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

It’s been a wierd couple of months at African genomics startup 54gene. In August, it sacked 95 staff, principally contract employees (in labs and gross sales departments) employed to work in 54gene’s COVID enterprise line launched in 2020. In September, co-founder and VP of Engineering Ogochukwu Francis Osifo left the corporate. And this week, founder and now ex-CEO Dr. Abasi Ene-Obong stepped down from his government position to get replaced by Normal Counsel Teresia L. Bost. 

This information coincided with extra job cuts. The corporate confirmed to TechCrunch that this second spherical of layoffs, which happened on Tuesday, affected over 100 employees: 55% of the entire workforce remaining after the primary spherical of layoffs. The biotech didn’t specify what roles and departments acquired trimmed.

The Washington- and Lagos-based genomics startup has been thought-about the showpiece of Africa’s fledging biotech house because it acquired into Y Combinator in 2019. However whereas 54gene launched to deal with the hole within the international genomics market, the place Africans make up lower than 3% of genetic materials utilized in pharmaceutical analysis, its development in 2020 overlapped elsewhere, with the COVID-19 pandemic, and it employed aggressively to satisfy the calls for of being one among Nigeria’s largest suppliers of COVID testing.

Its preparedness to satisfy this chance with its scientific diagnostic arm was additionally a catalyst to growing its income and elevating two large development rounds in fast succession: a $15 million Collection A that 12 months and a $25 million Collection B in 2021 from traders similar to New York-based Adjuvant Capital, Pan-African agency Cathay AfricInvest Innovation Fund (CAIF), KdT Ventures and Endeavor Catalyst.

But, 2022 will likely be a 12 months to neglect for the biotech startup. Not solely has its revenues dwindled and laid off nearly 200 staff, however the firm’s worth has additionally been considerably trimmed in a interval when startups’ valuations are taking a beating. In accordance with folks with information of the matter, 54gene’s valuation has dropped by two-thirds, from the $170 million secured when it raised its Collection B to about $50 million in a bridge spherical involving lead traders from the corporate’s board.

Sources additionally mentioned the down spherical closed at a 3x to 4x liquidation desire, which means that traders — sometimes the lead investor — could be paid again triple or quadruple their cash earlier than different stakeholders, together with different traders, founders and staff within the case of an exit. These phrases, which shift energy again to traders, had been uncommon in the course of the enterprise capital increase between mid-2020 and final 12 months however are actually commonplace on this fundraising atmosphere.

54gene didn’t affirm or deny the premise of this deal. Nonetheless, it said in an e-mail response: “The present traders injected contemporary capital into the corporate at phrases that replicate present market circumstances. We hope this spherical not solely helps the corporate by this difficult interval but in addition positions it for fulfillment sooner or later — whether or not or not it’s to boost further capital, entice strategic companions, or one other future path.”

Typically, liquidation preferences sign that traders need to defend themselves if a growth-stage portfolio firm exits at a price decrease than initially anticipated. In some circumstances, the traders consider that the startup may battle to supply a stable exit as a result of underlying challenges affecting its enterprise.

When the corporate’s first layoff information broke, allegations of economic impropriety had been leveled towards the then-CEO and his executives from a bunch of staff. And although they continue to be unfounded, these accusations have come to gentle once more following Ene-Obong’s resignation. Affected staff — who declare they haven’t acquired their severance packages and spoke to TechCrunch on the situation of anonymity — unsubstantially blame 54gene’s present troubles on irresponsible hiring, questionable enlargement drives and misappropriation of funds. The YC-backed biotech didn’t reply to TechCrunch’s request for feedback about its former executives’ alleged mismanagement of funds and staff’ unpaid severance packages.

54gene’s tight-lippedness on the matter and Bost’s appointment from her authorized position to interim CEO arbitrarily raises questions and leaves room for interpretation tilting towards these accusations, particularly as each co-founders resigned a couple of weeks aside. Nevertheless, in an e-mail to TechCrunch, the corporate subtly counterargues that Osifo’s resignation had been in course of for a while and was unrelated to this month’s actions, whereas Bost, employed final September, was what 54gene wanted — with help from COO Delali Attipoe — for its subsequent part.

“Teresia is a well-rounded government with a depth of expertise within the international pharmaceutical and biotech business, main international groups and overseeing company governance,” the corporate mentioned. “These expertise, coupled together with her breadth of expertise driving enterprise operations and translating advanced regulatory necessities, will likely be invaluable on the helm of 54gene on this subsequent part of the corporate. Delali and Teresia will make an incredible workforce that collectively will strengthen 54gene’s place as a genomics chief within the business.”

In the meantime, 54gene said that its ex-chief government “will proceed to help the corporate in its go-forward plans similar to strategic partnerships and fundraising” with out explaining why he stepped down.

Nevertheless, in accordance with a number of folks with information of happenings on the firm, the phrases of 54gene’s new deal contributed to Ene-Obong’s resignation. They are saying Ene-Obong — retaining his place on 54gene’s board whereas transferring to a brand new senior advisor position — could have resigned as CEO in protest of 54gene’s new valuation and the liquidation desire provided by traders within the bridge spherical. There may be some hypothesis that a number of the traders additionally tried to reprise the corporate’s earlier prized spherical to get extra shares whereas diluting that of the founders and different traders. 54gene declined to touch upon the matter.

The truth that 54gene needed to prepare a bridge spherical in-house regardless of securing over $45 million during the last three years is a reminder that biotech tasks are extremely capital-intensive — as an illustration, it prices about $700 to sequence a human genome (one among 54gene’s primary procedures). Sometimes, biotechs deploy traders’ funds into analysis whereas serious about income later and the case isn’t totally different with 54gene. Nonetheless, the style wherein the genome startup is aggressively chopping prices by shedding employees in two batches– and shutting down its scientific diagnostic arm — is considerably troubling regardless of the plain results of the pandemic. This present disaster, coupled with the arduous job forward of the corporate, has additionally led many tech observers to surprise if its current and previous executives can hold the moonshot mission afloat lengthy sufficient to generate substantial income, not to mention construct a stable enterprise.

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