23andMe Reportedly Considers Selling Lemonaid Telehealth Unit

23andMe is reportedly considering the sale of Lemonaid Health, its telehealth operation.

The consumer genetic testing kit company acquired Lemonaid in 2021 for $400 million and is now weighing a sale, per a Friday (Jan. 17) Business Insider report that cited sources familiar with the matter.

PYMNTS has contacted 23andMe for comment but has not yet gotten a reply.

The news comes months after 23andMe announced it was cutting more than 200 jobs — or around 40% of its staff — as part of a larger restructuring.

The company’s stock has plunged since a 2023 data breach that exposed the private information of around 7 million customers. 23andMe revealed the breach in October 2023, around six months after it began, with the incident affecting nearly half the users in the company’s database at the time.

Last September, 23andMe announced it had agreed to pay $30 million to settle all claims related to the breach.

With sales of DNA test kits declining, Ancestry.com has said that the idea of it acquiring 23AndMe — its closest competitor — would likely not bear fruit due to antitrust concerns.

“23andMe specifically would be challenging because they’re the No. 2 in the category, and we’re the No. 1 in the category,” Ancestry Chief Legal Officer Greg Packer said during a meeting last fall, per a Bloomberg News report.

He noted that the Federal Trade Commission (FTC) would probably consider the merger as potentially monopolistic. As rivals in the highly consolidated consumer DNA-testing market, Ancestry and 23andMe are uniquely positioned at the top of the sector, which intensifies the antitrust complexities surrounding a possible acquisition.

This latest news comes amid a “pivotal moment” for digital healthcare, as PYMNTS wrote last week, “with innovation, funding and expansion creating new opportunities and challenges for startups and established companies.”

Venture funding for the sector reached $10.1 billion last year. That’s a slight dip from 2023, though still exceeding pre-pandemic investments. Still, a drop in later-stage funding reveals larger companies are having more trouble securing capital, which could lead to consolidation and partnerships, that report added.

“Many late-stage players spent significant capital developing and piloting their solutions but weren’t able to clear the necessary hurdles to operate sustainably at scale,” Lawrence M. Chu, co-chair of Global M&A at Goodwin, said in Rock Health’s 2024 Digital Health Care Report released last week.

“Today’s decrease in late-stage investments will likely lead to more M&A in the near future. These acquisitions may not be ‘champagne popping’ events, but they will streamline operations and free up founders to eventually start a new crop of digital health companies.”