Here’s the letter that $600 million healthcare startup uBiome sent to reassure investors after it was raided by the FBI

uBiome; Yutong Yuan/Business Insider

Microbiome-testing company uBiome raised $105 million from investors, reaching a valuation of $600 million.
On April 26, the company was raided by the FBI. Its cofounders and co-CEOs, Jessica Richman and Zac Apte, were placed on administrative leave less than a week later.
The letter from interim CEO John Rakow reveals that beyond the FBI, the US Attorney’s Office for the Northern District of California and "several other US and California governmental agencies" were involved in the April 26 search.
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Microbiome-testing company uBiome is seeking to reassure investors, after placing its cofounders on leave on the heels of an FBI raid.

UBiome has raised $105 million from investors including OS Fund, 8VC, Andreessen Horowitz, and Y Combinator, racking up a $600 million valuation. The company runs lab tests that provide information about the bacteria in your body, called the microbiome. Most of the tests work by having customers use a swab to take a sample of their poop from recently used toilet paper.

In late April, the FBI raided uBiome’s headquarters, reportedly related to the company’s billing practices. Customer complaints obtained by Business Insider show a pattern of sending patients unexpected bills of up to $3,000 for years.

After the raid, the company placed cofounders and co-CEOs Jessica Richman and Zac Apte on administrative leave. John Rakow, the company’s general counsel, is acting as the interim CEO, and uBiome has said publicly that it plans to cooperate with investigations, and has also launched its own independent investigation.

UBiome has also suspended sales of two of its products, the doctor-ordered SmartGut and SmartJane tests.

In a letter to investors sent on Wednesday and obtained by Business Insider, Rakow laid out his immediate plans.

Among his top goals is "restoring the company’s credibility, including restoring the integrity of uBiome’s leadership and billing practices," he wrote.

The letter reveals that beyond the FBI, the US Attorney’s Office for the Northern District of California and "several other US and California governmental agencies" were involved in the April 26 search.

Here’s the letter obtained by Business Insider:

Dear uBiome investor:

On Friday April 26, 2019 the Federal Bureau of Investigation ("FBI"), the United States Attorney’s Office for the Northern District of California ("USAO"), and several other US and California governmental agencies searched the Company’s facilities in San Francisco pursuant to a search warrant. I am writing to inform you of steps uBiome has taken in response and my plans for the company to move forward.

The Board of Directors has appointed me as Interim Chief Executive Officer of uBiome, effective immediately. The Company’s Co-CEOs and Founders, Jessica Richman and Zac Apte, are currently on administrative leave, and a Special Committee of the Board is conducting its own independent investigation into uBiome’s billing practices.

Right now, uBiome is focused on the following four objectives:

1. Cooperating fully with federal authorities;
2. Resolving any issues with private insurers;
3. Restoring the company’s credibility, including restoring the integrity of uBiome’s leadership and billing practices; and
4. Publishing verifiable, third-party vetted documentation on the clinical validity and utility of our products.

To this end, we will be taking immediate internal and operational actions.

1. First, within the next few days, we will be introducing a new Code of Ethics.
2. To start anew, we will be establishing a new set of core company values which will focus on the following principles:
  - Putting our customers’ interests first.
    - We need to deliver excellent, dependable products of the highest integrity…always!
  - Developing our employees in a rewarding working environment.
    - We value and respect differences of opinion. We encourage employees to speak up and often.
  - Acting with integrity at all times.
  - Doing the "right thing," even when no one is looking.
    - Speak up when you suspect any impropriety.
  - And, most importantly, our employees must act as one team.
3. We will temporarily be shifting our focus to our consumer product, Explorer, and our growing network of partnerships and grants.

At this moment in time, uBiome will not be offering, marketing, billing, or processing the SmartGut or SmartJane products. We will, however, continue to offer and process our Explorer consumer product, in addition to new and existing partnerships and grants.

It’s important to reiterate that this suspension of SmartGut and SmartJane does not insinuate a lack of value or utility in our products. In fact, there is significant clinical evidence and medical literature that demonstrates the utility and value of these products as important tools for patients, healthcare providers, and our commercial partners. As noted above, we’re in the process of developing third-party vetted documentation on the clinical validity and utility of our products, and we look forward to continuing to demonstrate this clinical utility and value at a time of growing demand in the market.

I promise to keep you informed as to our progress on these matters as well as any other significant developments.

If you have any questions or concerns, please don’t hesitate to reach out at any time. It is my full expectation that we will work through our challenges and come out a stronger company.

Thank you,

John

Want to tell us about your experience with uBiome? Email the author at lramsey@businessinsider.com.

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