This two-step process became central to the legal dispute, as five states—California, Kentucky, Tennessee, Texas, and Utah—argued it violated their genetic privacy laws, which generally require companies to obtain a consumer's express consent before transferring genetic information.
Judge Sontchi rejected the states' arguments, concluding that transferring genetic data to a wholly owned subsidiary as part of a larger business transaction doesn't trigger the consent requirements in state genetic privacy laws. He also dismissed the debtors' novel argument that bankruptcy law preempts state genetic privacy laws entirely.
"Nothing in the Bankruptcy Code suggests that Congress intended that these salutary laws should be unenforceable merely because a debtor or a trustee is the seller," the judge wrote in rejecting 23andMe's preemption theory.
The sale followed a competitive auction process where the initial opening bid was just $52 million. TTAM's winning $305 million offer—nearly six times that amount—beat out pharmaceutical company Regeneron, which remains the backup bidder with a bid of $256 million.
Professor Neil Richards of Washington University in St. Louis, who served as the court-appointed Consumer Privacy Ombudsman, had recommended requiring opt-in consent from all customers before their data could be transferred. However, Judge Sontchi declined to impose this requirement, noting that it would likely cause the transaction to fail, pushing the company toward a more costly reorganization plan or Chapter 7 liquidation.
"If I were to impose an opt-in requirement, it is highly unlikely that it would ever be fulfilled, or even attempted," the judge wrote. He noted that the parties could achieve the same result—TTAM owning the 23andMe business—through a plan of reorganization that wouldn't require customer consent but would cost the bankruptcy estates approximately $20 million in additional expenses.
As part of the sale, TTAM has committed to several privacy enhancements, including maintaining customers' rights to delete their accounts and data, forming an independent consumer privacy advisory board, and providing customers with two years of identity-theft monitoring. The company will also adopt in perpetuity 23andMe's policies allowing customers to opt out of research.
"Following the closing, customers are likely to have the same or better experiences (with respect to privacy and otherwise) with TTAM as they have with the Debtors today," Judge Sontchi concluded.
The court shortened the usual 14-day stay period to 10 days, meaning the transaction can close after July 7, 2025, barring a successful appeal from the objecting states. In the meantime, the companies can take preliminary actions such as forming the new subsidiary and providing notice to customers.
The case highlights the complex intersection of bankruptcy law and privacy protection in an era when consumer genetic information has become a valuable corporate asset. Approximately 1.9 million customers have deleted their accounts since 23andMe's bankruptcy filing, demonstrating significant consumer concern about the fate of their genetic information.
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