Genetic testing company 23andMe can proceed with a $305 million sale to the company’s co-founder Anne Wojcicki after a U.S. bankruptcy judge rejected California’s bid to delay the sale while the state appeals over privacy concerns related to the deal.

U.S. Bankruptcy Judge Brian Walsh, who previously approved Wojcicki’s buyout of the company, said in a court hearing in St. Louis that California’s appeal was “likely to fail” and that California customers would not be “irreparably harmed” if the sale went forward while the state appealed.

“They remain free to delete their accounts and data at any time,” Walsh said of 23andMe’s California customers.

23andMe Files for Bankruptcy

23andMe filed for bankruptcy in March, seeking to sell its business after a drop-off in consumer demand and a 2023 data breach that exposed millions of customers’ genetic data.

California had argued the sale violates the state’s Genetic Information Privacy Act, which prohibits the transfer and disclosure of genetic data or biological samples to third parties, including Wojcicki’s new non-profit TTAM Research.

The state had sought to prevent California customers’ data from being transferred, a step that 23andMe said would effectively kill the sale. California consumers represent about 1.8 million of the approximately 10 million genetic profiles in 23andMe’s inventory, according to California’s court filings.

“Everyone knows that this is a sale of DNA to a third party,” California’s attorney Bernard Eskandari said in court. “It has always been a sale of DNA to a third party.”

TTAM Research won a bankruptcy auction for 23andMe’s assets in June, overbidding a $265 million offer from Regeneron Pharmaceuticals.

TTAM said it would continue to protect customers’ genetic data and maintain 23andMe’s privacy policies, including customers’ right to delete their data. Wojcicki was 23andMe’s CEO before its bankruptcy filing, and her new nonprofit’s name is an acronym formed from the first letters of the words “twenty-three and me.”

Several other U.S. states, including New York and Texas, also opposed the sale and said that their state laws also prevent the sale of customers’ genetic data without their consent. Walsh overruled those objections on June 27.

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(Reporting by Dietrich Knauth in New York, Editing by Alexia Garamfalvi and Marguerita Choy)