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A 2023 data breach hurt demand for 23andMe's core services

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Transaction is expected to complete in the third quarter

By Mariam Sunny and Siddhi Mahatole

May 19 (Reuters) - Regeneron Pharmaceuticals ( REGN )

said on Monday it will buy genomics firm 23andMe Holding ( MEHCQ ) for

$256 million through a bankruptcy auction, and promised to

prioritize the ethical use of DNA data from customers using

ancestry testing and other services.

Through the deal, Tarrytown, New York-based Regeneron aims

to bolster its capabilities in genomics-driven drug discovery by

integrating 23andMe's trove of more than 15 million customer DNA

profiles, collected via its popular direct-to-consumer

saliva-testing kits.

South San Francisco, California-based 23andMe filed for

bankruptcy in March, seeking to sell its business at auction

after a decline in consumer demand and a 2023 data breach that

exposed sensitive genetic and personal information of millions

of customers.

The second-highest bid, for $146 million, was submitted by a

nonprofit research institute founded by 23andMe's former CEO and

cofounder Anne Wojcicki, according to court documents.

The transaction, expected to complete in the third quarter,

puts the spotlight back on data privacy issues sparked off by

the data breach. 23andMe, once a trailblazer in ancestry DNA

testing, has also faced dwindling demand for its core services.

The transaction "starts to bring about a good conclusion to

what otherwise could have been a difficult bankruptcy case,"

said trial attorney Daniel Gielchinsky, co-founder and partner

at DGIM law.

Gielchinsky said Regeneron, with its proven track record,

will do a better job in the long run of protecting consumer

information safeguarded by privacy laws.

The hack and subsequent bankruptcy filing have drawn

scrutiny from U.S. lawmakers concerned that genetic data on

millions of customers could be sold to unscrupulous buyers.

Acknowledging the heightened scrutiny, Regeneron on Monday

said it will uphold 23andMe's existing privacy policies and

comply with all applicable data protection laws.

Regeneron also committed to working transparently with a

court-appointed independent overseer who will assess the

implications of the deal for consumer privacy.

The overseer is expected to deliver a report to the

bankruptcy court by June 10. The court is scheduled to consider

approval of the transaction on June 17.

The investments in genomics "make good strategic sense" for

Regeneron, but might take a decade or more to see a return,

Bernstein analyst William Pickering said.

As part of the agreement, Regeneron will acquire all units

of 23andMe except its on-demand telehealth service Lemonaid

Health, which is being shuttered.

After the transaction, 23andMe will operate as a wholly

owned unit of Regeneron.