Dozens of state attorneys general have sued to block the sale of 23andMe’s genetic material just as a biotechnology company is seeking to buy the company out of bankruptcy for hundreds of millions of dollars.
The bipartisan group of 27 states and the District of Columbia alleges that 23andMe has collected and is now looking to sell “genotype data,” or raw genetic code, from 15 million people that is paired with data on a person’s physical appearance and their family tree. The news comes as the potential buyer, biotechnology company Regeneron, faces a bidding war with 23andMe founder Anne Wojcicki, who offered $305 million for the company through her recently founded nonprofit TTAM Research Institute.
Daniel Gielchinsky, a Florida-based bankruptcy attorney at DGIM Law not involved in the case, told Fortune that despite the states’ lawsuit, the decision on whether 23andMe can sell its genetic material will be made in bankruptcy court, which has full jurisdiction over the issue. The lawsuit may have been made outside of bankruptcy court because the states believe they won’t get a fair shake for similar objections already raised in bankruptcy court, which has a reputation for being pro-debtor and mostly looking to facilitate either a sale or reorganization.
Furthermore, if the states succeed in preventing the sale of 23andMe’s genetic data, it would render the company essentially worthless, said Gielchinsky. If the bankruptcy court does approve the sale it will likely come with consumer privacy protections that the buyer, Regeneron, must adhere to.
Still, if the sale of the genetic data is allowed to go forward, it could set a precedent for future cases, as companies collect increasingly personal data about Americans, Gielchinsky said.
“I wouldn’t say it’s as saleable as browsing data, for instance, but certainly this would create a marketplace where that data, that medical data, or biogenetic data, can ultimately be sold to someone who the consumer didn’t sign up with in the first place,” Gielchinsky told Fortune.
