Struggling poo-testing startup uBiome files for bankruptcy, months after FBI kicks off investigation
Months after the FBI launched a probe into its billing practices, beleaguered poo-testing startup uBiome has filed for bankruptcy.
Jessica Richman and Zach Apte launched uBiome in 2012, after raising $350,000 from a crowdfunding campaign to facilitate a microbiome study. The company — which maps the ecosystem of microbes in the body to develop tests evaluating gut and vaginal health — has since hauled in more than $100 million in venture capital from Y Combinator, Andreessen Horowitz, and 8VC.
In the beginning, San Francisco-based uBiome made all the right moves. It wooed a number of leading scientists from UCSF and Harvard, including geneticist George Church, on its scientific advisory board, recruited former controversial Novartis CEO Joe Jimenez to its board, released a handful of direct-to-consumer tests designed to gauge microbial health, and inked a partnership with L’Oréal to research the skin microbiome.
But soon, things started to fall apart. In April, the FBI commenced an investigation into the company’s billing practices — eventually raiding uBiome’s offices — around the time sources told CNBC that the startup was hounding doctors to approve tests with little oversight, billing consumers multiple times without their consent —and insurance plans were starting to reject the claims.
The company got rid of half its staff earlier this summer. In addition, insiders told Business Insider that the science backing up its tests was flawed from the start — triggering an internal investigation. A journal where uBiome published its basic research is also investigating the companies claims, BI reported. The sale of some of the company’s tests was also recently suspended.
Shortly after the FBI investigation became public, uBiome’s founders departed to make room for a new management team.
In a filing, uBiome blamed its founders for much of its trouble. “The Founders implemented certain business strategies…that were highly problematic, contained significant operational (but not scientific) flaws and, in some instances, were of questionable legality,” the filing said.
“These issues included improper insurance provider billing practices, improper use of a telemedicine physician network (known as the External Clinical Care Network), overly aggressive and potentially misleading marketing tactics, manipulation of customer upgrade testing, and improper use of customer inducements. Moreover, certain information presented to potential investors during the three rounds of capital raise my have been incorrect and/or misleading.”
“(W)hile the Debtor experienced a serious setback as a result of the (FBI) Investigation, the Investigation resulted from the business practices implemented by the Founders, not bad science or bad lab practices. The Debtor has established a new Board and a new Business Plan, and is poised to move forward. This Chapter 11 Case will provide the fresh start necessary to do so.”
After filing for bankruptcy, uBiome has secured $8 million in financing from Silicon Valley Bank. The startup is seeking to consummate a sale of its business within the first 75 days, and in a separate filing unveiled it currently has assets worth $50 to $100 million, an estimated liabilities in the range of $10 to $50 million.