Online mental health startup Cerebral is cutting 20% of its workforce as it restructures operations, reportedly to meet patient demand and lower growth targets.

The layoffs take effect this week and will impact all of the company’s divisions, according to The Wall Street Journal, which first reported the cuts based on its review of an internal memo sent to staff by CEO David Mou.

A Cerebral spokesman acknowledged the moves, saying they’re part of “an ongoing transformation program” intended to “realize operational efficiencies while prioritizing clinical quality and safety across the organization.”

Visit volumes for behavioral health rose in 2020 and have remained more than 15% above pre-pandemic levels, a recent analysis of healthcare claims data showed. Cerebral launched that same year, one of many online mental-health startups emerging to fill the demand.

The San Francisco firm has offered prescriptions for controlled substances used to treat ADHD and other mental-health conditions. It raised more than $400 million in venture funding and hired scores of nurse practitioners on a contract basis to see clients. 

But Cerebral ran into trouble. In May the company disclosed a grand jury subpoena from the Justice Department as part of an investigation into possible violations of the Controlled Substances Act. That was followed a month later by a Federal Trade Commission probe into the firm’s business practices. 

Earlier this year, members of the medical community alleged that Cerebral’s advertising contained misleading health claims. Social media platforms Meta and TikTok pulled some ads. 

In response to the scrutiny, Cerebral paused prescribing of ADHD controlled substances, updating its paid social ads to reflect the change. It also launched a review of its existing promotional efforts and formed a committee — composed of clinical and brand team members — to review its paid social efforts. Mou, formerly chief medical officer, replaced co-founder and former CEO Kyle Robertson. 

Over the summer, the company dialed back marketing spend and released some of its contract NPs, moves which the Journal – citing an email from Mou and other documents – had chalked up to a reduction in patient appointments and decline in new patients. 

A Cerebral spokesman said the decision to slash marketing was designed “to slow growth and double down on clinical quality and safety.” 

This month, per the Journal report, Cerebral also stopped accepting new patients for another service known as care counseling. 

The spokesman added that the company has not changed its mission to “democratize access to high-quality mental healthcare for all.”