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 be changed 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 passed off on Tuesday, affected over 100 employees: 55% of the full workforce remaining after the primary spherical of layoffs. The biotech didn’t specify what roles and departments obtained trimmed.
The Washington- and Lagos-based genomics startup has been thought of the showpiece of Africa’s fledging biotech house because it obtained into Y Combinator in 2019. However whereas 54gene launched to handle 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 in every of 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 Sequence A that yr and a $25 million Sequence B in 2021 from buyers equivalent 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 yr to neglect for the biotech startup. Not solely has its revenues dwindled and laid off virtually 200 staff, however the firm’s worth has additionally been considerably trimmed in a interval when startups’ valuations are taking a beating. In response to individuals with data of the matter, 54gene’s valuation has dropped by two-thirds, from the $170 million secured when it raised its Sequence B to about $50 million in a bridge spherical involving lead buyers from the corporate’s board.
Sources additionally stated the down spherical closed at a 3x to 4x liquidation desire, that means that buyers — usually the lead investor — could be paid again triple or quadruple their cash earlier than different stakeholders, together with different buyers, founders and staff within the case of an exit. These phrases, which shift energy again to buyers, have been uncommon in the course of the enterprise capital increase between mid-2020 and final yr however are actually commonplace on this fundraising setting.
54gene didn’t verify or deny the premise of this deal. Nonetheless, it acknowledged in an electronic mail response: “The prevailing buyers injected contemporary capital into the corporate at phrases that mirror present market circumstances. We hope this spherical not solely helps the corporate by this difficult interval but additionally positions it for achievement sooner or later — whether or not or not it’s to boost extra capital, appeal to strategic companions, or one other future path.”
Typically, liquidation preferences sign that buyers wish to shield themselves if a growth-stage portfolio firm exits at a price decrease than initially anticipated. In some instances, the buyers consider that the startup may battle to supply a strong exit as a result of underlying challenges affecting its enterprise.
When the corporate’s first layoff information broke, allegations of economic impropriety have 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 growth 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 number of weeks aside. Nonetheless, in an electronic 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 stated. “These expertise, coupled along 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 important group that collectively will strengthen 54gene’s place as a genomics chief within the business.”
In the meantime, 54gene acknowledged that its ex-chief government “will proceed to help the corporate in its go-forward plans equivalent to strategic partnerships and fundraising” with out explaining why he stepped down.
Nonetheless, based on a number of individuals with data 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 shifting to a brand new senior advisor position — could have resigned as CEO in protest of 54gene’s new valuation and the liquidation desire supplied by buyers within the bridge spherical. There’s some hypothesis that a few of the buyers additionally tried to reprise the corporate’s earlier prized spherical to get extra shares whereas diluting that of the founders and different buyers. 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 over the past three years is a reminder that biotech initiatives are extremely capital-intensive — for example, it prices about $700 to sequence a human genome (one in every of 54gene’s foremost procedures). Usually, biotechs deploy buyers’ funds into analysis whereas excited about income later and the case isn’t completely different with 54gene. Nonetheless, the way through which the genome startup is aggressively reducing prices by shedding employees in two batches– and shutting down its scientific diagnostic arm — is considerably troubling regardless of the apparent results of the pandemic. This present disaster, coupled with the arduous process forward of the corporate, has additionally led many tech observers to surprise if its current and previous executives can preserve the moonshot challenge afloat lengthy sufficient to generate substantial income, not to mention construct a strong enterprise.