Health IT unicorn Outcome Health settled a three-month legal battle with investors, and as part of that deal, cofounders CEO Rishi Shah and President Shrada Agarwal will step down.
Shah and Agarwal will no longer be part of daily management and will instead act as chairman and vice chairman.
As part of the settlement, the pair will also join the investors — which include Goldman Sachs, Google’s Alphabet and others — in investing another $159 million into the company to reduce bank loans and add capital to the company.
Chief Operating Officer Nandini Ramani will lead the company during the interim period while Outcome Health searches for a new CEO. Ramani joined the Chicago-based startup in August 2017 as chief engineering officer, following her role as Twitter’s vice president of engineering.
Further, the board of directors will expand to include three new independent directors and two investor representatives. And all new campaigns will be verified by a third party.
“This resolution is based on two principles: a shared belief in the performance of the company’s business model and conviction in its mission and impact as it pursues the path forward,” Shah wrote in a blog post.
Outcome Health launched back in 2006 with a $5.6 billion valuation. The company advertises for pharma companies on iPad-style tablets, large-format touchscreens, and flat-screen TVs in provider offices that stream ads and educational programming.
However, the company’s investors filed suit at the end of last year, claiming former employees charged customers more for ads on screens than Outcome actually installed. Investors alleged they were misled by the false data and financial reports when they poured $487.5 million into Outcome after a Series A funding round last year.
While those employees were fired after Agarwal and Shah discovered their misbehavior, pharmaceutical advertisers pulled millions of dollars in ads from the company and some hospitals distanced themselves from Outcome as a result.
In early January, Illinois suspended two tax credit agreements with the company and one-third of the company’s employees took a voluntary buyout after the reports and lawsuit.