- Microbiome-testing company uBiome's board now only has one independent director, following a raid of the company by the FBI in April.
- In a letter to investors sent Tuesday, a special committee of uBiome's board of directors said that two board members, UCSF professor Joe DeRisi and early founder Witt Wisebram, have resigned.
- That leaves 8VC partner Kimmy Scotti as the sole independent board member, heading up a special committee of the board that placed cofounders and co-CEOs Jessica Richman and Zac Apte on administrative leave.
- "At this critical time, Ms Scotti, through the Special Committee, and with the support of her partners at 8VC is fully committed to acting in the best interests of all uBiome's stakeholders, even if she must do so alone," the letter said.
- You can read the full letter below.
- Visit Business Insider's homepage for more stories.
Microbiome-testing company uBiome is down to its last independent board member, as the startup confronts scrutiny from federal and state officials.
In late April, the FBI raided uBiome's headquarters, reportedly related to the microbiome-testing company's billing practices. After the raid, two of the startup's three independent board members resigned: Witt Wisebram, one of the company's original founders; and Dr. Joseph DeRisi, a professor at the University of California, San Francisco.
That leaves 8VC partner Kimmy Scotti as the sole independent board member, according to a letter sent to investors on Tuesday that was obtained by Business Insider. 8VC led the company's series B funding round.
"At this critical time, Ms Scotti, through the Special Committee, and with the support of her partners at 8VC is fully committed to acting in the best interests of all uBiome's stakeholders, even if she must do so alone," the letter said.
DeRisi and Wisebram were initially slated to serve with Scotti on a special committee of the board that was probing the billing issues. UBiome has said publicly that it plans to cooperate with investigations, and has also launched an independent probe, led by former federal prosecutor George Canellos, a partner at the law firm Milbank.
After the FBI raid, UBiome's board arranged a call for the following Sunday morning, April 28, according to two sources familiar with the matter. At that time, DeRisi and Wisebram were still involved, and the board placed cofounders and co-CEOs Jessica Richman and Zac Apte on administrative leave.
John Rakow the company's general counsel, is serving as the interim CEO.
Former Novartis CEO Joe Jimenez had been on UBiome's board as well, but resigned earlier in April prior to the FBI raid, according to uBiome.
"Mr. Jimenez left the board of uBiome in April 2019 to devote his attention to building a biotech venture fund," the company told Business Insider
Jimenez, DeRisi, and Wisebram did not return requests for comment.
UBiome 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. Earlier this month, uBiome told customers that it had suspended sales of two of the tests.
uBiome has raised $105 million from investors including OS Fund, 8VC, Andreessen Horowitz, and Y Combinator, racking up a $600 million valuation.
In an earlier letter to investors sent May 8, Rakow revealed 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 full letter uBiome sent to investors, obtained by Business Insider
Dear uBiome Shareholder,
As uBiome announced on May 1, 2019, a Special Committee of the company's Board of Directors was formed in the immediate aftermath of the service of a search warrant on uBiome's headquarters in San Francisco. The purpose of this communication is to provide you with as much information as possible about what the Special Committee is doing to protect stakeholders' interests in uBiome.
The Special Committee was initially composed of uBiome's three independent directors: Kimberly Scotti of 8VC, one of uBiome's largest investors; Witt Wisebram, one of the company's original founders; and Dr. Joseph DeRisi, a professor at the University of California, San Francisco. The Special Committee was given the mandate to investigate the events that resulted in the search warrant and was given plenary power to take whatever actions were required by that investigation. Prior to issuing its findings, the Special Committee is not required to consult with the company's co-founders, Jessica Richman and Zac Apte, who have the contractual right to serve on uBiome's Board.
The Special Committee took immediate action. First, it placed the company's co-CEOs on administrative leave. They are not permitted to access the company's electronic systems or its physical locations. The suspensions are indefinite.
Second, the Special Committee appointed the company's General Counsel, John Rakow, as Interim CEO. Under his leadership, the company is introducing a new code of ethics and has elected to suspend the processing of SmartGut or SmartJane products, which are ordered by providers and paid for by insurers. The company is also in the process of developing third-party vetted documentation supporting the clinical validity and utility of its offerings. The Special Committee is strongly supportive of these steps.
Third, the Special Committee hired Milbank, a nationally respected law firm, to lead an independent investigation on the Special Committee's behalf. George Canellos, a former senior federal prosecutor and global head of Milbank's litigation and arbitration group, is running the process. Milbank has been instructed to follow the evidence wherever it leads and to cooperate with the authorities. Their work is already well underway.
Since the Special Committee was formed, both Dr. DeRisi and Mr.Wisebram have elected to resign from uBiome's Board. Ms Scotti is therefore the sole independent director and the sole member of the Special Committee. Ms. Scotti, with the full support of her partners at 8VC, has chosen to remain on the Board in the face of these unexpected and unpleasant developments. Although Ms. Scotti and 8VC believe it would be helpful for additional independent directors to be appointed to assist with the process of directing the Special Committee's investigation, no one has yet come forward to serve. At this critical time, Ms Scotti, through the Special Committee, and with the support of her partners at 8VC is fully committed to acting in the best interests of all uBiome's stakeholders, even if she must do so alone.
Best,
The Special Committee of the Board of Directors of uBiome
