Issue 135

Welcome back to E&O Fridays, a paying subscribers-only weekly newsletter focused on the world of digital pharma products and FDA-regulated digital health.

 E&O Fridays.

Here’s what’s going on in FDA-regulated digital health:

• The Digital Therapeutics Alliance published a helpful series of high-level, country-specific guides that cover regulations and other FAQs about digital therapeutics.
• Pear Therapeutics inked another value-based agreement for its substance use disorder prescription digital therapeutics (reSET and reSET-O) with a state Medicaid plan: Oklahoma’s SoonerCare. Pear already has a similar agreement in place with Massachusetts’ Medicaid.
• The FDA granted a 510(k) clearance to Biotricity for its wearable, peel-and-stick 3-lead ECG device Biotres.
• Insulet also announced a 510(k) for its Omnipod 5 automated insulin delivery system for people with Type 1 (six years and older). “Omnipod 5 is the first tubeless automated insulin delivery (AID) system that integrates with the Dexcom G6 Continuous Glucose Monitoring (CGM) System and a compatible smartphone to automatically adjust insulin and help protect against highs and lows.”
• Earlier this month Mahana Therapeutics, which offers an FDA-cleared prescription digital therapeutic that treats IBS, announced it had joined the new class of startups in a London-based digital health accelerator. The company already has a managing director of UK operations. While Pear has made inroads in Singapore and Akili has a deal in place for the Japanese market, Mahana set its sites on the UK as its first international market.
• One more thing… In a letter to CMS, industry group Aimed, which counts Pear Therapeutics as a backer, suggested that the Biden administration’s plans for tweaking health insurance should include more coverage for prescription digital therapeutics. Here’s how they suggest CMS implement that as part of the Notice of Benefit and Payment Parameters 2023 Rule: “Qualified health plan issuers are required to maintain a network of providers who offer primary and specialty care to ensure that all services are available without unreasonable delay. In the 2023 NBPP, HHS proposes to conduct quantitative network adequacy reviews and expand this review to include the use of telehealth by providers to inform future network adequacy and provider access standards. Aimed Alliances supports the inclusion of tracking telehealth data as part of network adequacy. Aimed Alliance encourages HHS to also track the use of prescription digital therapeutics (PDTs) to inform future network adequacy and provider access standards… Like telehealth, PDTs expand access to care for patients and help reduce access-related health disparities. As the future of healthcare continues to evolve and the use of technology within healthcare expands, we encourage HHS to actively track the use of telehealth as well as PDTs to ensure the adequacy of provider networks and that qualified health plan consumers have access to needed care without unreasonable delay.” (Talk about a Hail Mary.)

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Akili Interactive’s past revenue, G&A and more

By now you’ve almost certainly read about Akili Interactive Lab’s announcement that it plans to become a public company via a SPAC merger with one of Chamath Palihapitiya’s many blank check companies. I’ll dig into a few areas that I found interesting, but if you are looking for the basic details of the deal (and want to dig in on your own) then the SPAC announcement press release and the investor presentation are each worth a click.

Why do PDT companies go public post-FDA but before demonstrating significant annual revenue growth?

Even though Pear Therapeutics made a similar move last year (Issue 107), I’m surprised Akili is going public while it is still pre-launch. It has me wondering about the differences between biotech IPOs, tech IPOs, and prescription digital therapeutics company IPOs (even though both Pear and Akili were SPAC transactions). In an interview this week, I asked Akili CEO and co-founder Eddie Martucci about it.

I set up the question by pointing out that many biotechs IPO when they are still relatively early in their R&D process (certainly pre-revenue and typically pre-FDA). Tech companies often IPO once they have an impressive enough track record of revenue growth (but pre-profits, of course). PDT companies like to think of themselves as a hybrid of biotech and tech. Here’s Martucci:

Akili wants to be public for various reasons. It wants easier access to capital. It wants to become a “household name,” and the platform that comes with being a public company could help boost its marketing efforts. Finally, the transparency that comes with being a public company may help it bolster trust with prescribers, payers, and other partners.

What were Akili’s annual revenue numbers for 2019, 2020, and 2021?

Akili and its SPAC sponsor didn’t mention annual revenues to date in either their press release or their investor presentation. As a result, I haven’t seen these numbers reported elsewhere, but buried in some of the new SEC filings are Akili’s annual revenue numbers for 2019 and 2020. Akili posted just shy of $20 million in revenue for 2019 and just under $4 million in revenue for 2020.

But remember: The company’s prescription digital therapeutic, EndeavorRx wasn’t in the market until mid-2020. Akili secured its De Novo clearance in June of that year. Still, the majority of Akili’s revenue for both 2019 and 2020 came from its partnership with Japanese pharma company Shionogi. (The two are creating a version of EndeavorRx for the Japanese market.)

A few other accounting details:

• Interestingly, Akili lists “cost of sales” for its $4 million in 2020 revenue at about $416,000. Its cost of sales for its 2019 revenue of $20 million was $1.3 million.
• Akili’s R&D expenses hit $15.4 million in 2020 and $21.3 million in 2019.
• The company’s selling, general and administrative costs (G&A), which is noted included patent-related costs and a couple of million dollars worth of stock-based comp in each year, hit $13.5 million in 2020 and $18.9 million in 2019.

A few hints for estimating 2021 revenue

While Akili has yet to share numbers for 2021, we know a few things about its soft launch of EndeavorRx from the company’s investor presentation. Here are the parameters. From September 2020 until December 2021, Akili had:

• About 1000 unique prescribers
• 62 percent wrote refills
• 34 percent were repeat prescribers
• 52 percent conversion for cash-pay prescriptions
• 88 percent conversion for reimbursed prescriptions
• $247 average net price for cash-pay scripts
• $387 average net price for reimbursed scripts
• About 10 percent of the prescriptions were reimbursed

So we know there were 1,000 prescriptions to start. About 900 of these were cash-pay, so they were worth about $222,300, but only 468 (52 percent) converted so that comes to about $115,596. Of the 100 reimbursed prescriptions we know 88 converted so that’s another $34,056. We know 34 percent of the 1,000 prescribers are repeat prescribers, but we don’t know how many scripts they wrote on average. Let’s assume two just to get the low-end of the range: 340 more scripts. So, 306 were cash pay and 160 converted at a price of $247 giving Akili $39,520. The other 34 were reimbursed and so 30 converted at a rate of $387 giving Akili another $11,610. Now, 62 percent of prescribers also wrote refills but that means they had a patient who actually converted their prescription the first time around. I’ll ignore that and just assume another 620 prescriptions. Sparing you the details, that comes to another $71,630 in cash-pay revenue and $21,285 in reimbursed prescription revenue. That’s only $300,000 for the low-end of the range but that’s for revenue from EndeavorRx from September 2020 until December 2021. If those 340 prescribers ended up prescribing EndeavorRx to many more than two of their patients on average, the numbers might be higher, but I’d be surprised if they resulted in more than low single-digit millions in revenue. Of course, its agreement with Shionogi may have generated tens of millions in licensing revenue for Akili last year, which likely dwarves EndeavorRx sales.

Future revenue estimate: $500M from ADHD products in the next 5-7 years.

Unlike Pear, Akili did not list out specific revenue targets for the next three years as part of its presentation to investors. Instead, Akili told investors it expects to hit $500 million in annual revenue from its ADHD products in the next five to seven years.

One slide (image below) showed that the company expects 50 percent of its future scripts to be cash-pay and 50 percent to be reimbursed via insurance, but when I asked to better understand the thinking behind that split, Martucci told me that split was based on “standard assumptions” and hopefully proves to be conservative. The company hopes to have a higher percentage of reimbursed scripts.

In recent weeks E&O has dug into insurance company medical policies that have called out all of the prescription digital therapeutics on the market today as lacking in evidence and, therefore, not medically necessary. I asked Martucci what the next step was to convince these big commercial payers. Did they need new studies or did payers just need to be better convinced that the evidence available to them is more compelling?

Martucci said that based on his reading of the policies, the insurance companies have not had a full readout of the data that is available to them.

“And that’s on us,” he said.

The last reveal in Akili’s SPAC filings that I thought was interesting was the company’s near-term milestones for its various cognition products. So, I’ll leave you with an image from the presentation. Here’s a look at next steps for Akili’s pipeline — the time frame refers to when Akili estimates the next milestone will hit, not when the product launches commercially. (Sorry, this may require you to find your reading glasses, but it appears legible to me…)

Clinical trial updates from NightWare, Affect Therapeutics, Pear, and the VA

This is a recurring feature of E&O Fridays that digs into new digital health-related clinical trials as well as updates to others E&O mentioned in previous issues.

NightWare completes its RCT with much lower than anticipated enrollment

NightWare, which offers an FDA-cleared prescription digital therapeutic for treating nightmares in adults with PTSD has completed its RCT. No results yet. While the company originally expected to finish up in May, it managed to do so in December. However, enrollment in the study only hit 81 participants out of an anticipated 400.

The clinical trial was a remote, randomized, double-blind, and sham-controlled study. Here’s how the study leads described the intervention:

The sham group had all the same hardware, and it measured their physiologic data too, but it did not deliver the mild vibrations when it detected nightmares.

Affect Therapeutics demos its CBT for MUD

Affect posted details on a demonstration study for its CBT-based program for treating methamphetamine use disorder (MUD), which is funded via a grant from National Institute on Drug Abuse (NIDA). Primary outcomes include engagement and retention in the program. Here’s how the company describes its intervention:

The VA is testing whether a homework module improves efficacy of CBT for depressive symptoms:

This VA is exploring ways to improve engagement with CBT programs for depression. The agency argues:

Pear published its Pear-008 study protocol in JMIR this week

In past issues of this newsletter I’ve tracked a handful of changes to Pear’s clinical study of Pear-008, a gamified version of its flagship reSET-O prescription digital therapeutic. This week the company published the study protocol in open access journal JMIR. Here’s the objective:

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