...well this sounds familiar...
Poop-testing startup uBiome was once valued at $600 million by Silicon Valley’s top VCs. It just filed for bankruptcy.
Erin Brodwin and Emma Court 22h
uBiome Toilet Paper 1
Microbiome testing company uBiome came under scrutiny after an FBI raid. Hollis Johnson / Business Insider
uBiome filed for bankruptcy on Wednesday, after months of challenges and setbacks for the poop-testing startup.
Founded in 2012, uBiome raised $105 million from investors like 8VC and Andreessen Horowitz to explore the microbiome, a "forgotten organ."
8VC now owns about 20% of the company while Andreessen Horowitz owns 11%, according to the bankruptcy filing.
The FBI raided uBiome's headquarters in April, reportedly related to the company's billing practices. Then, the company's top executives departed.
uBiome built a big set of data based on the human microbiome, but the data was flawed in ways that risked making uBiome's tests unreliable, Business Insider previously reported.
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Silicon Valley gut-health startup uBiome has filed for bankruptcy protection, capping months of challenges and setbacks for the once-buzzy startup.
uBiome filed for chapter 11 bankruptcy protection in US Bankruptcy Court in Wilmington, Del.
Court documents said the company may owe millions of dollars to health insurance companies, and could also face criminal and civil penalties from ongoing investigations.
The poop-testing firm, which counts 8VC and Andreessen Horowitz as its biggest investors, said it hopes to entice an investor to purchase it for its scientific knowledge of the microbiome, even as it grapples with the investigations.
"uBiome's business will be better positioned for success under new ownership," acting CEO Curtis Solsvig said in a statement.
"This step builds on the decisive actions the Board and new management team have recently taken to stabilize the Company and leverage the substantive value of our advanced microbiome testing and analysis assets," he added.
The company has been in hot water for some time: uBiome is currently under federal investigation related to its billing practices and laid off half its staff earlier this summer. In addition, insiders told Business Insider that key science was flawed from the start, prompting the company to start an internal investigation. A top science journal where uBiome published its basic research is also investigating.
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The Wall Street Journal first reported on uBiome's bankruptcy filing earlier on Wednesday.
Read more: uBiome convinced Silicon Valley that testing poop was worth $600 million. Then the FBI came knocking. Here's the inside story.
"We have taken significant action to put the company on stronger footing and believe in the strength and potential of uBiome's scientific achievements and IP," Kimmy Scotti, 8VC partner and a uBiome board member, said in an emailed statement to Business Insider.
uBiome convinced Silicon Valley that testing poop was worth $600 million
Over its seven-year history, uBiome raised $105 million from high-profile investors including Andreessen Horowitz, 8VC, and OS Fund. At one time, it was valued at $600 million. 8VC now owns about 20% of the company while Andreessen Horowitz owns 11%, according to the bankruptcy filing. OS Fund isn't mentioned in the filing.
But uBiome's value had long been precarious, according to insiders.
As uBiome advanced from citizen science project to clinical-testing company, it overstated the medical value of its tests and prioritized growth over patient care, insiders previously told Business Insider.
The bankruptcy filing confirms that these practices helped lead to the company's problems, and it places the blame on uBiome cofounders Jessica Richman and Zachary Apte.
On the heels of the FBI raid, uBiome's board of directors created a special committee to investigate. Shortly after, the committee placed Apte and Richman on leave. Both cofounders continued to be paid until they were removed from the company in July, according to the filing.
"The Founders implemented certain business strategies with respect to the SmartX products that were highly problematic, contained significant operational (but not scientific) flaws and, in some instances, were of questionable legality," the filing reads.
A representative from Andreessen Horowitz declined to comment on this story.
According to the filing, "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."
The document notes that "inadvertent billings to Tricare, Medicare, and Medicaid" totaled roughly $4 million. In addition, uBiome must also address "over $10 million" worth of refund requests from other insurance companies related to its clinical tests.
A uBiome Explorer test kit. Erin Brodwin
Throughout the bankruptcy filing, uBiome says that the company's value is linked to the scientific knowledge and intellectual properties that it's developed.
But some insiders previously told Business Insider that uBiome's basic science was flawed as well.
Read more: uBiome insiders say key science at the buzzy startup was flawed from the start. Now, the company and a top science journal are investigating.
A plan to sell uBiome kits at CVS and 'save 100 jobs'
In the bankruptcy filing, uBiome's current leadership says it believes parts of the company can be preserved, albeit with some big changes.
"Simply put, uBiome needs a clean slate and a fresh start to save the business and 100 jobs," the document reads.
Part of that fresh start involves a plan for uBiome to start selling its sole remaining test — the Explorer— at CVS Pharmacy following a purchase order agreement. The deal would involve an "upgraded version" of Explorer, according to the filing.
uBiome also said in the filing that it has contacted 180 potential buyers, of whom 13 had shown initial interest. None has moved forward with a deal.
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