Re: [DIYbio] UBiome co-founders charged with fraud by SEC

https://www.mddionline.com/regulatory-quality/ubiome-story-more-just-good-poop-joke

MD+DI News Editor Amanda Pedersen loves a good poop joke as much as anyone, but medtech companies that commit fraud are no laughing matter. 

During this week's Medtech Unfiltered video, Pedersen sounds off about companies like Theranos and uBiome. In case you missed it, the Securities and Exchange Commission recently filed litigation against the co-founders of San Francisco, CA-based uBiome, a now-defunct stool-testing company. They are accused of fraudulently raising millions of dollars and duping doctors into ordering unnecessary tests. Read the full story here.

The video transcripts (edited for clarity) are below:

Good morning everybody, and welcome to Medtech Unfiltered. I'm Amanda Pedersen, I'm the news editor at MD+DI, and today I want to talk to you about the uBiome story that MD+DI published earlier this week. It was a story that was covered widely in mass media and that is primarily because it made for a good poop joke. Don't get me wrong, the people that know me the best know that I love a good poop joke. In fact, I kind of live for them. But in this case, I think it needs to be pointed out that this story has implications for the industry that go far beyond just making a good poop joke in a headline – and I saw some good ones. I think my favorite was, 'Turns Out That Stool-Testing Company was Full of It.' Not gonna lie, I kinda wish I'd thought of it myself.

But as I said, this story – for those of you who are not familiar with it – is a story that really sounds familiar to the industry. You know, it's hard not to think of Theranos when you hear the story. So, uBiome was a San Francisco-based company, and recently … late last week, the two co-founders, who are actually now married as it happens, they were indicted on formal charges [brought by] the Securities Exchange Commission claiming that they misled health insurance providers, their investors, and doctors and patients. So [these are] pretty serious allegations. Apparently, it all started back in 2018 when they were raising money for their [series] C round, and during that series C round of financing they raised $60 million, valuing the company, at the time, at $600 million – that's not chump change. And it was all based on misleading investors into believing that their technology was much better than it actually was.

They were a stool-testing company, and they allegedly violated all kinds of ethical and scientific rules, so to speak, Including using old stool samples that customers had provided to do testing. And they were warned by their employees, including the director of their laboratory … that this could be a problem, this could get them into legal problems, as it in fact has. So they were – according to the SEC complaint that was filed – aware of the fact that their technology was not what it was cracked up to be. And just like in the case of Theranos they continued to go by the philosophy 'Fake it 'till you make it,' and that's just not acceptable anymore, if it ever was, which in this industry, when you're dealing with people's lives and health, [it shouldn't have been].

If it sounds like I'm taking personal offense to this particular case, it's because I am. About 22 years ago, I was diagnosed with an inflammatory bowel disease, and that is one of the conditions that they were testing patients for. So they would convince doctors to do these tests on patients' stool samples to determine if they had IBD and what kind of IBD they had, and they also later expanded into women's health and sexually transmitted diseases. But anyway, my point is that, yeah, we all got a good laugh at the headlines, and we kind of made some jokes of our own in the story that we published, but it's not a joke at all.

Industry really needs to stand up to companies that are doing this, particularly in the diagnostic community, given the situation that we've been in for the past year with COVID-19. The diagnostic industry is more important than ever. That's not to say that it wasn't important before, it's always been very important, but the public eye is on the diagnostic space more than they ever have before. …

When we hear about these stories it just makes it that much harder – when it's already so incredibly hard – for a medtech company or a diagnostic company to raise money. They have so many barriers to adoption. They need [to raise] the funds to fund it, they need to go through the regulatory hurdles and convince FDA that it is both safe and effective, and they have to convince health insurance companies that … it's a technology that is worthy of reimbursement, and then they have to convince doctors to prescribe these tests, and patients in turn to use them and trust them. You want to talk about trust issues, hearing stories like this is why so many patients have trust issues. They don't know if they should trust their doctor because maybe their doctor is getting kickbacks to prescribe such tests, or maybe their doctor is just regurgitating everything that the salesperson told them and [hasn't] actually looked into it, and you know there's just so many levels where trust becomes a problem when you're dealing with people's health.

So these are really serious allegations. You know I've always said that the best thing about everything that happened with Theranos is that it served as a warning and a cautionary tale for the rest of the industry. The rest of the industry can take note of what Theranos [allegedly] did and didn't do, and the mistakes that they allegedly made, and take precautions themselves and put policies and procedures in place at their own companies to ensure that this never happens to them. Nobody wants to end up being Theranos, or in this case, the next uBiome. uBiome was not as well known, of course, as Theranos, but they did have quite a bit of support and there was quite a bit of enthusiasm around their technology.

So I apologize if I'm on my soapbox … but it's because I really care about this industry, and I really care about patients, and I just don't want to see this happen again. I don't want to see good companies have to climb that much higher and work that much harder to overcome these barriers to adoption because of the failures and mistakes and flat out lies told by other companies in this space. It just really gives the industry as a whole bad reputation. Theranos did no favors whatsoever for the industry in terms of reputation, and if the allegations against uBiome prove to be true and their found guilty of these charges, then that's just going to be another hit to the industry. … We all remember The Bleeding Edge documentary that [debuted on] Netflix a few years ago, and was kind of a wake-up call for the industry that patients are paying attention, and patients are well educated, and they are not just blindly following their doctor's advice as they might have done in the past. They have access to information, and they are seeking that out, they are educating themselves and increasingly taking charge of their own care.

So it's just it's a hot button topic for me for a lot of reasons, and it would be even if the disease that [uBiome] was trying to test for wasn't something that impacted me personally. But in this case, it actually does [impact me personally], so I'm just going to be on my soapbox about it all I want, and I apologize for that.

So back in 2016 when Theranos was big in the news, [MD+DI] published a story where we had spoken to a regulatory consultant by the name of David Amor, and he provided several really good tips for the industry on how to avoid finding yourself in a situation like Theranos. I really encourage [any company] making a diagnostic test or medical device or even a pharmaceutical for that matter, to really take heed of these tips, and take this seriously if you're not already. A couple things that he mentioned … be strict about documentation and control, but be stricter about intended use.

And I can't help but just add a couple of my advice. I'm not a scientist. I'm not a doctor, I'm not an engineer … but it's really just basic [common sense]. You don't have to be a scientist or engineer to know that you really shouldn't lie to your investors – or any of your stakeholders. Listen to the experts that you do hire. If your scientists and engineers come to you and say, 'look, the way that we're doing things is not right, and this could raise some red flags, and this could get the FBI raiding us or whatnot. … It just comes down to honesty and not being greedy. I mean, both of these co-founders … the company itself made millions of dollars off of these misrepresentations of their technology, but [the co-founders] themselves each made millions of dollars off of that series C round in 2018 … I just think it's a really important topic.

I really encourage you, if you have not already read the story … I really encourage you to read the story MD+DI published. …These are really important things to take note of, so we will of course be following the story and bring you updates as they happen.

Another thing that they've David Amor talked about was usability studies, and that's something that is very important, probably more so than ever before in today's environment, and we're going to be talking more about that next week, so I really hope you can join us. Once again, I'm Amanda Pedersen and this has been Medtech Unfiltered.

On Thursday, March 25, 2021 at 11:03:45 PM UTC-7 Biology Discussions wrote:

https://www.youtube.com/watch?v=UkEHHSdSV9Q

https://www.youtube.com/watch?v=QBV7HRGM7ns

Turns Out James Corden was not only doing a parody of Theranos but he had no idea he was doing a parody of ubiome when he was going after Theranos. 

On Monday, March 22, 2021 at 10:22:28 PM UTC-7 Biology Discussions wrote:

https://www.sfgate.com/news/editorspicks/article/ubiome-richman-apte-sec-filing-charges-fraud-16042042.php

Here is more

A married pair of San Francisco entrepreneurs were indicted Thursday on multiple federal charges, the latest twist in the saga of a once trendy, now bankrupt fecal matter-testing startup.

Zachary Schulz Apte and Jessica Sunshine Richman, co-founders of defunct microbiome testing company uBiome, are accused of bilking their investors and health insurance providers, federal prosecutors said. They were indicted Thursday on multiple federal charges, including conspiracy to commit securities fraud, conspiracy to commit health care fraud and money laundering.

Their court appearances have not been scheduled, and it was not immediately clear if they had attorneys who could speak on their behalf.

Apte, 36, and Richman, 46, founded uBiome in 2012 as a direct-to-consumer service called "Gut Explorer." Customers would submit a fecal sample that the company analyzed in a laboratory, comparing the consumer's microbiome to others' microbiomes, prosecutors said. The service cost less than $100 initially.

The company grew to include "clinical" tests of gut and vaginal microbiomes, which were aimed to be used by medical providers so uBiome could seek up to $3,000 in reimbursements from health insurance companies. The federal indictment states that uBiome sought upwards of $300 million in reimbursement claims from private and public health insurers between 2015 and 2019. The company was ultimately paid more than $35 million for tests that "were not validated and not medically necessary."

Apte and Richman met in San Francisco in 2012 through the California Institute for Quantitative Biosciences Garage, an incubator used by UCSF. Together, they founded uBiome and received funding from Silicon Valley investors like 8VC in San Francisco and  Andreessen Horowitz in Menlo Park, which hold 22% and 10% stakes in uBiome, respectively, according to court documents.

For a time, they were the latest up-and-coming business determined to disrupt the medical testing industry. In 2018, Richman was even named an "innovator" winner in Goop's "The Greater goop Awards" and at its peak, uBiome was valued at $600 million.

Apte and Richman married in 2019, the year their startup began its death spiral. In May, the FBI raided their San Francisco offices and uBiome suspended all testing and put the pair on administrative leave. In October 2019, just a month after filing for bankruptcy, the company went into liquidation and shut down.

Much like the high-profile collapse of Elizabeth Holmes' Theranos blood-testing business, prosecutors allege Apte and Richman assured investors their medical tests were reliable when, in fact, they weren't. The couple "painted a false picture of uBiome as a rapidly growing company with a strong track record of reliable revenue through health insurance reimbursements for its tests. UBiome's purported success in generating revenue, however, was a sham," the SEC wrote in a complaint.

The defendants are also accused of falsifying documents, lying and concealing facts about their billing model when asked by insurance providers, as well as misleading and defrauding their investors.

On Saturday, March 20, 2021 at 4:18:00 PM UTC-7 Dakota Hamill wrote:

Yeah I just wish I had my microbiome data from them I got years ago as
an old control. Crazy to me how big a company can get before obvious
fraud is found.

On Sat, Mar 20, 2021 at 2:01 AM Biology Discussions
<discussio...@gmail.com> wrote:
>
> Get Ready for Theranos the Sequel
>
> https://www.fiercebiotech.com/medtech/ubiome-co-founders-charged-fraud-by-sec
>
> The founders of microbiome-testing startup uBiome have been charged with defrauding investors out of $60 million by convincing them it was a successful business before being forced to shutter operations, declare bankruptcy and flush all its assets in late 2019, according to the Securities and Exchange Commission (SEC).
>
> The federal watchdog agency charged Jessica Richman and Zachary Apte with "painting a false picture of uBiome as a rapidly growing company," including that it had established health insurance reimbursements for its clinical tests, designed to diagnose diseases by screening the microorganisms found in fecal samples.
>
> Instead, the SEC's complaint claims uBiome's revenue relied on "duping doctors into ordering unnecessary tests and other improper practices," the agency said in its announcement of the filings.
>
> "We allege that Richman and Apte touted uBiome as a successful and fast-growing biotech pioneer while hiding the fact that the company's purported success depended on deceit," said Erin Schneider, director of the SEC's San Francisco regional office.
>
>
> "Investors are entitled to know the material risks of the companies they are investing in, no matter how transformative those companies claim to be," Schneider said.
>
> According to the complaint (PDF), filed in San Francisco federal court, the pair of co-CEOs directed employees to provide insurers with backdated medical records when seeking reimbursements—before ultimately having to suspend the company's entire medical testing business.
>
> At the same time, Richman and Apte made millions by selling their own uBiome shares during fundraising, according to the SEC, which is seeking court orders requiring them to return their gains and pay civil penalties.
>
> Before spiraling over the course of 2019, uBiome raised $83 million—and tapped former Novartis CEO Joe Jimenez for its board—amid promises that it planned to spin its tests into the development of its own line of therapeutics.
>
>
> But by the middle of the next year, uBiome had laid off at least half of its staff—including the laboratory leaders and key personnel necessary to fulfill its promise of offering at-home, direct-to-consumer sequencing tests for wellness, food and lifestyle choices.
>
> That year, the company also put its physician-ordered tests, focusing on the gut and women's health, on indefinite hiatus following an FBI raid of its San Francisco headquarters.
>
> Shortly thereafter, Richman and Apte went on administrative leave while John Rakow, the company's general counsel, would serve as interim CEO for about two months before being replaced by a firm brought in by uBiome's board of directors to review the company's operations.
>
> By early October, almost one year exactly after the $83 million round, uBiome announced it would cease operations entirely.
>
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