54gene valuation slashed by over $100M amid job cuts and CEO exit • TechCrunch

It’s been an amazing few months at 54gene’s African genomics launch. In August, it laid off 95 employees, mostly contract workers (in labs and sales departments) hired to work on the 54gene business line in 2020. And this week, founder and now former CEO Dr. Abasi Ene-Obong stepped down as CEO and was replaced by General Counsel Theresia L. Bost has been appointed.

The news coincided with more job cuts. The company confirmed to TechCrunch that this second round of layoffs, which took place on Tuesday, affected more than 100 employees: 55% of the workforce that remained after the first round of layoffs. The biotech did not specify which roles or departments were cut.

The Washington and Lagos-based genomics startup has been considered a showcase of the African biotech space since joining Y Combinator in 2019. But while 54gene was launched to overcome the gap in the global genomics market, Africans make up less than 3%. genetic material used in pharmaceutical research, its growth elsewhere in 2020 has coincided with the COVID-19 pandemic, and it has aggressively recruited to meet the demands of being one of Nigeria’s largest COVID testing providers.

Its willingness to embrace this opportunity with its clinical diagnostic device was also a catalyst for its revenue growth, raising two major growth rounds in quick succession: a $15 million Series A that year and a $25 million Series B in 2021 from investors like New York. -York-based Adjuvant Capital, pan-African company Cathay AfricInvest Fund (CAIF), KdT Ventures and Endeavor Catalyst.

However, 2022 will be a year to forget about biotech startups. Not only did its revenue plummet and it laid off nearly 200 employees, but the company’s value also plummeted in an era when startups are being battered. 54gene’s valuation has fallen by two-thirds, from the $170 million it raised when it raised its Series B to about $50 million in a round of money secured by the company’s lead investors, according to people familiar with the matter.

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The sources also said that the lower round was closed with a liquidation preference of 3x to 4x, which means that the investors – usually the lead investor – get their money before other interested parties, including other investors, founders and employees, in the event of an exit three times or four times. . These terms, which put the power back in the hands of investors, were rare during the venture capital boom of the mid-2020s and last year, but are now commonplace in this fundraising environment.

54gene did not confirm or deny the basis of this agreement. However, it said in an emailed response: “Existing investors have injected new capital into the company on terms that reflect current market conditions. We hope this round will not only support the company during this difficult period, but also positions it for future success – whether it’s raising additional capital, attracting strategic partners or some other way forward.”

Often, liquidation preferences indicate that investors want to protect themselves if a growth-stage portfolio company exits at a lower value than originally anticipated. In some cases, investors believe that a startup may struggle to achieve a sustainable exit due to underlying problems affecting its business.

When news of the company’s layoffs first broke, allegations of financial impropriety against the then-CEO and his superiors came from a group of employees. And although it remains unfounded, these allegations have resurfaced following Ene-Obong’s resignation. Affected employees – who claim they have not received their severance packages – and spoke to TechCrunch on condition of anonymity – strongly blame 54gene’s current woes on irresponsible hiring, questionable drives and misappropriation of funds. The YC-backed biotech did not respond to TechCrunch’s request for comment on the mismanagement of funds and unpaid packages from users by its former executives.

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54gene’s firm stance on the matter and Bost’s appointment of his legal role as interim CEO arbitrarily raises questions and leaves room for interpretation to these accusations, especially when both co-founders resigned within weeks of each other. However, in an email to TechCrunch, the company clearly countered that Asifo’s resignation had been ongoing for some time and was not related to this month’s activities, while Bost, who was hired last September, was what was that 54gene – with the support of COO Delali Attipoe – for its next phase.

“Terezia is a versatile executive with deep experience in the global pharmaceutical and biotechnology industries, overseeing leading global teams and overseeing corporate governance,” the company said. “These skills, along with his extensive experience in managing business operations and translating complex regulatory requirements, will be invaluable in leading 54gene through this next phase of the company. Delaly and Theresia will make a great team that together will position 54gene as a leader in genomics.” strengthen in the field.

Meanwhile, 54gene said its former executive “will continue to support the company in its future plans, such as strategic partnerships and fundraising,” without elaborating on the reason for his resignation.

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However, the terms of 54gene’s new deal prompted Ene-Obong’s resignation, according to several people familiar with the company. They say Ene-Obong – retaining his position on the 54gene board while transitioning to a new role as a senior adviser – may step down as CEO in protest at 54gene’s new valuation and preferred liquidation by investors in the money round. There is some speculation that some of the investors also tried to repeat the company’s previous bonus round to get more shares, while reducing the shares of the founders and other investors. 54gene declined to comment on the matter.

The fact that 54gene, despite having received more than $45 million in funding over the past three years, had to raise money in-house is a reminder that biotech projects are very capital-intensive — for example, to sequence the human genome, about 700 Dollars are required (one of the main procedures of 54gene). Usually, biotechnologies use investors’ money in research, while thinking about income later, and the case with 54gene is no different. Still, the way the genome startup is cutting costs by cutting staff in two groups — and aggressively closing its clinical diagnostics arm — is somewhat troubling, despite the pandemic’s obvious impact. This current crisis, combined with the company’s difficult task ahead, has also led many tech watchers to question whether its current and past executives can sustain the satellite project long enough to generate significant revenue, let alone build a solid business.


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