23andMe bankruptcy sale may need national security review

By Dietrich Knauth

April 22 (Reuters) - Bankrupt genetic test company 23andMe may face opposition from the U.S. government if it tries to sell itself to a foreign buyer, according to a Tuesday court filing by national security agencies.

23andMe, which has genetic information for 15 million consumers, is trying to find a buyer for its business after filing for bankruptcy last month. The company has said it won’t go through with a sale that does not protect its customers’ genetic data, but the bankruptcy has drawn scrutiny from state attorneys general and lawmakers who warn that customer data could be sold to unscrupulous buyers.

The federal government echoed those concerns in a Tuesday court filing by the U.S. Committee on Foreign Investment in the United States (CFIUS), an interagency body that vets foreign investments into U.S. companies for national security risks.

CFIUS said that it may need to review any sale that sends U.S. customers’ genetic data to an overseas buyer, and the transaction “may be prohibited or restricted” if it puts U.S. national security at risk.

CFIUS review can create major delays in large international transactions. With Nippon Steel's proposed buyout of Pittsburgh-based U.S. Steel, CFIUS spent months reviewing that deal for national security risks before then-President Joe Biden decided to block it, a decision that Trump reversed earlier this month when he ordered CFIUS to re-open its review.

U.S. law has safeguards to prevent foreign buyers from exploiting the sensitive personal data of U.S. persons, and particular scrutiny is placed on buyers from countries like China, Russia and Iran, according to CFIUS. The interagency group said it would look to evaluate whether a foreign buyer or investor could use “health and biological data” to “threaten to impair” U.S. national security.

23andMe has not yet named a buyer for its assets.

The company has received “significant interest" from potential buyers and it hopes to be able to name a lead bidder by the end of the week, 23andMe attorney Chris Hopkins said at a Tuesday hearing in St. Louis, Missouri, bankruptcy court. The company would then proceed to an auction, Hopkins said.

The potential bidders are mostly U.S.-based companies, with strong records on privacy and data security, Hopkins told U.S. Bankruptcy Judge Brian Walsh.

23andMe’s founder Anne Wojcicki has also expressed interest in buying back the company in a take-private transaction.

The case is In re: 23andMe Holding Co, U.S. Bankruptcy Court for the Eastern District of Missouri, No. 25-40976

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