Troubled Digital Mental Health Startup Cerebral Lays Off More than 1,000 Employees

Cerebral Inc. announced to employees it will lay off 20% of its workforce, impacting just over 1,000 people.

This 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 institute layoffs soon after news surfaced the company was under investigation by the U.S. Department of Justice for its prescribing practices of controlled substances. 

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

“These are difficult decisions, which were not taken lightly, but they have been made to best serve our clients who depend on us for high-quality care, each and every day,” Cerebral CEO David Mou said in an internal memo, which was acquired by Behavioral Health Business. “This is a challenging time for many companies. … [W]e have a duty to our patients to ensure our business is healthy and sustainable throughout challenging economic times.”

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

A major block of the layoffs will be in the care counselor and coaching department, impacting about 400 of 500 workers, according to sources familiar with the matter. BHB reported earlier in the month that Cerebral had decided to stop taking coaching and care counseling clients and intended to allow the programs to shrink on their own.

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

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

Cerebral began meetings with impacted team members. These meetings will continue throughout the week, the memo states. The company will have town hall meetings early next week for employees to ask questions.

“The changes we have made over the last several months — including our decision to reinvest marketing spending in clinical quality and safety efforts — are necessary to ensure we serve our patients with the highest possible standards,” the memo states.

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

The swift growth, big investment checks and scores of media reports about alleged mishandling of controlled substances have brought massive scrutiny on the company. Reports surfaced about the company’s handling of controlled substances such as Adderall for ADHD. A handful of retail pharmacies have stopped working with Cerebral.

Cerebral announced it would 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 throughout, the company has focused its message on clinical quality and safety since Mou succeeded founding 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 health conditions without his parent’s consent who eventually died by suicide.

The company has also paused “exploratory” efforts at it reorients under leadership and charts how to best proceed following the high levels of growth and scrutiny, Mou said in June.