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Embattled startup Cerebral, a "mental telehealth" company backed by prominent investor SoftBank, plans to cut back staff as part of an effort to restructure its operations.

The layoffs were first reported by Bloomberg Tuesday. Employees affected by the cutbacks will be notified by July 1, the media outlet reported, citing an email from Cerebral Chief Operating Officer Jessica Muse.

The company confirmed the layoffs to Fierce Healthcare Thursday.

In an emailed statement, a Cerebral spokesperson said the company's leadership team is launching an organizational review aiming to simplify Cerebral's structure, reinvest in its core business and "double down on quality" to make the company more efficient.

"This process will necessitate difficult decisions to restructure our operations, most notably the closure of a certain number of roles within the Cerebral team. Our top priority is to approach this process with empathy, fairness, and transparency, ensuring we treat our team members with the dignity and benefits they deserve," the spokesperson said in the statement.

The decision comes as Cerebral is mired in a federal investigation into its prescribing practices and "possible violations" of the Controlled Substances Act.

The Controlled Substances Act regulates the distribution of potentially addictive medicines like Adderall and Xanax.

Cerebral provides comprehensive, online mental health services for depression, anxiety, PTSD, attention-deficit/hyperactivity disorder (ADHD), bipolar disorder and a range of other conditions.

CVS Health, the largest pharmacy chain in the country, recently announced it will no longer fill prescriptions for controlled drugs ordered by providers who work for telehealth companies Cerebral and Done Health.

Two weeks ago, the company's board voted to replace CEO Kyle Robertson, a co-founder of the startup. Dave Mou, M.D., the company's chief medical officer and president, has been tapped to take over for Robertson as Cerebral's CEO.

Cerebral, which has a valuation of $4.8 billion, launched in January 2020 and grew rapidly, propelled by increased demand for behavioral health care services during the pandemic. The startup banked $300 million in a series C round in December, boosting its valuation to $4.8 billion.

Problems started for the well-funded startup after a former executive filed a labor lawsuit alleging that Cerebral fired him after he complained about the company's prescribing practices. Matthew Truebe, former vice president of product and engineering at Cerebral, claims that the company "egregiously put profits and growth before patient safety," including overprescribing medications for ADHD.

Prior to that, Cerebral faced increased scrutiny from the media about its prescribing practices, particularly for controlled drugs used for the treatment of ADHD.

In an effort to right the ship, the company announced last week a number of initiatives to "drive more sustainable growth and sustainable." Among the initiatives, the company plans to review internal practices and policies to enhance clinical safety and quality of care and reinforce responsible marketing, executives said in a press release.

The company also plans to expand its treatment program and grow its services supporting those with alcohol use disorder, opioid use disorder and other substance use disorders.

The company also aims to explore "innovative initiatives and other approaches" to deliver treatment at scale for some of the most common mental health conditions, including depression, anxiety, bipolar disorder and ADHD.

And, the company said it will assess its clinical operations, client support, clinical support and pharmacy team structure and processes to "optimize for greater
clarity, simplicity, and efficiency."

Cerebral says it has provided mental health care to more than 400,000 patients since its launch in 2020. Cerebral has also achieved industry-leading patient outcomes:

https://www.fiercehealthcare.com/health-tech/cerebral-announces-layoffs-part-operational-restructure-amid-federal-investigation