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

It’s been a strange couple of months at African genomics startup 54gene. In August, it sacked 95 employees, mostly contract staff (in labs and sales departments) hired to work in 54gene’s COVID business line launched in 2020. In September, co-founder and VP of Engineering Ogochukwu Francis Osifo left the company. And this week, founder and now ex-CEO Dr. Abasi Ene-Obong stepped down from his executive role to be replaced by General Counsel Teresia L. Bost. 

This news coincided with more job cuts. The company confirmed to TechCrunch that this second round of layoffs, which took place on Tuesday, affected over 100 staff: 55% of the total workforce remaining after the first round of layoffs. The biotech didn’t specify what roles and departments got trimmed.

The Washington- and Lagos-based genomics startup has been considered the showpiece of Africa’s fledging biotech space since it got into Y Combinator in 2019. But while 54gene launched to address the gap in the global genomics market, where Africans make up less than 3% of genetic material used in pharmaceutical research, its growth in 2020 overlapped elsewhere, with the COVID-19 pandemic, and it hired aggressively to meet the demands of being one of Nigeria’s largest providers of COVID testing.

Its preparedness to meet this opportunity with its clinical diagnostic arm was also a catalyst to increasing its revenue and raising two huge 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, Pan-African firm Cathay AfricInvest Innovation Fund (CAIF), KdT Ventures and Endeavor Catalyst.

Yet, 2022 will be a year to forget for the biotech startup. Not only has its revenues dwindled and laid off almost 200 employees, but the company’s value has also been significantly trimmed in a period when startups’ valuations are taking a beating. According to people with knowledge of the matter, 54gene’s valuation has dropped by two-thirds, from the $170 million secured when it raised its Series B to about $50 million in a bridge round involving lead investors from the company’s board.

Sources also said the down round closed at a 3x to 4x liquidation preference, meaning that investors — typically the lead investor — would be paid back triple or quadruple their money before other stakeholders, including other investors, founders and employees in the case of an exit. 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 didn’t confirm or deny the premise of this deal. Still, it stated in an email response: “The existing investors injected fresh capital into the company at terms that reflect current market conditions. We hope this round not only supports the company through this challenging period but also positions it for success in the future — whether it be to raise additional capital, attract strategic partners, or another future path.”

Often, liquidation preferences signal that investors want to protect themselves if a growth-stage portfolio company exits at a value lower than initially expected. In some cases, the investors believe that the startup might struggle to produce a solid exit due to underlying challenges affecting its business.

When the company’s first layoff news broke, allegations of financial impropriety were leveled against the then-CEO and his executives from a group of employees. And though they remain unfounded, these accusations have come to light again following Ene-Obong’s resignation. Affected employees — who claim they haven’t received their severance packages and spoke to TechCrunch on the condition of anonymity — unsubstantially blame 54gene’s current troubles on irresponsible hiring, questionable expansion drives and misappropriation of funds. The YC-backed biotech didn’t respond to TechCrunch’s request for comments about its former executives’ alleged mismanagement of funds and employees’ unpaid severance packages.

54gene’s tight-lippedness on the matter and Bost’s appointment from her legal role to interim CEO arbitrarily raises questions and leaves room for interpretation tilting toward these accusations, especially as both co-founders resigned a few weeks apart. However, in an email to TechCrunch, the company subtly counterargues that Osifo’s resignation had been in process for some time and was unrelated to this month’s activities, while Bost, hired last September, was what 54gene needed — with support from COO Delali Attipoe — for its next phase.

“Teresia is a well-rounded executive with a depth of experience in the global pharmaceutical and biotech industry, leading global teams and overseeing corporate governance,” the company said. “These skills, coupled with her breadth of experience driving business operations and translating complex regulatory requirements, will be invaluable at the helm of 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 stated that its ex-chief executive “will continue to support the company in its go-forward plans such as strategic partnerships and fundraising” without explaining why he stepped down.

However, according to several people with knowledge of happenings at the company, the terms of 54gene’s new deal contributed to Ene-Obong’s resignation. They say Ene-Obong — retaining his position on 54gene’s board while moving to a new senior advisor role — may have resigned as CEO in protest of 54gene’s new valuation and the liquidation preference offered by investors in the bridge round. There is some speculation that some of the investors also attempted to reprise the company’s previous prized round to get more shares while diluting that of the founders and other investors. 54gene declined to comment on the matter.

The fact that 54gene had to arrange a bridge round in-house despite securing over $45 million over the last three years is a reminder that biotech projects are highly capital-intensive — for instance, it costs about $700 to sequence a human genome (one of 54gene’s main procedures). Typically, biotechs deploy investors’ funds into research while thinking about revenue later and the case isn’t different with 54gene. Still, the manner in which the genome startup is aggressively cutting costs by laying off staff in two batches– and shutting down its clinical diagnostic arm — is somewhat troubling despite the obvious effects of the pandemic. This current crisis, coupled with the arduous task ahead of the company, has also led many tech observers to wonder if its present and past executives can keep the moonshot project afloat long enough to generate substantial revenue, let alone build a solid business.

54gene valuation slashed by over $100M amid job cuts and CEO exit by Tage Kene-Okafor originally published on TechCrunch

54gene CEO steps down as the company looks to cut more jobs

54gene co-founder and chief executive officer Dr. Abasi Ene-Obong has stepped down from his executive role, the African genomics company confirmed to TechCrunch today.

The three-year-old company has appointed General Counsel Teresia L. Bost as interim CEO. She will be supported by Chief Operating Officer Delali Attipoe, the company said. Ene-Obong, on the other hand, will retain his position on 54gene’s board while moving to a new role of senior advisor.

Ene-Obong’s resignation and Bost’s ascension comes two months after 54gene laid off 95 employees, or more than 30% of its workforce, in August. The layoffs affected employees, mostly contract staff (in labs and sales departments) recruited to work in 54gene’s COVID business line launched in 2020 to complement its flagship product: a biobank of the African genome.

Founded in 2019 by Ene-Obong, 54gene addresses the gap in the global genomics market where Africans make up less than 3% of genetic material used in pharmaceutical research despite being more genetically diverse than any other population. The audacious project has received over $40 million from investors such as Adjuvant Capital, Y Combinator and Cathay AfricInvest Innovation Fund (CAIF) and partnered with organizations like Illumina, Genentech and Parexel.

Biotechs globally tend to have a long-term approach toward making money; in fact, such companies can still be worth billions with little to no revenue. For the Washington-based but Africa-focused 54gene, its primary revenue path involves working with pharmaceutical companies to co-develop drugs and medicine–and that takes time. A typical time frame for a new drug from creation to market entry can take up to a decade, so it made sense for 54gene to turn its lab capabilities to COVID testing as a new source of revenue.

However, the decline in COVID testing has presented 54gene with fresh challenges: dwindling revenues and redundant roles. Though it has already let go of 95 employees, the company confirmed that it will conduct a second round of layoffs following restructuring across several departments. According to the YC-backed company, it wants to focus resources on its core mission of African genomics research and equalizing precision medicine. At the same time, its clinical diagnostic arm takes the back seat.

Here’s more information on the company’s new direction:

Going forward, the primary focus will be on the unique genomic research the company has started by further leveraging its genomic datasets derived from 54gene’s state-of-the-art biobank, that currently houses over 130,000 unique patient samples and corresponding genomic data, all with the objective of positioning the company to make contributions to precision medicine and drug discovery. This continues the meaningful work the company has invested in, whilst de-emphasizing the clinical diagnostic business line at the time.

It’s unclear exactly why Ene-Obong is stepping down. Yet, it’s not farfetched to assume that the company’s recent struggles are a contributing factor. Also, when the company carried out its first round of layoffs, allegations of financial impropriety were leveled against him and his executives from a group of employees. But such claims are unfounded, at least for now. Interestingly, the former CEO’s resignation also comes one month after Ogochukwu Francis Osifo, the company’s co-founder and VP, Engineering, left the company in September.

In response to whether the company’s decision to let him go was performance-related or because the ex-CEO was moving on to new projects, 54gene only said, “Abasi has decided to step down as the CEO but will continue to support the company in its go-forward plans such as strategic partnerships and fundraising. We cannot comment on what other new interests he will pursue if any, but we wish him well and still consider him a key team member.”.

As 54gene shifts into a new phase, Ene-Obong, who consulted for organizations such as Gilead and IMS Health in the past, believes the startup is in the best hands as Bost and Attipoe “have deep insight into the workings of 54gene.” Bost boasts more than 20 years of extensive knowledge and experience across pharmaceutical, biotechnology and healthcare industries with companies such as Celgene and Quartet Health while providing strategic support of securities matters, corporate governance and finance matters. Attipoe, on the other hand, brings more than 15 years of experience in the pharmaceutical sector working with firms like Roche and Genentech.

Ene-Obong, addressing his exit and the transition in a statement, said:

I have always believed that the scale of genetic diversity in Africa and other highly diverse populations will materially impact our understanding of biology and lead to better medicines and interventions for the global population, and I am proud of what has been achieved at 54gene. I’d like to thank the 54gene Board for their support over the years, and the many talented scientists and technology professionals I have had the pleasure to work with during my time at the company. I will continue to support the company and the scientific ecosystem, particularly the African genomics ecosystem. Teresia and Delali bring decades of experience in building and scaling high-impact global pharma companies, and they also have deep insight into the workings of 54gene. I am excited to see them take the company to its next phase.

54gene CEO steps down as the company looks to cut more jobs by Tage Kene-Okafor originally published on TechCrunch

African genomics startup 54gene lays off 95 as COVID testing business struggles

African genomics startup 54gene has laid off 95 employees, or about 30% of its LinkedIn-sourced 290+ employees. A company’s spokesperson confirmed the news after several sources informed TechCrunch of the layoffs last week.

Founded in 2019 by Dr. Abasi Ene-Obong, the three-year-old startup seeks to address the gap in the global genomics market where less than 3% of genetic material used in pharmaceutical research is African. This is despite reports saying Africans and people of African ancestry are more genetically diverse than all other world populations combined.

As one of Africa’s most audacious projects, 54gene has received enormous backing from the likes of Y Combinator, Adjuvant Capital and Cathay AfricInvest Innovation Fund (CAIF) and several investors who have invested $45 million in the company, including a $25 million Series B last September; a large chunk of the company’s investment goes into its biobank (which now has a capacity of over 300,000 samples) and lab testing centers.

In 2020, 54gene saw an opportunity to make additional revenue during the pandemic as it turned its lab capabilities and re-positioned itself to conduct COVID-19 testing, which spiked in Africa when the company closed its Series A round. It was a big part of the company’s operation; at some point, 54gene was one of Nigeria’s largest providers of COVID testing.

However, with the significant decline in tests, many 54gene employees recruited in relation to COVID operations had to be let go, the company’s spokesperson told TechCrunch. Multiple business functions supporting the COVID business line, including labs and sales departments, were affected. The virtual winding down of that business line led to redundancy in these functions, alongside data entry and sample collection officers who were contract staff. Other operational and technology jobs were affected as well.

“Like so many others navigating this current market situation, we are not immune to having to make adjustments to headcount and our financials, in order to remain competitive within the market,” said the spokesperson, adding that the company implemented the staff reduction on August 18.

The company’s spokesperson also stated that 54gene will provide affected employees with statutory support, in compliance with local regulations, and in some instances, the biotech startup will provide additional severance pay, as well as health insurance coverage extended for a total of three months.

Layoffs have become the norm as rising interest rates and an extended bull run that swept across private and public markets over the last couple of years, among other factors, combine to make life difficult for tech companies. Amidst recession fears, investors are being stringent with their money, mainly toward growth- and late-stage startups. As a result, startups have had to cut costs and trim down workforces to survive; those who have had some success raising capital have had to adjust to pre-pandemic valuations.

54gene joins a growing list of African startups that have had to resize their workforce in a bear market despite raising several million dollars within the last 18-24 months. Other companies include Swvl, Vezeeta, Wave, Sendy and Marketforce.

African genomics startup 54gene raises $25M to expand precision medicine capabilities

Less than 3% of genetic material used in global pharmaceutical research is from Africa. The staggering gap is quite surprising because Africans and people of African descent are reported to be more genetically diverse than any other population.

Since launching in 2019, African genomics startup 54gene has been at the forefront of bridging this divide in the global genomics market. Today, the company has secured $25 million in Series B funding to bolster its efforts.

This round comes a year after the company, founded by Dr Abasi Ene-Obong, raised $15 million in Series A and two years after closing a $4.5 million seed round.

In total, 54gene has raised more than $45 million since its inception.

With the world’s analyzed genomes coming mostly from anywhere that isn’t Africa, the continent remains a valuable source of new genetic information for health and drug discovery research.

This is where 54gene’s work is relevant. The company conducts and leverages this research to ensure Africans are recipients of upcoming drug and medical discoveries.

Last year when we covered the company last year, CEO Ene-Obong disclosed that for 54gene to conduct this research, it recruits voluntary participants who donate genetic samples via swab or blood tests.

It still very much works this way. However, instead of depending on third-party health centres like hospitals and sending the samples abroad for analysis, 54gene launched its own genetics sequencing and microarray lab in Lagos last September. The company did this in partnership with U.S.-based biotech company Illumina.

Speaking with TechCrunch, Ene-Obong says in addition to the genotyping capabilities offered, the lab also provides whole-genome sequencing (WGS) and whole-exome sequencing (WES).

Not to bore you with the jargon but here’s why this is important. Genotyping tends to show only 0.02% of an individual’s DNA; however, WGS can show almost 100% of the same person’s DNA.

For WES, although it represents only 1.5% of the human genome, it shows approximately 85% of known disease-related variants.

With these three in place, the company can advance genomics research and expand its ability to help scientists and researchers in Africa.

Unlike fintech and other fast-moving sectors like e-commerce, innovation in healthtech takes some time to take shape finally. 54gene is one of the few startups in the sector and even in Africa to have moved from seed stage to Series B in under two years.

It’s this sort of frightening speed that makes one wonder what the company is doing right. So I ask the CEO whether the company is indeed seeing significant progress in advancing African genomics; he answers in the affirmative.

“Though the arc of conducting early research through drug approval can be long in biotech, we have taken the approach to building the backbone that is needed for short-term successes to long-term gains that provide better healthcare delivery and treatment outcomes from diseases,” he added.

In addition to setting its first lab, the CEO says the company increasing its biobanking capacity by 5x and is counts that as a major success.

During its last raise, 54gene had a biobank capacity for 60,000 samples. If Ene-Obong comments are anything to go by, the two-year-old company currently has a biobank with over 300,000 samples, close to its longer-term aim to manage up to 500,000.

Another one is the recruitment and training of talent to generate and process data needed to produce insights for the company’s drug discovery efforts.

Nigeria has a dearth of experienced clinicians and with the remaining few leaving in droves, it is not hard to see why it is a win for the company. Knowing this, 54gene plans to use part of the new funding to recruit and train more professionals

Other use of funding will expand its capabilities in sequencing, target identification and validation, and precision medicine clinical trials. Also of great importance is its expansion across the African continent.

To aid this expansion, 54gene will have to carry out partnerships. A recent one occurred between the company and the Tanzania Human Genetics Organization and Ene-Obong says 54gene is in varying stages of conversations with more partners. However, he was tight-lipped on who they might be.

“We are excited about our Africa-first approach which will see us expand to countries within East and West Africa in the coming year,” he added.

54gene made some hires to this end: Michelle Ephraim, Colm O’Dushlaine, Peter Fekkes, Teresia Bost, Jude Uzonwanne — all of who have decades of experience working with companies like Leica Biosystems, Regeneron Genetic Center, Novartis, Celgene, and the Bill and Melinda Gates Foundation

Pan-African venture capital firm Cathay AfricInvest Innovation Fund led this round. Lead investor from the company’s Series A funding, Adjuvant Capital invested once again with participation from other VCs including KdT Ventures, Plexo Capital, Endeavor Capital, and Ingressive Capital.

Planting seed investments on tech’s frontiers nets KdT Ventures $50 million for its latest fund

Like other venture investors over the past year, Cain McClary, co-founder of the investment firm KdT Ventures, recently made the jump to Austin. But unlike the rest of them, he was coming from Black Mountain, NC.

McClary had spent the better part of the last three years with his co-founder Mack Healy building out a portfolio that would be the envy of almost any investor looking at financing startups whose businesses depend on innovations at the borders of current technological achievement.

Since 2017, when the firm closed on the first $3.5 million of what ended up being a $15 million fund (they had targeted $30 million), McClary and Healy managed to find their way onto the cap table of businesses like the green chemicals manufacturer, Solugen; health diagnostics technology developer, PathAI; the Nigerian genetic dataset developer, 54Gene; the novel biomaterials developer, Checkerspot; and the genetics-focused therapy company, Dyno Therapeutics. 

That portfolio — and the subsequent top decile performance that Cambridge Associates has said comes with it — has allowed McClary and Healy to close on an oversubscribed $50 million new fund to invest in promising startup companies.

KdT co-founders Cain McClary and Mack Healy. Image Credit: KdT Ventures

Hailing from a small Tennessee town outside of Leipers Fork (itself a small Tennessee town) McClary studied medicine at Tulane and business at Stanford where he linked up with Healy through a mutual friend.

Healy, who had done stints throughout big Bay Area startups like Airbnb, Databricks, and Facebook brought the software expertise (and some capital to stake the firm) while McClary provided the life sciences know-how.

Together the two men set out to hang their investment shingle at the intersection of software and life sciences that was proving to be fertile ground for new business creation. Each company in the firm’s portfolio depends on both the advances in understanding how to code computers and living cells.

McClary had left California for personal reasons when he launched the fund in 2017 and in 2020 relocated to Austin for professional ones. Healy had already set up shop in the city and it was easier, McClary said to fly out to San Francisco to look for companies from the Austin airport than it was from Ashville.

Also, both men were placing big bets on the Dell Medical School at the University of Texas to become the breeding ground for the type of entrepreneurs that the firm is looking to back.

Mack was there… the Dell Medical School and we think it’s going to be produce the types of entrpereneurs that we want to support. Houston has a med system. I firmly believe that texas has a place at the table in the future 

“The way that we define it is that we like to invest in the physical layer of the world,” said McClary. “That includes not only medicine, but chemicals and agriculture. All of that is driven by some of the things that we have this sourcecode for the physical world.”

Mapping the unmapped corners of the frontier tech startup world means that the firm not only has a presence in Austin, but has hired principals to scour Houston and Research Triangle Park in North Carolina for hot deals.

That doesn’t mean the firm is forsaking California though. One of the most recent deals in the KdT portfolio is Andes Ag, an Emeryville, Calif.-based startup that’s applying yield-boosting microbes directly to seeds in an effort to improve crop performance for farmers.

“The KdT team speaks the language of science, making them an outlier in this area of venture investing,” said JD Montgomery of Canterbury Consulting, a limited partner in KdT’s first and second fund. “They are passionate about building the science companies of the future that will tackle some of the significant challenges our world faces in the next decade and beyond.”

African genomics startup 54gene raises $15M led by Adjuvant Capital

Greater availability of African genomic data could lead to medical breakthroughs for the continent’s 1.2 billion people.

That’s the driving proposition of 54gene — a U.S. and Nigeria based startup — that collects African genetic code for use in health research and drug development.

The company has closed a $15 million Series A round, in part, to address a deficiency in these processes.

“As of the time we launched, less then 3% of all genome wide association studies globally had been conducted in Africa. There was a lack of data coming from Africans…and the diaspora,” 54gene founder and CEO Dr. Abasi Ene-Bong said.

“We are trying to address the gap that currently exists in precision medicine for people of the African continent,” he told TechCrunch on a call from Lagos.

New York based Adjuvant Capital led the round 54gene will now deploy toward that goal. Founded in 2019 by Ene-Bong, the company is headquartered in San Francisco with a biobank facility in Lagos that holds capacity for 60,000 samples. The startup has an engineering team and a proprietary platform to catalog and analyze the genetic data.

Image Credits: 54gene

54gene also has over 300 researchers, clinicians and geneticists across the continent and a research lab in Nigeria.

With the $15 million — which brings total VC to $19.5 million — the startup will expand its biobank capabilities to 200,000 samples, with a longer term goal to manage up to 500,000. 54gene is also boosting its lab capabilities. “With this funding we are about to expand that lab so we can process actual genetic data for tens of thousands, if not hundreds of thousands of people,” said Ene-Bong.

54gene plans to hire across the organization, from seeking a new VP of finance to adding additional scientists.

The company recruits research participants in Africa through studies at venues, such as hospitals, to take genetic samples via swab or blood tests. “Participants have to give us their informed consent before any testing,” explained Ene-Bong.

Adjuvant Capital Managing Partner Jenny Yip confirmed the VC firm’s lead on the $15 million investment. In addition to funds from Adjuvant — which itself is backed by The Bill and Melinda Gates Foundation and Novartis — 54gene is a 2019 Y Combinator alum and received follow on funding from the Silicon Valley accelerator.

The company has a longer time horizon to income, but the primary path to revenues is paid co-development of drugs and medicine working with pharmaceutical companies. “When the drug is in the market…and approved medicine [54gene] and the pharma company will share revenues,” said Ene-Bong.

When it comes to life-saving treatments in Africa, big pharma has faced criticism going back decades. The primary point of friction: the industry’s insistence on strict IP enforcement and high-margin prices for HIV-Aids related treatments on the continent. This has led to legal battles between pharma companies and the government of South Africa over that country allowing production of cheaper generic versions of those drugs.

On the value of Africa’s pharmaceutical industry, McKinsey and Company research estimates it at roughly $14 billion, and grossly under its potential — given an addressable market of some percentage of 1.2 billion people for new drugs.

For its part, 54gene’s CEO Abasi Ene-Bong is clear the company is a for-profit entity, but aims to balance money-making motives (and those of pharma partners) with advancing health in Africa.

The startup plans to exert leverage over the pricing process through its practice of co-developing drugs.

Dr Abasi Ene Obong, Image Credits: 54gene

“When you are a service provider to big pharma you can’t really make such a request. But when you are a development partner you co-own a significant stake of what’s being developed and have more of a say,” said Ene-Bong.

The startup is unable to disclose any current big pharma partners or which health issues in Africa it’s aiming genetic research toward tackling.

“I can say we will prioritize diseases that affect Africans disproportionately,” Ene-Bong said.

One obvious ailment in need of more effective prevention and treatment is malaria — with 92% of the world’s 219 million cases occurring in Africa, according to WHO data.

54gene has also turned its capabilities to COVID-19, which has spiked in Africa since mid-March. The company has re-positioned itself to do testing for the virus in Nigeria’s public health facilities and plans to offer coronavirus screening in its Lagos lab soon.

“We hope that when given approval, we can do more than 3000 tests a day,” said Ene-Bong