Drugmaker Regeneron Pharmaceuticals will buy genetic testing firm 23andMe Holding for $256 million USD through a bankruptcy auction, the companies said on Monday.

Regeneron said it will comply with 23andMe's privacy policies and applicable laws with respect to the use of customer  data and that it is ready to detail its intended use of the data to a court-appointed overseer.

The bankruptcy proceedings, filed in March, had drawn scrutiny from lawmakers who warned that millions of customers' genetic data could be sold to unscrupulous buyers.

23andMe last month agreed to allow a court-appointed overseer for the company's handling of customers' genetic information and its security policies during the bankruptcy.

The company has collected genetic data from 15 million customers who ordered its DNA testing kits online and provided saliva samples.

The company had been struggling with weak demand for its ancestry testing kits and a data breach in 2023 that exposed millions of customers' genetic data.

As part of the agreement, Regeneron will acquire all units of 23andMe, except telehealth service Lemonaid Health, which the genetic testing firm plans to wind down.

After the transaction completes, 23andMe will continue to operate as a wholly owned direct or indirect unit of Regeneron, the companies said.

The companies expect to close the deal in the third quarter of this year.