Exclusive: How Calibrate stumbled from hot weight-loss startup to $20 million sale under threat of bankruptcy

• Calibrate sold itself in a tough deal to a private-equity firm, per a document obtained by Insider.
• The document shows that Madryn Asset Management got a 70% stake in the company for $20 million.
• The firm threatened to force Calibrate into bankruptcy if the startup didn’t accept the buyout.

Calibrate, a weight-loss startup, was forced to make a difficult deal with private equity firm Madryn Asset Management, according to company documents reviewed by Insider.

According to the documents, Madryn received a 70% stake in Calibrate in exchange for only $20 million. Madryn had already loaned the troubled weight-loss startup more than $60 million, giving it negotiating power over the transaction.

Insider first reported on October 20 that Calibrate, which prescribes popular drugs like Ozempic and Wegovy, was selling itself to Madryn and restructuring after experiencing patient complaints and refunds.

Isabelle Kenyon, the company’s founder, stepped down as CEO as part of the restructuring. According to the documents, she is left with a 2.5% stake. The documents, dated October 17, include a merger agreement and a list of Calibrate investors, and were distributed to shareholders as part of the transaction.

According to Pitchbook, the deal terms are especially harsh for a startup that has raised approximately $170 million from investors such as Tiger Global, Founders Fund, and Optum Ventures. Madryn’s previous lending is also included in the figure.

Calibrate, Madryn, Kenyon, and the company’s venture capital backers did not immediately respond to requests for comment for this story. According to a Calibrate spokesperson, the transaction “strengthens the company’s financial position as the leading metabolic health business and allows the business to achieve profitability.”

Madryn’s takeover completes a turbulent year for Calibrate. While it was one of the first companies to be built to prescribe new weight-loss drugs, the startup experienced difficulties getting patients their medications on time and responding to their messages, and paid out millions of dollars in refunds in the first half of the year, as previously reported by Insider. According to Insider, some long-term patients have regained much of the weight they lost after Calibrate failed to get them medications.

---

The Inside Story of Madryn’s Takeover

Calibrate raised approximately $127 million by the end of 2021, including a $100 million Series B round led by Founders Fund and Tiger Global. It planned to raise another round of equity funding in 2022, but it was unable to do so due to “difficulties in the equity markets and increases in the company’s operating costs,” according to the document.

Calibrate’s board then looked for other sources of funding and agreed to borrow money from Madryn in November 2022. By October of this year, the private equity firm had loaned Calibrate $64 million.

According to the document, as Calibrate faced operational challenges in 2023, the company defaulted on the terms of its loans at least once. The document does not identify these difficulties or explain why Calibrate defaulted. However, Insider reported that Calibrate received a flood of complaints from members this year as it struggled to respond to their messages on time and provide them with access to popular weight-loss drugs.

Those difficulties had a financial impact, as the startup was forced to issue numerous refunds to its members. Calibrate issued nearly $2.6 million in refunds in March alone, according to Insider. According to a company presentation, those refunds accounted for nearly 60% of Calibrate’s direct-to-consumer sales that month.

Nonetheless, according to the document, Madryn provided additional funding and agreed to hold off on taking action against the startup while Calibrate attempted to correct its course, including by pursuing a sale to another company. Calibrate was in acquisition talks with a “large healthcare leader” this summer, according to Fortune, but the deal fell through.

Reorganization or bankruptcy

Finally, in September, Madryn presented Calibrate with two options: restructure, giving Madryn majority ownership of Calibrate, or file for Chapter 11 bankruptcy.

Calibrate agreed to restructure on September 12, and the agreement was finalized on October 16.

Madryn exchanged $20 million in loans for senior equity in Calibrate under the terms of the agreement. Existing equityholders of the company will see their stakes converted into Class C shares, totaling 15% of the company.

Founders Fund and Tiger Global now own approximately 1% of the company.

Some convertible investments will be converted into Class B shares. They are not named in the document, but they will own 15% of the company.

According to the document, these ownership percentages are preliminary and subject to change.

According to the documents, Madryn can still force Calibrate to declare bankruptcy “in the event of certain circumstances.”

According to the terms of the agreement, if Calibrate fails or is acquired by another company, Madryn will be paid first. Before other investors receive any money back, the private-equity firm will receive twice as much as it put in — $40 million in returns from the initial $20 million in equity funding.

At best, the company’s prospects are hazy. Several other startups have rushed to offer weight-loss medications online. And Calibrate appears to be laying off employees: More than a dozen Calibrate health coaches have posted on LinkedIn in the last week that they are looking for a new job or that they left the company in October.