May 19 (Reuters) - Drugmaker Regeneron Pharmaceuticals

will buy genetic testing firm 23andMe Holding ( MEHCQ ) for $256

million through a bankruptcy auction, the companies said on

Monday.

Regeneron said it will comply with 23andMe's privacy

policies and applicable laws with respect to the use of customer

data and that it is ready to detail its intended use of the data

to a court-appointed overseer.

The bankruptcy proceedings, filed in March, had drawn

scrutiny from lawmakers who warned that millions of customers'

genetic data could be sold to unscrupulous buyers.

23andMe last month agreed to allow a court-appointed

overseer for the company's handling of customers' genetic

information and its security policies during the bankruptcy.

The company has collected genetic data from 15 million

customers who ordered its DNA testing kits online and provided

saliva samples.

The company had been struggling with weak demand for its

ancestry testing kits and a data breach in 2023 that exposed

millions of customers' genetic data.

As part of the agreement, Regeneron will acquire all units

of 23andMe, except telehealth service Lemonaid Health, which the

genetic testing firm plans to wind down.

After the transaction completes, 23andMe will continue to

operate as a wholly-owned direct or indirect unit of Regeneron,

the companies said.

The companies expect to close the deal in the third quarter.