Afrigather It has been an eventful few months for 54gene, the Washington-based Nigerian genomic firm. Barely two months after shedding 30% of its workforce, Dr Abasi Ene-Obong, its co-founder and CEO, stepped down as CEO, and Teresia Bost, its common counsel who joined the corporate September final 12 months, stepped up as CEO. There was one other spherical of layoffs in October; this time, 100 individuals, about 55% of its workforce, had been laid off. In accordance with three sources who spoke to TechCabal on situation of anonymity, the corporate has gone from over 300 employees to only 39 in two months.
Current experiences and accounts from workers who spoke to us confirmed that the corporate goes by way of a tricky time. One supply shared that the corporate’s runway had nearly dried up, and there was an pressing want for contemporary capital to maintain the lights on. This led to a down spherical that shrunk the corporate’s valuation to $50 million from the $170 million it acquired for its $25 million collection B over 14 months in the past. In accordance with a current report by TechCrunch, the down spherical closed at a 3x to 4x liquidation desire. Two of the sources talked about to TechCabal that, this funding spherical and valuation haircut is probably going why the CEO stepped down. Ene-Obong and 54gene didn’t reply to TechCabal’s inquiries for this story.
Why the colossal valuation reduce?
For context, accepting such a funding time period proves that the corporate is struggling and in want of rescuing money. Right here’s a timeline of how the corporate segued into such dire straits.
54gene was based in 2019 by Dr Ene-Obong to analysis the molecular parts of Africans and construct a biogenetics information financial institution to reinforce Africa-focused drug improvement and medical improvements. Despite the fact that Africans are extra genetically various than individuals from different areas, solely 2% of genetic analysis focuses on African topics, whereas 90% focuses on Caucasian information. Therefore the information variety issues presently dealing with drug discovery and improvement globally. 54gene got down to resolve this variety downside by constructing a genetic information financial institution, beginning with a pattern of 100,000 Africans—largely Nigerians.
For an rising market the place innovation largely revolves round fintech, this firm’s guarantees had been novel: so novel that in July 2019, barely 7 months after launch, it acquired a $4.5 million seed funding from a number of high-profile traders together with YCombinator, Fifty Years, Higher Ventures, KdT Ventures, Hack VC and Techammer.
Genomic analysis, the corporate’s focal enterprise, calls for numerous capital however takes a very long time to yield any sizable earnings. Scientific analysis often takes 4 to 6 years to finish and ship to pharmaceutical or different medical stakeholders. However just a few months after closing the spherical, COVID-19 hit, and the corporate noticed a possibility to be a first-line responder to the pandemic in Nigeria. It rapidly started to construct assets round COVID testing, establishing a testing lab in Lagos and a cellular lab—a truck—in Ogun, and rapidly turned the primary accredited non-public entity to manage COVID testing in Nigeria. It labored carefully with the federal government, raised $500,000 in funding from company companions to ramp up testing, created supporting roles for the vertical, and employed numerous fingers. 54gene generated substantial income from COVID-19, which might have served as a very good funding various for its genomic operations, which was already costly to run.
However COVID-19 income was ephemeral. By the top of 2021, it turned apparent that the COVID enterprise was not sustainable. So, the corporate launched one other testing subsidiary known as 7RL. This new enterprise would supply healthcare suppliers and sufferers entry to world-class, cost-effective, speedy, dependable and superior molecular diagnostics. What might go flawed for a lab already operating molecular analysis to begin providing molecular diagnostics and advisory providers? Reply: every part.
In accordance with one supply, 7RL was the start of the enterprise’ cash woes. About three months earlier than launching a brand new vertical, the corporate had raised its $25 million collection B spherical and employed world pharmaceutical prime expertise, together with Teresia Bost, its present CEO. There have been sufficient assets to enterprise into this new enterprise that was anticipated to supply money circulate as COVID-19 did. 7RL ran for lower than eight months earlier than shutting down, however it hemorrhaged essentially the most money within the enterprise, in line with two sources.
For context, one piece of biotech tools might be as costly as $1 million, and an govt on the firm confirmed to TechCabal that there are just a few such items of kit of their labs. Sequencing is just not low cost: it prices between $500 to $700 a pop. One human can generate a genome sequence of as much as 1 terabyte of information, rising the price of the cloud storage used. An influence scarcity might render the sequence ineffective, no matter its completion stage. So energy should keep on, each time, resulting in a mountainous value of energy working in a rustic like Nigeria the place energy is unstable.
7RL expanded into Kenya, establishing one other world-class lab in Nairobi and hiring native scientists to man its operations—all of whom have been fired and the lab locked away fully. The mix of genetic analysis and analysis was going to ship the world to 54gene, however for no matter causes nonetheless unknown, it nearly killed it as a substitute. Regardless of all of the funding put into it, 7RL didn’t ship. That is shocking as a result of the alarming charge of genetic and molecular illnesses within the nation ought to have given the corporate a soft-landing market. For example, Nigeria is presently estimated to have 233,911 most cancers instances, with 124,815 new instances and 78,899 most cancers deaths, yearly.
To remain afloat, the corporate stated in a press release launched on October 25 that it’s returning to a lean construction, shedding near 90% of its workers. It has additionally taken a u-turn again to its core worth proposition which is conducting genomic analysis and constructing biodata that may be used for precision medication for Africans.
“Going ahead, the first focus can be on the distinctive genomic analysis the corporate has began by additional leveraging its genomic datasets derived from 54gene’s state-of-the-art biobank, that presently homes over 130,000 distinctive affected person samples and corresponding genomic information, all with the target of positioning the corporate to contribute to precision medication and drug discovery.,” the assertion learn. “This continues the significant work the corporate has invested in, while de-emphasising the medical diagnostic enterprise line at the moment.”
Whatever the runway refueling that got here with the down spherical money, and the change of guard on the helm, it may be too early to say the darkish cloud is not any extra hovering over the corporate. Capital is pretty much as good as workers’ morale, particularly when “present workers are anxious of being the following to be laid off,” one supply informed TechCabal.
Conclusively, there are nonetheless questions begging for solutions: How did 7RL, an organization with a large market alternative, fail in the back of substantial assets? However the chief amongst them is: what’s going to turn out to be of the African genomic firm within the brief and long run?
