It’s been a strange few months at African genomics startup 54gene. In August, it laid off 95 employees, mostly contract staff (in laboratories and sales departments) hired to work in the COVID business line 54gene launched in 2020. In September, a co-founder and Vice President left of Engineering Ogochukwu Francis Osifo the company. And this week, founder and former CEO Dr. Abasi Ene-Obong from his executive role and was replaced by Senior Counsel Teresia L. Bost.
This news coincided with further job cuts. The company confirmed to TechCrunch that this second round of layoffs, which took place on Tuesday, affected more than 100 staff members: 55% of the total workforce left after the first round of layoffs. The biotech did not specify which roles and departments were cut.
The genomics startup based in Washington and Lagos is considered the main new African biotech space since it joined Y Combinator in 2019. But while 54gene was launched to address the gap in the global genomics market, where Africans are more less than 3%. In terms of genetic material used in pharmaceutical research, its growth in 2020 overlapped elsewhere, with the COVID-19 pandemic, and it employed strongly to meet the demands of being one of the test providers of COVID- 19 largest in Nigeria.
His readiness to seize this opportunity with his clinical diagnostic arm was also a catalyst for increasing his revenue and raising two massive growth rounds in quick succession: a $15 million Series A that year and a $25 million Series B in 2021 from investors such as New York. -based Adjuvant Capital, the pan-African firm Cathay AfricInvest Innovation Fund (CAIF), KdT Ventures and Endeavor Catalyst.
However, 2022 will be a year to forget for the biotech startup. Not only has its revenue declined and laid off nearly 200 employees, but the company’s value has also declined significantly in a period where startup valuations are taking a hit. According to people with knowledge of the matter, 54gene’s valuation has fallen by two-thirds, from the $170 million it secured when it raised its Series B to about $50 million in a bridge round that took lead investors from the company’s board.
Sources also said the round was closed at a 3x to 4x liquidation option, meaning investors – typically the lead investor – would be paid back three or four times their money before other interested parties, including other investors , founders and employees in the event of an event. . These terms, which shift power back to investors, were rare during the venture capital boom between mid-2020 and last year but are now commonplace in this fundraising environment.
54gene has neither confirmed nor denied the origin of this agreement. However, he stated in an email response: “The existing investors have injected fresh capital into the company on terms that reflect current market conditions. We hope that this round will not only support the company through this challenging period but will also see it succeed going forward – whether that be raising additional capital, attracting strategic partners, or another way forward.”
Often, liquidation favors indicate that investors want to protect themselves if a growing portfolio company exits at a lower value than originally thought. In some cases, the investors believe that the start-up may have difficulty achieving a firm exit due to fundamental challenges affecting its business.
When the company’s first news broke, allegations of inappropriate behavior were made against the then Chief Executive Officer and his executives by a group of employees. And although they have no basis, these accusations have resurfaced after Ene-Obong’s resignation. Affected employees — who claim they have not received their severance packages and spoke to TechCrunch on the condition of anonymity — vaguely blame 54gene’s current troubles on irresponsible hiring, dubious expansion drives and misappropriation of funds. The YC-backed biotech did not respond to TechCrunch’s request for comment about its former executives’ alleged mismanagement of funds and unpaid employee severance packages.
54gene’s tension on the matter and the appointment of Bost from his legal role as interim CEO raises questions arbitrarily and leaves room for interpretation to be biased towards these accusations, especially with the two co-founders resigning a few weeks apart. However, in an email to TechCrunch, the company is flatly arguing that Osifo’s resignation had been ongoing for some time and was unrelated to this month’s actions, although Bost, who was hired last September , what 54gene – backed by COO Delali Attipoe – needed for its next step.
“Teresia is an outstanding executive with deep experience in the global pharmaceutical and biotechnology industry, leading global teams and overseeing corporate governance,” the company said. “These skills, along with his breadth of experience driving business operations and translating complex regulatory requirements, will be invaluable to 54gene in this next phase of the company. Delali and Teresia will make a great team that together will strengthen 54gene’s position as a genomics leader in the industry.”
Meanwhile, 54gene said its former chief executive “will continue to support the company in its plans going forward such as strategic partnerships and fundraising” without explaining why he stepped down.
However, according to some people with knowledge of the company’s proceedings, the terms of 54gene’s new deal contributed to Ene-Obong’s resignation. They say Ene-Obong – keeping her position on the 54gene board while moving to a new senior adviser role – may step down as CEO in protest at 54gene’s new valuation and the liquidation option offered by investors in the bridge round. It is speculated that some of the investors also tried to replant the previous valuable round of the company to get more shares while diluting the shares of the founders and other investors. 54gene declined to comment on the matter.
That 54gene had to settle a bridge round internally despite receiving over $45 million in the past three years is a reminder that biotech projects are very capital intensive – for example, it costs about $700 to sequence a human genome ( one of the main procedures 54gene). Typically, biotechs deploy investors’ funds to research with an eye on later revenue and the case is no different with 54gene. Still, the genome startup is aggressively cutting costs by laying off staff in two batches — and shutting down its clinical diagnostic arm — despite the clear effects of the pandemic. This current crisis, along with the hard work ahead of the company, has many tech watchers also wondering if its current and former executives can keep the moonshot project afloat long enough to generate revenue. generate substantial, let alone build a solid business.