Troubled digital mental health company Cerebral is laying off more than 1,000 employees

Cerebral Inc. announced to employees that it would cut 20% of its workforce, affecting just over 1,000 people.

The news, which was first reported by The Wall Street Journal, marks the second major round of layoffs announced by the company this year. In June, the San Francisco-based digital mental health startup confirmed it would implement layoffs soon after news broke that the company was being investigated by the US Department of Justice over its prescription practices for controlled substances.

On Monday, Cerebral sent a company-wide memo saying the layoffs “will be spread across all divisions — HQ Operations, HQ Support, Clinical Care.”

“These are difficult decisions that were not made lightly, but were made to best serve our customers who rely on us for high-quality care every day,” Cerebral CEO David Moe said in an internal memo. which was acquired by Behavioral Health Business. “This is a challenging time for many companies. … [W]We have an obligation to our patients to ensure that our business is healthy and sustainable during difficult economic times.”

The company is also seeking “operational efficiencies” through the layoffs and is “doing everything we can to support our affected colleagues,” according to a Cerebral spokesperson.

A major block of the layoffs will be in the Care Consultants and Coaching division, affecting about 400 of 500 workers, according to sources familiar with the matter. BHB said earlier this month that Cerebral had decided to stop accepting coaching and consulting clients and intended to allow the programs to wind down on their own.

Before the layoffs, the company employed about 5,500 people.

Other efficiency efforts announced in Mou’s letter include shrinking “clinical physician teams to better meet patient demand,” increasing investment in complex case managers, shrinking operational teams in “closing of non-core programs’ and increasing reliance on technology for operational functions to name a few.

Cerebral has started meetings with affected team members. These meetings will continue throughout the week, the memo said. The company will hold town hall meetings early next week for employees to ask questions.

“The changes we’ve made over the past several months — including our decision to reinvest marketing spend into clinical quality and safety efforts — are necessary to ensure we serve our patients to the highest possible standards,” the memo said.

Cerebral’s increased focus on profitability marks some form of progress for the fast-growing company. Founded in 2019, the company has raised $462 million in funding, according to Crunchbase.com. It secured a valuation of $4.8 billion in the latest round of funding.

Rapid growth, major investment scrutiny, and dozens of media reports of alleged controlled substance abuse brought enormous scrutiny to the company. There have been reports of the company’s work with controlled substances like Adderall for ADHD. Several retail pharmacies stopped working with Cerebral.

Cerebral announced it will stop prescribing most controlled substances in May. The Drug Enforcement Administration has reportedly looked into the company’s prescribing practices, along with another digital mental health company, Done Global Inc.

All along, the company has focused its message on clinical quality and safety since Mou succeeded CEO Kyle Robertson in May, touting investments in its patient crisis identification system. In September, the Wall Street Journal also reported that Cerebral treated a minor with mental illness without his parent’s consent, who eventually died by suicide.

The company has also halted “exploratory” efforts to reorient itself under management and map out how best to proceed after high levels of growth and control, Moe said in June.

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