8 min. read

Trouble in Pear-adise? More details on ESI’s digital formulary.

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Issue 021.

Get E&O weekly. | Subscribe| Digital health research from Brian Dolan.

Welcome to E&O.

Last week’s newsletter had a balmy 70 percent open rate. Here’s what’s happening this week:

  • I spent the past few days at the Boston-based DTx East conference, which was squarely focused on all things digital therapeutics. The event had a handful of standout panels and presos on-stage, but — as always — the conversations between sessions proved more informative. Scroll down for my initial writeups, and I’ll relay more from the event in next week’s note.
  • You likely saw this already but here are quick links for the four FDA guidance documents (updates and mulligans) that the agency posted this week. Their publication coincides with AdvaMed’s big MedTech conference. Just so you have the links handy: Here’s the updated guidance on mobile medical apps, the updated (after 20 years) guidance on using off-the-shelf software in medical devices, policy for low-risk, general wellness devices, revisions to MDDS, draft guidance on (the always-controversial) clinical decision support, and guidance on how the FDA is applying the software exclusions found in the 21st Century Cures Act.
  • The self-described “largest, family-run hospital group in Germany”, Schön, has acquired depression-focused digital therapeutics company Aurora Health for an undisclosed sum. Aurora offers an app called Moodpath, which has been downloaded 1.8 million times. Schön will bundle the app with its remote visits, telemedicine offering. More here in German, but Google Chrome’s translate gets you the gist.
  • While you’re translating German, here are recommendations from two Germany-based DTx companies for improving and clarifying the recently drafted Digital Supply Act legislation, which — among other things — is intended to drive reimbursement for digital therapeutics in that country.
  • Three financing deals of note: FeetMe, which has developed wearable gait assessment technology, raised a €9.4 million Series A. Eko, which offers a smart stethoscope for AFib and heart failure screenings, raised a $20 million Series B. Proteus Digital Health alums founded a virtual pharmacist company, called Arine, last year and Rock Health just announced its an investor but funding details were undisclosed.

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Trouble in Pear-adise?

Pear’s ongoing commercialization efforts with its partner Sandoz, a subsidiary of Novartis, was a common and consistent discussion topic during coffee breaks at DTx East. It’s also more or less where E&O’s The Pear Therapeutics Report ended, so this article picks up where the report left off…

By all accounts (on the sidelines of DTx East, anyway), the rollout has put a strain on the Pear-Sandoz partnership, but some characterized the pair’s struggle to convince payers and detail docs as bleaker than others.

Contrast these private conversations with what was said on-stage. Pear Therapeutics’ Chief Commercial Officer Alex Waldron described the rollout with Sandoz as going “extremely well”, but he made no mention of any particular payer as having signed on. This was pointed out to me by two people at the event: If Pear-Sandoz had inked a payer contract for either reSET or reSET-O by now, wouldn’t they have announced it?

Sandoz’s Head of Digital, Andre Heeg spent much more time on-stage discussing early lessons learned from his partnership with Pear, and he never echoed Waldron’s “extremely well” characterization. Here’s what Heeg said about early efforts to figure out the best way to deploy a salesforce to get reSET and reSET-O to market:

“To be quite frank, I’m not going to sit here and say it was easy. At the end of the day, this is really messy. It requires determining the right resources, the right talent, all of these types of levels requires a very specific kind of talent that is different from the pharma sales team’s core. You need to be more flexible, more entrepreneurial, more persistent, right? You also need to enjoy the failings [and think of them] in terms of learnings. It’s a huge learning curve for us.”

Heeg was on-stage with his colleague Joris Van Dam, who leads digital therapeutics at Novartis. Novartis’ deals with Pear are for digital therapeutics that are not yet at the commercialization stage. When asked about how difficult it is for a big, conservative pharma company to deal with the “fail fast” mindset typical of smaller digital companies like their partner Pear, Van Dam deftly turned the premise on its head and explained that failure is a key part of any big research-focused company’s process:

“We actually had the opposite experience with Pear. We said ‘You know, let’s take three or four shots at this. It’s OK to fail.’ And they said, ‘No, no, we can’t fail that often!’ But this also depends on what stage of the [digital therapeutic] you are at, and I think we benefited a lot from the perspective of our research partner on that. We are — not only at Novartis but as an industry — use to failure but also using it to our scientific advantage to study what failed. Research is all about learning.”

When the moderator, Akili’s VP of Market Access and Trade Jeffrey Abraham, asked Van Dam to comment specifically about learning and iterating from failures at the commercial stage, the Novartis executive half-jokingly, half-icily said thanks for the “forewarning” on that question. He briefly commented:

“At the later stage and with commercialization it is different. Especially with pharmaceuticals. With digital therapeutics, the costs are different, so failure at that stage is not as costly [as they are with pharmaceuticals]. It’s a good question and ‘I don’t know’ is the short answer.”

Sandoz’s Heeg jumped in:

“On the commercial side, it is probably a little bit different because there you necessarily don’t want to fail too often. My observation from the second half of last year and the first half of this year is that the hype around commercialization of digital therapeutics was huge, but now it’s the phase of ‘yea, show me the outcome’ — ‘show me what is the path to revenue’. The reality is — the perfect model — in my experience, no one has figured that out.”

Heeg then listed off open questions about digital therapeutic commercialization around prescription, payers, and direct-to-consumer strategies. Then Heeg continued:

“It’s interesting that we are still in this phase where we are still figuring this out. A few years from now a couple of people will have failed a lot, a couple will have learned, and we will have a few successful models out there. Right now it is still in the trial phase.”

Heeg also discussed more specifics around sales force strategies for digital therapeutics products. His general take is that DTx requires a new kind of sales rep, so the ideal route is to build one from scratch. That said, if a pharmaceutical company already has a sales force with presence in the field around the digital therapeutic’s medical condition, the likelihood Sandoz would use their own salesforce would be “pretty high”. Sandoz did not have a salesforce focused on addiction before building one for reSET, Heeg said.

“The other thing is the calls are very different from the calls in traditional pharma. Imagine: You have to address how the patients actually get access to this. How do they install it? And, oh, by the way, there is a new version now. The button is no longer green, it is blue now. It is very different. You need reps who have an entrepreneurial mindset and are able to explain something that the doctor does not know at all. But also [the rep] has to have some technical understanding… to be able to explain the technical aspects in very simple words.”

One final remark from the stage at DTx East that may or may not have had anything to do with Pear’s Sandoz partnership came from longtime Pear investor and board member Zack Lynch from Jazz Ventures. Lynch was speaking on a panel of investors about trends in the industry. He also has made investments in multiple digital therapeutics companies, so it is unfair to assume these remarks were entirely Pear-inspired:

“I don’t think we really know the true go-to-market strategy. Every other year it goes from partnering, back to self-commercialization, back to partnering, and back to self-commercialization. I think the jury is still out and that will [also] depend on the indication. This week, for me, it’s self-commercialize.”

Apple’s under-appreciated regulatory feat

During a handful of discussions over coffee at DTx East this week, I was surprised to find a number of attendees who did not fully understand what made Apple’s FDA clearances for its ECG SaMDs unprecedented.

The odd, seemingly coordinated timing of the clearance is widely known, but the Apple clearances also marked the first time that the FDA regulated ECG software while ignoring the sensors that acquired the electrocardiogram. The agency essentially ignored the Apple Watch’s hardware — specifically its PPG sensors — in the clearance process.

I’ve been waiting and watching, but so far no company has managed to use Apple’s clearances as predicates to push something through the agency. The move by the FDA to give Apple a pass on its medical sensors has left SaMD regulatory experts scratching their heads. Which company is likely to follow Apple’s lead and be the first to use them as a predicate? It will likely happen soon.

More details on Express Scripts’ digital formulary plans for 2020

At the DTx East conference Express Scripts’ VP of New Solutions, Mark Bini shared more details on his company’s plans to launch a digital health formulary in early 2020. Bini said he believed digital therapeutics belong in pharmacy benefits, and ESI’s digital formulary will enable that. However, the company plans to be flexible and work with its payer clients to cover digital products as they see fit.

Bini also argued that the pharmacist should take a lead role in the last mile of digital therapeutics:

“It is the pharmacist’s role to understand the medication’s chemical makeup, the side effects, limitations, etc. It is an opportunity from the digital standpoint to expand the pharmacist’s role — and pharmacy’s role — and have the pharmacist understand the algorithm. Have the pharmacist understand how this digital therapeutic metabolizes in the brain and can stop your anxiety or depression. There is an opportunity there to expand the pharmacist’s role and to provide coverage as a pharmacy benefit, which we can do today. We can do it pretty turnkey.”

Bini also explained that the digital formulary initiative aims to help overwhelmed HR benefits offices figure out which digital health solutions are worth deploying. ESI has the capability to vet and manage some of that process, Bini said.

“We have taken everything we know to work well in a medication formulary process, and we have applied as best practices in the digital health space. We have assembled a panel of doctors, specialists, pharmacists, researchers in accessibility and usability, as well as health services researchers who are looking at methodologies of [the digital products’] studies, and they are evaluating those solutions through the lens of clinical sufficiency, clinical viability, clinical effectiveness, as well as usability and engagement, and then and only then, are we looking at value. Notice, I didn’t say price. To our clients, it is really about the value of their return on investment.”

Bini stressed how flexible ESI would be in its approach to digital coverage:

“One of the nuances of this formulary is that it is not blanket coverage, it is an opt-in approach. Clients will have the optionality to choose a la carte which solution works best for them. That’s something, personally, I think we can all celebrate in this room: We are getting to a point where clients see value in creating such a formulary where, even if it is opt-in and not blanket coverage, it is a step in the right direction.”

As expected, the digital formulary will handle adjudication too. It will likely go live during the first half of 2020. While ESI has existing relationships with digital health companies like Livongo and ResMed/Propeller, the company is applying the same application and review process to all digital products interested in securing a spot in its digital formulary.

That’s a wrap on Issue 021. More from DTx East in next week’s newsletter.

5 min. read

Omada hits 275K cumulative users. More on Pear, Limbix, ATX.

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Issue 020.

Get E&O weekly. | Subscribe | Digital health research from Brian Dolan.

Welcome to E&O.

Last week’s newsletter had a 64 percent open rate. Here’s what’s happening this week:

  • I’ll be at the DTxEast event in Boston next week, and I’m excited about the lineup. Let me know if you’ll be there.
  • Missed this last week: Trialcard acquired medication adherence startup Mango Health. When Mango’s founder and CEO Jason Oberfest left to join Apple’s health team in December, it was a fair assumption that the company was looking for a buyer.
  • Germany-based digital therapeutics company Kaia raised $8 million in a round led by UnitedHealth Group’s Optum Ventures. Kaia offers programs that address back pain and COPD. The company says it has enrolled 275,000 people into its programs. It just raised a $10M round in January led by Balderton Capital.
  • Sequoia-based digital therapeutics company Limbix, which markets a VR kit for various mental health conditions is currently pursuing an FDA clearance for its VR-based digital therapeutic, called Spark, for adolescent depression. It’s working with Stanford and TrialSpark on the prescription digital therapeutic, which is currently undergoing a feasibility study. Check out its full pipeline of PDTs here.
  • A former Walgreens exec, Adam Falat, just announced the launch of his new digital therapeutics startup ATX Therapeutics. The company’s initial strategy is to try to sell digital therapeutics directly to consumers. No specific focus is revealed in the launch announcement, but the company does hint at a few areas of interest: “many chronic diseases are caused by a short-list of risk behaviors, such as tobacco use, poor nutrition, lack of physical activity and excessive alcohol use.”
  • At Health 2.0 in Santa Clara, Omada Health’s CEO Sean Duffy said the company has had 275,000 people enroll in its programs. Omada typically uses the cumulative number of people instead of a real-time one. The latest figure makes for about 25,000 new users since the last update, which was 250,000 in May of this year. At this current rate, Omada is currently adding about 7,000 or so new users each month. It also added 50 new customers (600 now) since it announced its funding in June, when it had 550 customers.
  • This study concluded that diabetes prevention programs should take measures to address depression and anxiety issues in their patient populations: “Both depressive symptom burden at baseline and change in this burden are associated with a graded reduction in the effectiveness of diabetes prevention programs at increasing physical activity in primary care.”

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Livongo, Omada, Kaia, Healthvana, Propeller user numbers: 100,000 – 300,000

It just struck me after compiling the quick links above that a number of companies I’m tracking have disclosed users numbers in this range. While they’re not apples-to-apples since some talk only of cumulative users, it’s striking how each of these companies count users in the low hundreds of thousands now:

  • Livongo: 192,000 members.
  • Propeller Health: >100,000 patients enrolled (as of May).
  • Kaia: 275,000 users enrolled.
  • Omada: 275,000 cumulative users.
  • Healthvana: >250,000 users.

Follow-up thoughts on Pear Therapeutics

In the days following the publication of The Pear Therapeutics Report last week, I’ve had conversations with a few of you about the findings. While Pear only recently launched its first product commercially, the company has managed to move quickly since its founding five years ago. Of all the twists and turns in Pear’s story thus far, the tactics that continue to pop up in conversations have been related to the company’s licensing strategy.

  • License others digital interventions: First off, Pear’s “roll-up” strategy in its first year of operation (2014-2015) to gather up (somewhat) exclusive rights to dozens of digital interventions that have proven their efficacy via RCTs with solid control arms, has allowed the company to skip a few steps. Most digital therapeutics companies begin with an idea for a digital intervention that they need to build and prove-out with a randomized control trial. Pear acquired the rights to interventions instead, and it did most of this licensing work early on, and quietly before the digital therapeutics trend had received much notice.
  • Use the interventions’ existing efficacy data for FDA: Pear has also managed to secure FDA authorization for at least one of its prescription digital therapeutics by referencing the efficacy data related to the early, academic version of the PDT. Pear still refines and evolves these digital interventions with its own team, but the advantage of showing up to the FDA with a mostly-baked, RCT-proven digital intervention has helped Pear get to market sooner. That same strategy will help it get future PDTs to market faster than the competition, too.

    In many of Pear’s known licensing agreements to date, the company has attained exclusive rights to use the inventor’s digital intervention as part of a combination product with some kind of pharmaceutical. In most cases, the inventor has retained the right to develop their digital intervention as a stand-alone offering or, at least, not as part of some combination product with a drug.

    A couple of the academics whose research is critical to Pear’s various digital therapeutics have banded together to form their own digital therapeutics company called eQuility. That startup includes various Pear Therapeutics inventors and licensors like Eric Leuthardt M.D., Roy Levien, Walter Greenleaf Ph.D., and Dror Ben Zeev. eQuility is working on digital therapeutics focused on depression, bipolar disorder, and sleep currently. It also has designs on anxiety, RA, IBD, and other inflammatory diseases. This slide deck from July is a good introduction to eQuility (slides 5-24).

Digital Pharma/Medtech deals: Sanofi-Happify, Bayer-One Drop, Medtronic-Novo, and more

This week saw an unusual number of deals between medtech/pharma and digital health companies. Here’s a quick rundown:

Sanofi inks 10-year deal with Happify Health: Happify Health will develop a version of its digital platform specifically for people with multiple sclerosis and plans to submit the co-developed digital therapeutic to the FDA for clearance as a medical device. Prior to this deal Happify has been focused on a direct-to-consumer and payer-facing offering that uses CBT to reduce anxiety and depression in the general population. Happify has managed to attract 4 million users for its consumer programs.

Bayer leads $40M investment in One Drop: One Drop, a diabetes-focused digital health company, which recently secured shelf space at Apple’s stores, just announced a $40 million Series B round led by Bayer. Perhaps more interesting: Bayer also inked a global commercial licensing agreement to use One Drop’s platform in areas beyond diabetes, including oncology, cardiovascular disease, and women’s health.

Medtronic-Novo Nordisk and Sanofi-Abbott: Medtronic partnered with Novo Nordisk in a nonexclusive agreement integrate insulin dosing data from future Novo smart insulin pens into Medtronic’s CGM devices, like its Guardian Connect system. Novo’s new smart pens are set to launch in 2020. Sanofi and Abbott inked a similar deal this week: The two plan to co-develop “tools that combine the revolutionary FreeStyle Libre technology with insulin dosing information for future smart pens, insulin titration apps and cloud software.”

That’s a wrap on Issue 020.

17 min. read

The Pear Therapeutics Report

In this article:

In this 4,500-word report, E&O digs into the strategic moves, challenges, and successes that the Pear Therapeutics executive team has navigated since its founding five years ago. The report covers dozens of Pear’s therapeutic areas of interest; financial details from licensing agreements the company has forged with academic researchers; why it acquired a small tech startup in its early years; its failed direct-to-consumer products and more.

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Fresh from vacation, ex-McKinsey analyst and then-venture capitalist Corey McCann M.D. Ph.D. stepped up to the mic at the first-ever NeuroGaming conference in 2013 and asked a question. Well, three actually: “Who’s going to pay for this? How much? And why?”

In his retelling of the episode, the room fell silent. The panelists, who were all dabbling in healthcare applications for neurogames, had no good answers.

A year later, while still working as a principal at MPM Capital, McCann returned to the conference, sat on a similar panel, and introduced himself as the CEO of a new startup named Pear Therapeutics. Software plus drugs were better than either alone, he argued. Pear Therapeutics was bornStephen Kennedy Smith, a scion of the Kennedy family, also helped incubate Pear via his holding company New Frontier Bio. .

Pear Therapeutics has come a long way in the past five years. Pear might be the first digital health company to operate as if it were a biotech company. McCann has referred to his company as the Genentech of digital therapeutics. It is, in fact, the first digital health company to secure FDA approval for software that claims therapeutic benefit in the label just like a pharmaceutical.

It has licensed an unknown but likely sizeable number of digital interventions from academics to populate its pipeline prescription digital therapeutics (PDTs). Pear has also raised $134 million and boasts a valuation close to half a billion dollars. The company has managed to secure a de novo clearance from the FDA, 510(k) clearances, and entry into the agency’s exclusive, Pre-Certification pilot program.

Most impressively, Pear has landed paying customers. Both Novartis and its generics division, Sandoz, have signed on to develop and launch digital therapeutics with the company. And two have already launched commercially.

This report will cover Pear’s progress to date along with lesser-known product failures and challenges. Here’s a table of contents for the sections that follow:

  • Pear’s therapeutic modalities and therapeutic areas
  • Current product pipeline
  • Pear’s 2016 direct-to-consumer debacle
  • Key struggle: Hiring tech talent to build digital therapeutics
  • Pivot to prescription-only
  • Pear’s asset licensing strategy: “Not in the content business”
  • Two examples (with financial details) of Pear’s licensing agreements
  • How and when Novartis pays Pear
  • Regulatory strategy, accomplishments to date
  • Pear’s funding and investor strategy
  • What’s next for Pear Therapeutics

Pear’s therapeutic modalities and therapeutic areas

At first blush, Pear appears to be a digital therapeutics company focused on central nervous system (CNS) disorders, but its longterm ambitions are wider in scope. Pear believes that any medical issue or condition that could be improved via behavior modification is a potential target for a prescription digital therapeutic. Here’s how Pear sees its market opportunity.

Over the years, Pear has pointed to more than 20 therapeutic areas that it believes could benefit from a prescription digital therapeutic.

As the list above shows, the areas of interest include: major depressive disorder, general anxiety disorder, post-operative pain, MS, Parkinson’s, tremor, stroke, hypertension, chronic heart failure, diabetes, irritable bowel syndrome, Crohn’s, ulcerative colitis, asthma, COPD, rheumatoid arthritis, psoriasis, overactive bladder, incontinence, and contraception. There are behavioral components to each of these conditions that are currently not addressed by pharmaceuticals today.The original slide had a copy-paste error in the oncology section so the specifics there remain undisclosed.

Pear’s therapeutic modalities include ones beyond cognitive behavioral therapy. Contingency management, cognitive remediation therapy, and cognitive control therapy are other neurobehavioral modifications the company is exploring along with various real-world data collection modalities and dose optimization.

Pear’s product pipeline

Pear Therapeutics’ current product lineup has been well-covered elsewhere, so here’s a brief overview of its current digital therapeutics:

Pear Therapeutics: reSET
  • reSET: A 90-day prescribable digital therapeutic program for adults already enrolled in outpatient treatment under the supervision of a clinician. This version of the program is approved for substance abuse disorders but excludes opioid use disorder. The clinician dashboard includes: “patients’ use of reSET, including lessons completed, patient-reported substance use, patient-reported cravings and triggers, compliance rewards, and in-clinic data inputs such as urine drug screen results.” The program is based on the work of Dartmouth’s Lisa A Marsch Ph.D. The product has made it through the FDA and Sandoz’s sales team is currently selling it to clinicians around the country.
  • reSET-O: An 84-day prescribable digital therapeutic program for adults that aims to increase the retention of patients in outpatient programs for opioid use disorder that include transmucosal buprenorphine and contingency management. It’s also based on Marsch’s work at Dartmouth. Like reSET, this product has already made it through the FDA and Sandoz’s sales team is selling it to clinicians right now.
  • Somryst: A prescribable digital therapeutic program for people with insomnia and depression. Pear has submitted Somryst to the FDA and it may end up being the first medical device to make it through the agency under its Pre-Cert program. Somryst offers “tailored neurobehavioral interventions… and sleep restriction driven by learning algorithms to reduce the severity of insomnia and symptoms of depression.” Somryst could also be the first product Pear uses its own sales force to bring to market without a pharma partner.
  • Thrive or Pear-004: Thrive, which the company also calls Pear-004, is a prescribable digital therapeutic for people with schizophrenia. Novartis has signed on to help Pear commercialize Thrive, which not yet through the FDA. Thrive is based on the work of University of Washington’s Dror Ben-Seev Ph.D.
  • Pear-oo6: Novartis has also partnered with Pear on a prescribable digital therapeutic for people with multiple sclerosis. This deal is markedly different from the Thrive deal since Pear-006 is still in the development stage. Pear is tapping Novartis’ in-depth understanding of multiple sclerosis to create the digital therapeutic.

Pear Therapeutics keeps an updated chart of its pipeline on its website here. This is what the status of its pipeline looks like today:

Pear’s internal timeline for launching particular interventions has shuffled over the years. For example, in March 2015 McCann said the company planned to first launch a digital therapeutic related to addiction (which ended up being split into two reSET and reSET-O) followed by one for PTSD. As the pipeline above shows, Pear’s PTSD offering, called reCALLAt one time reCALL was a virtual reality-based program that worked with a VR headset, but the company has not mentioned this therapeutic or its current iteration in recent years. , is now half a dozen products down the pike. Back in 2015, McCann expected depression, general anxiety, and sleep to follow, but it seems likely Pear’s insomnia therapeutic, Somryst, will be its third on the market as it currently awaits FDA approval in early 2020.

Pear’s PTSD VR-based digital therapeutic reCALL

Pear’s longterm strategy is to develop into a platform that serves up 50 to 60 digital therapeutics. It aims to have five more prescription digital therapeutics on the market within the next four years. Once that milestone is reached it aims to accelerate its launches and scale up with multiple PDTs advancing on parallel tracks.

Pear’s 2016 direct-to-consumer debacle

Perhaps more than any other digital therapeutics company today, Pear stresses that its products are all prescription digital therapeutics, and it has even pushed the abbreviation PDT along with that messaging.

At a neurogaming conference in 2014, Pear’s CEO Corey McCann teased the launch of a direct-to-consumer line of products, which — as it turned out — was still two years away:

“The first quick and dirty category for us is in the supplement and food space. We are in the process of launching a family of products into one of the supplement chains you are all familiar with. This would create a suite of supplement software combinations.”

Pear’s first product launch was for a line of digital wraparounds packaged with a line of supplements co-branded with the big supplement retail chain The Vitamin Shoppe. Starting in mid-October 2016, the digital supplement product line was available online and at any brick-and-mortar Vitamin Shoppe.

The vita+apps experiment included digital supplements for mood, sleep, memory, stress, vision, and attention. Here’s what they looked like:

“vita+apps, powered by Pear Therapeutics is a mental/behavioral training tool used in conjunction with matched dietary supplements. All of our apps and games are based on clinically validated and tested therapeutics. As a novel approach to address vision, memory, mood and more, vita+apps combines digital applications with supplements to create a short-term, goal-oriented approach that helps patients modify the thoughts and beliefs that may underlie distress and behaviors.”

A year later the apps went offline and the vita+apps homepage just featured a thank you note that announced the apps would no longer be supported. Apart from the archived homepage, a passing mention on Pear Therapeutics’ Facebook page, and a tweet on The Vitamin Shoppe’s Twitter account, there is no other mention of vita+apps online. During the two years that the Pear worked with The Vitamin Shoppe to develop and launch vita+apps its strategy changed. In 2014, McCann talked about its three revenue streams coming from digital wraparounds for supplements, digital therapeutics paired with generic pharmaceuticals, and digital therapeutics paired with branded pharmaceuticals.

Key struggle: Hiring tech talent to build digital therapeutics

In the beginning, Pear believed that its digital therapeutics would need to be built by people who had experience creating games because the company predicted that engagement would be all-important. One of Pear’s first key technical hires was its first CTO, Rabah Shihab. Pear actually didn’t hire Shihab, it acquired his mobile engagement SaaS startup, AppBarbecue/IndieYardThe startup had just one investor: James Hong, co-founder of Web 1.0 viral sensation Hot or Not. , which was a mobile game promotion service for indie developers.

Shihab and Pear’s founders then hired a tech team that favored candidates with gaming experience, and while that team likely was well-suited to build Pear’s ill-fated direct-to-consumer products, the company ultimately realized game developers are not ideal developers for the regulated world of software as a medical device. Here’s McCann in 2018 looking back on the early tech hires:

“So we hired a bunch of people who had been successful game designers and game coders, and that’s not a crazy approach. If you look at Akili Interactive, which is the other player in the space, this is exactly what they have done. It has worked for them. It didn’t work for us at all.”

Pear found that its best developers were ones who had prior experience building electronic medical records or, failing that, developers with experience building in highly-structured, regulated industries, like fintech. FDA regulatory submissions required the software team to abide by quality management systems (QMS) and to make sure every line of code adhered to general manufacturing principles (GMPs). No game developers thrived in an environment that might include check-ins three times a day to ensure compliance, McCann said, adding: “There is a lesson there that we learned the hard way. And, in full candor, we learned it many times over.”

Pear’s tech team looked very different before the company’s vita+apps launch vs. after the line of consumer products was shuttered in late 2017.

One final note on Pear’s hiring: From the outset, Pear has been adamant about its dual-headquarter strategy with offices in both San Francisco and Boston. The company believes the best talent for tech is in the San Francisco area and the best biotech talent is in Boston. Rather than compromise, Pear decided to have a footprint in both locations.

Pivot to prescription-only

By September 2017, Pear had removed all mentions of its old supplement partner, The Vitamin Shoppe, from its website and refreshed its branding to emphasize its focus on prescription digital therapeutics. It’s likely no coincidence that September 2017 was the same month Pear secured a de novo clearance from the FDA for its reSET prescription digital therapeutic. It’s also the month that the FDA announced Pear was one of the very few companies to get into its Pre-Certification pilot. Did the FDA suggest that Pear cut ties with The Vitamin Shoppe and steer clear of the supplement industry?

Pear Therapeutics is now focused on three types of asset-based deals with pharmaceutical companies:

  • discovery deals where an asset doesn’t yet exist but it can by leveraging Pear’s platform;
  • development stage deals that already have some clinical data backing an intervention but they require more to get FDA approval;
  • and commercial-stage deals that already have enough clinical data to get approval (or are already approved by the agency) and now just need to be sold.

Pear’s mandate is to prove that its platform can support all three flavors of asset-based deals.

Pear’s asset licensing strategy: “Not in the content business”

One of the tactics that sets Pear Therapeutics apart from most of the other companies operating in the digital therapeutics space is that Pear licenses digital interventions from academic researchers instead of building their own from scratch. Pear has a close relationship with controversial patent clearinghouse Intellectual VenturesNoted neurosurgeon Dr. Eric Leuthardt, whose intellectual property Pear licensed at the very beginning in order to have freedom to operate, has said he introduced McCann to IV. , but the company has also signed contracts directly with individual scientists and smaller holding companies.

McCann has referred to the company’s asset licensing as a “roll-up” that Pear spent most of its time on during its first year of existence in 2014 and 2015. While the exact number of licensing deals has never been disclosed, the company’s executives have implied their portfolio is sizeable and likely includes dozens of interventions.

During their first year, McCann and his team combed through the medical literature and other sources to create a list of between 1,500 and 2,000 digital interventions. Because Pear believed early on that obtaining regulatory clearance or approval for these digital therapeutics would be their most formidable bottleneck, they prioritized digital interventions that already had good quality data backing them up.

In particular, Pear sought out interventions that had already gone through randomized control trials where patients in the control arm received an active comparator, which could make for an existing approvable endpoint in the eyes of the FDA. Those criteria winnowed the list down to about 500 after excluding any without RCTs. The list got much smaller after factoring in the control arm. Fine-tuning for clinically- and statistically-significant effects left the team with their initial list of targets. In the final analysis, Pear focused on interventions that targeted patient populations with significant unmet needs, which might include areas where clinician consolidation make access to care particularly challenging.

Two examples (with financial details) of Pear’s licensing agreements

Pear signed a licensing agreement in late 2014 with a small Canadian company called ehave, which had developed a web-based intervention for ADHD. Here are the basic terms of that deal:

On December 9, 2014, we entered into a software license agreement with Pear Therapeutics, Inc. (“Pear”) pursuant to which we will provide Pear with a world-wide, non-transferable perpetual license to the Company’s products for Pear to create, commercialize, distribute and sublicense a combination product using our Megateam software applications for treating mental health conditions including ADHD. The license will be exclusive with respect to a combination product subject to Pear obtaining rights to sell with an acceptable drug and non-exclusive with respect to any other rights.

Pear will pay us a royalty of 2.5% of any net revenues from the license of our products, to be paid quarterly. We may terminate the agreement if Pear has not paid us $4,000,000 in annual royalties for each of 2022, 2023 and 2024 and Pear has not obtained regulatory approvals to commercialize combination products and integrated products (our software imbedded within the source code of Pear branded products) within eight years. Either party may terminate the agreement for a material breach by the other after notice and a 30-day cure period. Pear may terminate the agreement upon a change of control of the Company, the Company becoming insolvent or upon 60 days’ prior written notice.

Notably, ADHD is not on Pear’s disclosed pipeline as detailed above, but the ehave agreement does allow Pear to use its intervention for other mental health conditions. Still, the 2022 deadline is just three years away, and an ADHD prescription digital therapeutic does not appear to be a priority for the company right now.

A more interesting example is the licensing agreement Pear struck with Dror Ben-Zeev, Ph.D., a professor of psychiatry and behavioral sciences at the University of Washington and licensed clinical psychologist, for an intervention focused on schizophrenia.

After Pear announced its deal with Novartis to commercialize a prescription digital therapeutic focused on schizophrenia (called THRIVE) that was based on Ben-Zeev’s intervention called FOCUS, he sued the company alleging they breached the agreement. I won’t get into the specifics of the lawsuit here, but suffice it to say the two settled out of court. Still, it must have been a tense few months for Pear whose new partner Novartis must have raised an eyebrow or two over the suit. Here’s how payments were structured in Ben-Zeev’s original April 2015 agreement with Pear:

  • Pear agreed to pay Ben-Zeev 5 percent royalties on net revenues within 90 days of receiving the revenues itself.
  • Pear agreed to pay $30,000 as a licensing fee when the agreement began and additional payments of $15,000 on that date each year the agreement remained in effect.
  • Pear agreed to pay $200,000 when the prescription digital therapeutic that included Ben-Zeev’s intervention secured regulatory approval.
  • Pear agreed to pay another $200,000 when it made the first sale of the commercial product.
  • Ben-Zeev agreed to provide 30 hours of consulting during the first year. Any consulting beyond that would be billed at $200/hour.

These two agreements alone show that Pear’s licensing terms vary from intervention to intervention.

How and when Novartis pays Pear

While specific numbers and percentages have not been publicly disclosed, payments in Pear’s February 2018 agreement with Novartis are similar in structure to the terms outlined in its contract with Ben-Zeev.

  • Novartis paid Pear an upfront fee and has agreed to pay additional amounts once the THRIVE prescription digital therapeutic reaches certain milestones related to the clinical trial and FDA approval.
  • Novartis will also pay Pear royalties on later commercial sales of THRIVE.

Pear’s regulatory strategy, accomplishments to date

McCann has long said that getting Pear’s first digital therapeutic through the FDA was the company’s primary bottleneck. It took Pear two years of discussions and meetings with the FDA before the agency announced it had cleared Pear’s addiction therapeutic, reSET in September 2017. That same month, Pear won a coveted spot in the FDA’s Pre-Certification pilot for companies developing software as a medical device. More than a year later, in December 2018, Pear announced the FDA had granted it a clearance for reSET-O, which was cleared for use in opioid use disorder. In early 2019, Pear announced that it had submitted its insomnia digital therapeutic Somryst to the FDA, but it claimed the digital therapeutic would be the first medical device to be cleared via the FDA’s Pre-Cert program in early 2020.

Back to Pear’s first meeting with the FDA back in 2015. Five of Pear’s early employees attended the meeting, which Pear set up to explore how the agency would regulate its digital therapeutics in the future. Here’s how McCann described how he thinks about the agency in 2018:

“I know people are afraid of the agency, but they get a bad rap. Their mandate is to make patients better.”

Besides buttering up the FDA from industry conference stages (never a bad tactic), McCann’s strategy was to approach the agency with its addiction digital therapeutic first since the opioid epidemic was in full swing. Pear recognized the agency had few, if any, pharmaceuticals in its pipeline that might address the problem:

“If you look at that mandate in the context of brain-related conditions, and specifically in the context of addiction-related conditions, there is almost nothing in the pipeline. There are 30 million Americans that suffer from these conditions, and we are in the midst of an epidemic. So it would be a good thing if the FDA is able to make a positive contribution in treating this set of patients. The first strategy for approaching the agency is to make the conversation sufficiently specific.”

McCann believed that had the Pear team approached the agency with vague questions about how it might regulate digital therapeutics in general, the result would have been a “nebulous regulatory conversation” that could make one of their investors or partners antsy. McCann also made clear from the first slide of his presentation to the FDA that Pear had a huge pipeline of digital therapeutics. This wasn’t a one-off conversation but rather a discussion about an approach Pear would take with the agency for many years to come.

Some news that has not been reported elsewhere yet: Pear just lost its VP of Regulatory Affairs to Apple a few weeks ago. David Amor is now listed in the FDA’s registry as the main contact at Apple for regulatory matters. Amor has shepherded Pear’s regulatory strategy for more than two years. He joined Pear in July 2017, which was just a few months before the company’s first FDA clearance. The job ad Pear posted to recruit Amor’s replacement shines a little light on the company’s regulatory strategy moving forward. Pear is seeking someone with experience in, not just SaMD, de novo, and 510(k) clearances but also:

“Substantial experience in all aspects of regulatory affairs, including successful NDA/MAA submissions, Commercial support, CMC, Clinical, Device 501(k) submission; experience with drug/device and 505(b)(2) product submissions strongly preferred.”

In its early years, Pear explained that it would first seek an FDA clearance for its software via either the de novo or 510(k) pathways. Once that was secured, the company planned to submit the software and drug as a combination product via a 505(b)(2) application.

The job posting also seeks candidates with regulatory experience from Asia, EU and other international markets, which suggests Pear has plans to go international soon.

One closing note for this section: McCann likes to tell the story of how the FDA notified Pear about its de novo clearance just minutes before the agency published its own press release celebrating the novel therapeutic’s approval. The FDA’s press release caught Pear off-guard and caused it to scramble to put together a media strategy that morning. It’s an interesting detail considering almost exactly a year later the FDA seemed to coordinate with Apple on its de novo clearances, which the FDA allowed Apple to announce first at the company’s World Wide Developers Conference.

Pear’s funding and investor strategy

Pear Therapeutics has raised $134 million across three rounds. Here’s a quick summary in reverse-order:

  • January 2019: Pear raised $64 million in its Series C round led by Temasek with other return backers: Novartis, 5AM Ventures, Arboretum Ventures, JAZZ Venture Partners, The Bridge Builders Collaborative, and Singapore-based EDBI. New investors included Blue Water Life Science Fund, Trustbridge Partners, and an undisclosed major diversified hedge fund.
  • January 2018: Pear raised $50 million in its Series B round led by Temasek with participation by 5AM Ventures, Arboretum Ventures, JAZZ Venture Partners, Novartis, Singapore-based EDBI, and the Bridge Builder’s Collaborative.
  • February 2016: Pear raised $20 million in its Series A led by 5AM Ventures, Arboretum Ventures, and JAZZ Venture Partners with participation from Bridge Builders Collaborative and several unnamed investors.

In the early years of Pear, McCann took meetings with other investors outside the ones mentioned above and he concluded that many biotech-focused funds were hesitant to invest because they believed the barriers to entry in digital therapeutics were too low and the IP would prove difficult to protect. Meanwhile, many tech-focused firms believed Pear’s biotech-like approach to building the business was too slow. In the end, McCann assembled a group of investors whom he had worked with personally in the past. The early investors brought skill sets and valuable insights from each of the major industries that Pear would meld together.

5AM is a biotech-focused venture fund. Arboretum is a medtech-focused venture fund. Jazz is a tech-focused fund. McCann said each of these investors saw something different in Pear. 5AM was impressed by the pitch that Pear was a very rapid path to a novel pharma product with drug-like reimbursement. Jazz saw the potential in leveraging the speed and iterative properties of software and applying those to medicines. Arboretum, like many medtech-focused funds, had been burned on many medical device deals that promised reimbursement, so the work there was convincing them Pear would be able to convince payers with the right proof points.

McCann often says that Pear was built like a traditional biotech company. Its roadmap is simply: get the data, get the approval, get the market traction, get the reimbursement, get the revenue, get the profit — in that order. That order of operations is also very different from a traditional tech company approach, which would start with building an MVP, getting it to market, and improving it based on early users’ feedback. McCann’s strategy with investors was to help them see Pear was just making “one cognitive leap”. This is just a biotech company where instead of a pharmaceutical it’s software. Everything else is the same.

What’s next for Pear Therapeutics

2020 is likely to be another milestone-filled year for Pear Therapeutics. Here are a few things to watch for:

  • FDA authorization for Somryst. Pear made a surprising announcement that its insomnia digital therapeutic would be the first to secure FDA approval via the agency’s Pre-Certification program. Many believe the Pre-Cert program to be a pilot that does not have the authority to clear devices. The FDA still needs to use the de novo backdoor for these authorizations. As a result, I’m curious to see what form the FDA authorization of Somryst takes.
  • Commercialization of reSET and reSET-O. Pear’s first two products are already in the market and I’m curious if its partner Novartis subsidiary Sandoz ends up publishing any financials related to these PDTs. I’m also curious to watch how these therapeutics are delivered to patients. Pear’s partnership with Diplomat’s EnvoyHealth is focused on patient and clinician onboarding. Finally, will payers get onboard? That all needs to take off in 2020. Another related, new endeavor that will begin for Pear: Real-world, commercial insights from Pear’s analytics partner InCrowd and resulting improvements to reSET/reSET-O based on them.
  • Customers beyond Novartis/Sandoz. Pear’s first customer is a big name pharma company, but it’s worth noting that the head of digital medicines at Novartis, Jeremy Sohn, was an executive at MPM Capital along with McCann and Pear co-founder William Greene. MPM clearly had a hand in incubating Pear given that McCann worked at both companies simultaneously for most of 2014. While Sohn certainly wasn’t the only decision-maker at Novartis to sign off on this deal, his connection to McCann was likely critical to it coming together. That background raises the question: Can Pear ink deals with pharmaceutical companies outside its founder’s inner circle?
  • IPO buzz. Pear Therapeutics is on many people’s shortlists for near-term digital health IPOs, and one of its early backers, Stephen Kennedy Smith, recently said in an interview that Pear would IPO in 2019. However, Pear executives often talk about the company’s goal of getting five to seven prescription digital therapeutics commercialized as its immediate mandate between now and 2022/2023. While market conditions will obviously have a big impact on this decision, Pear would be wise to wait and IPO once it has these initial half dozen PDTs in the market.
  • Longterm success: For Pear, longterm success looks the same as it does for any life sciences company. It either needs one of its digital therapeutics to take off and reach blockbuster status or it needs to drive similar, aggregate revenues across its portfolio. Pear executives typically state that showing PDTs work across its portfolio is the company’s longterm mandate.
2 min. read

Excerpts from the Pear Therapeutics Report.

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Issue 019.

Get E&O weekly. | Subscribe | Digital health research from Brian Dolan.

Welcome to E&O.

Last week’s newsletter had a 68 percent open rate. Here’s what’s happening this week:

  • After weeks of research, I am excited to push live The Pear Therapeutics Report. More on that below, but don’t miss this one. Lots of scoops. Anyone working in, partnering with, or investing in digital therapeutics needs to understand Pear Therapeutics in depth. This 4,500-word report is the best way to start.
  • Cognoa, which is developing digital therapeutics for the diagnosis and treatment of autism, inked an important partnership with Eversana that sheds some like on the DTx company’s commercialization strategy. Eversana will act as a hub that helps with adjudication and delivery of Cognoa’s digital therapeutics.
  • Hinge Health, which offers musculoskeletal-focused digital therapeutic programs, now has 85 employers as customers. PwC is among them and often co-presents its own case study for the company. This is from May: A total of 3,389 employees started an application to participate in the program, with 2,750 (81%) completing their application, 2167 (64%) being accepted into the program, and 1,650 (49%) ultimately being onboarded and initiated. Participants averaged two to three exercise therapy sessions a week and they engaged with coaches five or more times a week.
  • Karuna Labs, which uses virtual reality-based programs to help retrain the pain to better deal with chronic pain, has raised $3 million in seed funding.
    * Much-hyped augmented reality unicorn Magic Leap has forged a number of health-related partnerships in recent months, including one with XRHealth. XRHealth’s ARHealth platform offers augmented reality-enabled programs focused on rehabilitation, cognitive training, psychological assessment, and distraction from pain.
    * London-based Bold Health just announced that its digital therapeutic for IBS patients, called Zemedy, is now enrolling 300 beta users for free.
    * Another UK digital therapeutics startup focused on inflammatory conditions, Ampersand Health, announced its acceptance into the DigitalHealth.London accelerator.
    * Did this get forwarded to you? Not yet a paying subscriber? You can sign up by clicking these very words.


The Pear Therapeutics Report

Pear likes to call itself the Genentech of digital therapeutics while acknowledging and embracing the hyperbole that comes with such a claim.

In this 4,500-word report, E&O digs into the strategic decisions, legal imbroglios, product launches, and the failures that Pear’s management team has successfully navigated over the past five years. Here’s the table of contents for The Pear Therapeutics Report (https://exitsandoutcomes.com/the-pear-therapeutics-report/) :

  • Pear’s therapeutic modalities and therapeutic areas
  • Current product pipeline
  • Pear’s 2016 direct-to-consumer debacle
  • Key struggle: Hiring tech talent to build digital therapeutics
  • Pivot to prescription-only
  • Pear’s asset licensing strategy: “Not in the content business”
  • Two examples (with financial details) of Pear’s licensing agreements
  • How and when Novartis pays Pear
  • Regulatory strategy, accomplishments to date
  • Pear’s funding and investor strategy
  • What’s next for Pear Therapeutics

Paying subscribers can read The Pear Therapeutics Report on the E&O site today.

That’s a wrap on Issue 019 — Send feedback on the Pear report by hitting reply here or by emailing me at b@exitsandoutcomes.com

3 min. read

Livongo’s beyond diabetes revenue. Fitbit loses exec to CVS-Aetna

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Issue 018.

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Welcome to E&O.

Last week’s newsletter had a 78 percent open rate. Here’s what’s happening this week:

  • I’ve been studying all things Pear Therapeutics these past few weeks. If you have any tips, leads, or insights on this ambitious company, please send them over. Must-read report on them coming your way next week.
  • CVS/Aetna poached Fitbit’s SVP and GM Adam Pellegrini as its new head of consumer health. Pellegrini was Fitbit’s top exec focused on moving the company into healthcare. He helped Fitbit get into FDA’s Pre-Cert program and led the acquisition of Twine Health, which became Fitbit Care. Pellegrini previously held a lead digital health role at Walgreens. CNBC has other details in its story here.
  • Ginger, which I’m learning no longer calls itself Ginger.io, announced a $35M Series C this week led by WP Global Partners. This brings Ginger’s total to $63 million raised. Ginger tells TechCrunch that some 200,000 people in 26 countries can access its services via their employers today. Customers include CBS, Netflix, Pinterest, Sephora, Twilio, Yelp and BuzzFeed. Their strategy is to move beyond the employer channel next. More here.
  • BrightInsight, a spin-out from Flex, has raised $25 million for its digital therapeutics platform-as-a-service offering. The company works with biopharma and medtech companies as a managed services provider that handles the regulatory lift, security risks, and privacy regulations that come with new digital products.

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Livongo Q2 revenues: 96% diabetes/hypertension, 4% mental health, 2% prediabetes

Livongo’s second-quarter results are out this week, and — despite increasing nearly every growth metric that matters — Wall Street was upset that the newly minted public company also increased its spending more than expected.

Livongo Founder and Chairman Glen Tullman said his company “did have IPO expenses” and “may have underestimated them slightly” and that the company is “continuing to invest because of [its] dramatic growth”. The stock dipped on the news.

While the higher than expected losses and resulting stock drop grabbed headlines, I was curious to learn more about Livongo’s business beyond its diabetes program.

Livongo doesn’t break out revenue from its hypertension program, but it did point to the increased costs of shipping more blood pressure monitors as a hint that interest is growing in the program.

Livongo did include some metrics around its behavioral health program and its prediabetes and weight management offering, both of which it launched following acquisitions: myStrength and Retrofit, respectively.

Its behavioral health business brought in $1.8 million in revenue during the second quarter and a net loss of $100,000. For the first half of 2019, its myStrength unit brought in $2.8 million in revenue with $500,000 in net losses.

Retrofit contributed less revenue but more net income than myStrength. During the second quarter, Retrofit’s prediabetes and weight management programs contributed $700,000 in revenue with $500,000 in net income. During the first half of the year, prediabetes and weight management programs brought in $2.1 million in revenue and $1.6 million in net income. (Livongo noted that it receives payment for its connected weight scales upfront for this program, but in the future, it will likely convert the model to a per person per month model like its diabetes program.)

Total revenue for the second quarter was $40.9 million.

So, prediabetes and weight management accounted for less than 2 percent of the quarter’s revenue, while behavioral health programs made up slightly more than 4 percent. The remaining 96 percent includes both diabetes and hypertension revenues, but I’d bet more than 90 percent came from diabetes programs.

Clearly, Livongo’s platform strategy still has a ways to go.

OptimizeRx acquires RMDY Health for $16M

This week patient engagement company OptimizeRx scooped up white-label app and chronic condition coaching platform RMDY Health, formerly known as Wellness Layers, for $16 million. The deal includes $8 million in cash and $8 million in equity when the transaction closes. RMDY was on track to bring in about $3 million in revenue for 2019.

RMDY counted Medtronic, IBM Watson, Premera, American Heart Association, VillageCare and Vitality as partners. The company offered a modular platform that allowed partners to piece together their own branded versions of care programs. RMDY called them digital therapeutics.

The company’s highest-profile project was its work with Medtronic and IBM Watson on a prediabetes program.

That’s a wrap on Issue 018 — Wrapping up The Pear Therapeutics Report today for publication next week, but always room for a few more insights. If you have them, send them my way by hitting reply to this email.

5 min. read

Quick data scan on federal contracts. Rethinking platform strategies.

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Issue 017.

Get E&O weekly. | Subscribe | Digital health research from Brian Dolan.

Welcome to E&O.

Last week’s newsletter had a 74 percent open rate. Here’s what’s happening this week:

  • The late arrival of your weekly newsletter follows a 24-hour, feverish flu afflicting the entire editorial staff — absolutely everyone — at E&O.
  • Big news for ResApp: The Australia-based DTx secured a CE Mark for its first commercial product ResAppDx-EU, as a Class IIa medical device. “ResAppDx-EU is a mobile software application to be used by clinicians for the diagnosis of lower respiratory tract disease, croup, pneumonia, asthma/reactive airway disease and bronchiolitis in infants and children.”
  • Israel-based BioBeat Technologies received FDA clearance for its cuffless, blood pressure device, which already has clearance for pulse oximetry. Still waiting for the summary document to hit the FDA database, but the official listing is right here.

Did this get forwarded to you? Not yet a paying subscriber? You can sign up by clicking these very words.

Rethinking digital health platform strategies

Propeller Health’s Chief Commercial Officer Chris Hogg wrote a column this week over at TechCrunch that makes the case for best-of-breed digital health offerings instead of a one-app-to-rule-them-all strategy. Here’s a snippet from his column:

“In this future, patients use a core clinical app, likely provided by their health system or primary care provider, that takes care of clinical interactions like scheduling, clinical data, reminders and follow-ups.

“Beyond that, patients use a set of specific apps that specialize in particular health issues — for example, respiratory disease, diabetes, mental health, increasing activity or improving sleep. Those apps will rise to the top because they’re the best on the market at managing those issues. The experience of managing your mental health will feel different than managing your diabetes, just as using Instagram feels different than using Facebook.

“In this ecosystem model, the patient’s core clinical app will link out to and connect to the problem-specific solutions. Health systems and physicians will adopt a small number of specialized platforms and products to focus on large clinical domains like cardiovascular, diabetes, respiratory and mental health. Data from these solutions will integrate back to the provider’s organization and will be available in the EMR and for population health management.”

While Hogg doesn’t name Livongo or Omada in his column, my read on this is that he is arguing that their current strategies will fail.

Livongo is a diabetes management company and the only financials and growth metrics it has disclosed to date are from that core program. However, the company has touted its hypertension program and mental health programs (via its myStrength acquisition) as evidence of their platform strategy. Other areas Livongo has expressed an interest in include respiratory disease management and musculoskeletal issues. I’m curious to see whether Livongo shares any data on its next quarterly investor call that shows its customers have demonstrated an interest in working with them beyond diabetes.

Omada hasn’t pushed a “beyond diabetes” narrative quite as much as Livongo. Omada started out as a prediabetes focused company, moved into diabetes, and added mental health-related programs after acquiring some of Lantern’s assets.

Even if these companies were to remain focused primarily on people with diabetes, offering complementary programs focused on hypertension and mental health to their diabetes population will help drive positive outcomes for patients with comorbidities. It may be that Livongo never actually moves into new areas and away from diabetes. Maybe it just bolts on programs that are likely to help its core users.

Propeller Health, of course, was acquired by ResMed for $225 million at the beginning of the year. ResMed’s business is largely CPAP machines and other respiratory devices. Following the acquisition, it’s unlikely the company could pursue other chronic conditions outside of respiratory.

Read Hogg’s column here.

Quick scan of DTx companies with US federal contracts

A decade ago, in the early years of digital health, it was a relatively big news event when a digital health company managed to ink a deal with a US federal agency. I was surprised by the hoopla around Fitbit’s deal with the Singapore government, so decided to dig into some government databases to see who’s signing deals with the US government.

Fitbit. $2.2 million. While it’s not a digital therapeutics company (yet?), Fitbit has done quite a bit of business with the federal government over the years. Its largest contract was one worth more than $1.7 million in 2015 with the US Army for Fitbit Charge HR in black.

Evidation Health. $1.3 million. Evidation Health has inked a handful of big contracts with the feds starting in 2016. Its deal sizes range from $500,000 to a little more than $700,000 and include work with the Army, the Air Force, and the HHS Office of Assistant Secretary for Preparedness and Response.

WellDoc. $969,087. WellDoc inked a big $1.6 million contract with the Air Force back in 2010 for a three-phase study that ended up not making it to completion. Assumedly that’s why the Air Force received some of the money back — to the tune of more than $627,000. You can read WellDoc’s 55-page report on how the study went right here (PDF) (https://apps.dtic.mil/dtic/tr/fulltext/u2/a606402.pdf) .

Propeller Health. $162,680. In the past few years, Propeller’s been working with the VA mostly, but it has one $59,380 purchase order from the CDC too. Propeller’s latest contract with the VA was signed just five days ago.

Omada Health. $153,150. Omada has only counted the Department of Veterans Affairs as a customer, and most of that figure comes from a study they did back in 2013 (http://newsroom.ucla.edu/releases/online-diabetes-prevention-programs-are-as-effective-as-in-person-sessions-for-weight-loss-study-finds) . The study included 268 VA members on Omada’s program and the VA paid $115,200 for the 12-month access. That comes to about $36 per member per month.

PatientsLikeMe. $149,751. Before the feds forced its China-based majority owner to divest, PatientsLikeMe inked a deal with the NIH in 2014 for the Army STARRS study, which focused on suicide rates in the army. (https://www.ncbi.nlm.nih.gov/pubmed/24865195)

Pear Therapeutics. $149,514. Pear Therapeutics received one purchase order from the NIH in 2017. The project was to develop “a virtual environment to enhance patient engagement in peer support in opioid use disorder.”

2morrow. $30,000. Smoking cessation-focused company 2morrow received $30,000 from the Army to support its SmartQuit study back in 2016.

AliveCor. $25,000. AliveCor has one 2016 purchase order on record from the NIH for $25,000.

Headspace. $7,200. Meditation-focused company Headspace inked a small deal with the Air Force for its app.

Triple Tree’s DTx report rounds up valuations

Investment bank Triple Tree was one of the first to recognize how big digital health would become, and its early research reports about mobile and digital health were formative texts for me as I started up MobiHealthNews. The firm now has a report out on digital therapeutics that’s well worth a read here.

Its list of valuations for some of the better-known DTx companies was helpful:
* Akili – $190M.
* Pear – $430M.
* Propeller – $225M (acquired).
* Omada – $600M.
* Neurotrack – $89M.
* Livongo – $3.4B (IPO’d, first-day trading valuation).

That’s a wrap on Issue 017 — what’d you think?

5 min. read

Novartis predicts Amazon DTx delivery. VR pain relief.

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Issue 016. Get E&O weekly. | Subscribe | Digital health research from Brian Dolan.

Welcome to E&O.

Last week’s newsletter had a 64 percent open rate. Here’s what’s happening this week:

  • Your editor is counting down the days until his son’s first day of Kindergarten next month and wondering how 5.5 years went by so quickly?
  • Wellframe’s Chief Medical Officer Dr. Trishan Panch wrote the must-read commentary this week in Nature. His argument boils down to: “The potential of AI is well described, however in reality health systems are faced with a choice: to significantly downgrade the enthusiasm regarding the potential of AI in everyday clinical practice, or to resolve issues of data ownership and trust and invest in the data infrastructure to realize it.”
  • The founder of Cord Health, which aimed to help people with Alzheimer’s or dementia, penned a particularly good post-mortem on his now mostly-dead startup: 3 Lessons from a Digital Health Zombie.
  • This overview on issues surrounding digital biomarkers is also a worthwhile in-depth to add to your weekend reading.
  • Dutch venture capital group Healthy.Capital put together a market map of digital health startups in Holland that includes dozens of digital therapeutics companies. Many of these are new to me.

But wait… there’s more, so hold off on clicking those and read on for results from clinical studies, surefire predictions from pharma execs, and much more below.

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“McMindfulness” and the medicalization of meditation

One of the more popular venture-backed meditation startups, Headspace, announced plans to create digital therapeutics last summer and subsequently established a subsidiary called Headspace Health to pursue them.

Fast Company has a profile on an author who just published a book that pushes back on the corporatization and medicalization of meditation: Ron Purser, “a management professor for over 30 years, Purser argues that the overwhelming marketing message pushed by the meditation industry might not be good for our mental health—that a ‘harmless’ solo activity based on calming our emotions might better help corporate entities.”

Purser has been referring to the trend as “McMindfulness” — also the name of his new book — since at least 2013.

Novartis DTx head predicts Amazon will move into fulfillment and delivery of prescription digital therapeutics

During a presentation at the Amazon Web Services Health and Life Sciences Cloud Symposium earlier this year, Joris Van Dam, the executive director and head of digital therapeutics at Novartis Institutes for BioMedical Research, not-so-subtly predicted that Amazon would soon dominate the delivery and fulfillment end of prescription digital therapeutics.

For the Novartis-Pear partnership, Van Dam said, both companies rely on AWS for its cloud services but “forget about digital for a little bit and think about therapeutics in the non-digital world. You can go to any Walgreens, Rite Aid, CVS. Wherever you go, you can find anything and everything for your health.”

Van Dam said that the digital version of that is coming. It will take some time but it will get there:

“So what are the core critical success factors for that digital version of your local pharmacy? First, is convenience: convenience to patients and to providers. Providers only have so much time in their day to see a lot of patients and it must be convenient and easy for them to prescribe this novel class of therapies.

There will be a world in which anyone who is diagnosed with diabetes, depression, schizophrenia gets one prescription and that prescription goes to the cloud and from the cloud goes to the patient everything they need to treat their disease: their pharmacotherapy, their digital therapeutic — maybe a device to measure their progress or maybe a device for VR or whatever kind of intervention.

But that convenience: one prescription, one box you get at home. It will come. I’ll leave it to you to speculate where that one box will come from, but you know what you’ve seen. What’s happening in the market. So, I think AWS is in a perfect position to be that partner.”

During his talk, Van Dam also pointed to a variety of medical issues and conditions that he believes are ripe with opportunity for digital therapeutics, including behavioral therapy, physical therapy, and ADHD.

Watch the full 18-minute talk from the AWS Symposium here.

Cedars-Sinai’s virtual reality for pain relief study results

While poring over Apple’s patents and patent applications earlier this year for The Apple’s Healthcare Work Experience report, it became clear that the company will likely release some kind of augmented reality or virtual reality hardware soon. The IP they’ve filed around virtual reality wearables is sizeable now. If they do launch such a device, I predict Apple will invite Cedars-Sinai’s Dr. Brennan Spiegel on-stage to demo a medical application for the technology. Apple always has a medical demo.

Last week Spiegel’s group at Cedars-Sinai announced the results of its 120-patient pain management study:

“For the purposes of the new study, researchers conducted a randomized comparative-effectiveness trial. The 120 adults in the study were admitted to Cedars-Sinai Medical Center for a variety of ailments including orthopaedic problems, gastrointestinal diseases and cancer. All of the patients had an average pain score of at least three out of 10 during the 24 hours prior to participating in the study. Half of the patients were given VR goggles with a variety of relaxing and meditative experiences to choose from. They were advised to use the headsets three times a day for 10 minutes per session—and as needed for breakthrough pain—over three days.”

The other group watched relaxation programs on the TVs in their room. The results “showed the on-demand use of VR resulted in statistically significant improvements in pain compared to the TV group, with patients in the VR group averaging 1.7 points lower on the pain scale. When researchers analyzed findings from the subgroup of patients with the most severe baseline pain of seven or above, VR patients averaged three points lower than the TV group.”

More from Cedars here or read the published study over at PLOS|ONE.

Expect results from the Pear-Novartis large schizophrenia DTx study in late 2019 or early 2020

Pear Therapeutics CEO Cory McCann said during an interview last week that the results from its large, sham-controlled trial of the Pear-004 digital therapeutic for schizophrenia should be out late 2019 or early 2020. McCann hyped the study as “probably one of the most rigorous clinical trials that’s ever been run with a prescription digital therapeutic”. Pear-004 is under development with the company’s partner Novartis. More from Evaluate here.

Swedish pharmaco Orexo inks deal with GAIA for opioid addiction and pain DTx

Sweden’s specialty pharmaceutical company Orexo announced plans to work with GAIA to develop a new digital therapeutic that focused on opioid use disorder. Under the terms of the deal, Orexo has exclusive commercial rights to the DTx. It expects to launch it in the US in 2022.

The offering, dubbed OXD-001, will likely include Orexo’s drug Zubsolv along with “fully-automated” counseling and psychosocial support. The offering will be built atop GAIA’s broca platform, which the company describes as an “AI-expert system” that “engages users in highly individualized, simulated 1:1 interactions, guiding patients step-by-step towards specific goals and therapeutic targets.” More here.

That’s a wrap on Issue 016 — what’d you think?

17 min. read

The AliveCor Report

In this article:

In this 4,400-word report, E&O digs into the strategic moves, challenges and lucky breaks that the AliveCor has team navigated since their original prototype went viral as the breakout device of the Consumer Electronics Show in 2011. How has its most formidable competitor, Apple, forced AliveCor to shift its strategy? What kind of traction does AliveCor have today? What is its path forward? Read on for all this and much, much more.

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AliveCor might never have existed if the Speaker of the House during Watergate, Rep. Carl Albert (D-OK) hadn’t had heart issues. That inspired his son — years later — to pursue biomedical engineering coursework while in medical school at Duke. He took those courses so that he could figure out how to build a heart monitoring device for his dad. (Those weren’t so easy to find back in the 1970s.) Dr. David Albert, the co-founder of AliveCor, did end up getting his medical degree, and he has invented many medical devices for heart patients since he began tinkering at Duke.

It’s also almost a certainty that AliveCor would have been a footnote in the annals of digital health history if a certain venture-backed company hadn’t botched its chance to acquire it — for a song — before the rest of the world had even heard of the iPhoneECG.

There’s also a good chance that if Dr. Albert hadn’t uploaded his YouTube video of a demo featuring his pre-FDA, prototype device before heading to CES 2011, the iPhoneECG would not have gone viral; Albert would not have appeared on Good Morning America and countless other news programs; and investors would have continued to argue that there was no market for a direct-to-consumer medical device for heart patients.

But, through a mix of luck and grit, AliveCor does exist. And as these pages will make clear, it’s an important case study for digital health entrepreneurs and investors. Apple clearly agrees. Last year, at a time when it was considered the most valuable company in the world, Apple announced its very first FDA-cleared medical device: a stripped-down, knock-off version of AliveCor’s Kardia Band.

Without a doubt, the tale of AliveCor is a storied one. Despite the many tempting rabbit holes in AliveCor’s history, this report will focus on the strategic decisions AliveCor management made along the way. It’s broken into sections focused on AliveCor’s growth metrics, product portfolio, regulatory strategy, business models, hiring problems, and longterm strategic opportunities.

AliveCor by the numbers

AliveCor is a private company so it keeps quiet about most of its growth metrics. Here’s a quick summary of ones mentioned throughout this report as well as a few additional ones that have not been reported elsewhere:

  • 2018 revenue: $24,000,000.
  • 2019 expected revenue: $40,000,000.
  • 2018 Q4 revenue: $10,000,000 — largely attributed to increased media attention resulting from Apple’s announcement about adding its own ECG software to the Apple Watch.
  • Monthly active users: 200,000.
  • First-year revenues from the veterinary market, pre-FDA clearance for humans: $1,000,000.
  • Number of ECGs in AliveCor’s database: Nearly 50,000,000.
  • Number of ECGs captured each month: About 1,500,000.
  • Current employee headcount: About 70.

A few quick takeaways

  • This has yet to be reported elsewhere: As of this summer, AliveCor has stopped selling its Kardia Band device as a result of Apple’s ECG feature launch. AliveCor has also put its SmartRhythm feature on pause, but this may make a return for other smartwatches in the future.
  • The venture-backed company teased in the introduction of this report was eCardio. Before AliveCor had a prototype built, eCardio made a $250,000 investment in the venture with an option to acquire AliveCor in short order. However, eCardio ran into revenue problems soon after and forfeited its option to acquire AliveCor’s technology. The AliveCor founders got to keep the money and used it to fund the development of its prototype devices, including the one featured in Dr. Albert’s viral YouTube video.
  • The metrics above show a current headcount of 70 employees with $24 million in revenue for 2018. While the headcount was likely closer to 60 for most of last year, the numbers (and the existence of the company’s television advertisements) suggest AliveCor is spending a substantial portion of its revenues on customer acquisition. Perhaps it goes without saying, but particularly true in this case: The ideal analysis of AliveCor’s long-term prospects would hinge on its CAC, which this report does not manage to piece together.
  • As the conclusion below discusses, AliveCor is well-positioned for growth. It will both complement and compete with the likes of Apple — and other big consumer device makers working to commoditize ECG features in wearable fitness devices. In other words, rumors of AliveCor’s demise have been greatly exaggerated.

AliveCor’s products, past and present

AliveCor Veterinary iPhone ECG: Launched in August 2012, the first commercial product from AliveCor was for veterinary use only: dogs, cats, horses, and other animals veterinarians treat. It’s still available via resellers for $299.

iPhone ECG/Alive ECG/AliveCor Heart Monitor: First available for preorder December 2012, this FDA-cleared device was for physicians-only initially at a $199 price point. It was a single lead ECG embedded in a case that fit the iPhone 4 and iPhone 4s. The second iteration of the device wasn’t a case, but a smaller, companion device that could be adhered to the back of various Android and iOS smartphones via velcro stickers. Physicians had to prescribe the device to patients who would then pay for it out-of-pocket.


AliveInsights: AliveCor added a remote interpretation service for its device users in November 2013. Patients prescribed an AliveCor device from their doctors could use the new service by taking an ECG reading and then opting to send it to either a cardiac technician or cardiologist, right from their smartphone. It cost $12 for a cardiologist to interpret it and either $2 or $5 for a cardiac technician to do so in either 24-hours or 30 minutes, respectively. The service was a temporary pilot powered by partnerships with CompuMed and its one-time, almost acquirer eCardio.

AliveCor Heart Monitor (OTC): In February 2014 AliveCor announced a new FDA clearance that made its device available to patients direct-to-consumer the following month. Anyone could now buy the device from AliveCor’s website for $199. They could send their ECG to their own physician via email (if their physician allowed that) or send the ECG to a remote interpreter via AliveInsights, as noted above. The price for buying a device OTC eventually settled at $99.

Kardia Pro/Kardia Station: In March 2017 AliveCor launched a physician portal called KardiaPro. They renamed it to KardiaStation in mid-2018 on the AppStore but the old branding weirdly remains in place elsewhere. Patients pay $15 a month to connect to their physician’s KardiaPro account. Physicians use the portal to review ECGs sent in from their own patients and they get reimbursed for Medicare patients using CPT Codes, including the new remote patient monitoring CCM codes. Kardia Pro aims to make getting this reimbursement easier. AliveCor has also worked to interface Kardia Pro with some EHRs, including Epic installations at various hospitals.

Kardia Mobile Premium: Each AliveCor device comes with 30 days of free premium service, which allows users to store unlimited ECGs in AliveCor’s cloud, provides them with a monthly summary of their readings, unlocks the ability to track medications, and allows them to buy a replacement device for just $19.99 if something happens to their first one. This service runs $9.99/month or $99/year.

Kardia Band: The first FDA-cleared medical device for the Apple Watch actually launched first (pre-FDA) in the UK in October 2016 for £199 / €229. It cost $199 in the US initially and the price was dropped to $99 shortly after Apple announced plans for its own FDA-cleared ECG software in September 2018. Apple’s launch effectively made Kardia Band obsolete. AliveCor quietly discontinued its Watch band in the summer of 2019, and it can no longer be purchased on AliveCor’s site or via Amazon.

SmartRhythm: As part of its Kardia Band offering, AliveCor used the continuous heart rate monitoring function of the Apple Watch to create a new analysis feature called SmartRhythm in its Kardia app. The offering compared users’ heart rate data and activity data to what AliveCor’s neural network predicted the user’s heart data should look like. When it sensed something was off, SmartRhythm instructed the user to use Kardia Band to record their ECG. AliveCor discontinued SmartRhythm in mid-2019, but it is like to return on other platforms — possibly even Apple’s — in the future.

FDA cleared algorithms: While not individually priced products today, AliveCor has been a pioneer in submitting new algorithms to the FDA for clearance as medical devices. So far the company’s algorithms are cleared to indicate: normal ECG, bradycardia, tachycardia or possible atrial fibrillation. The FDA has also cleared AliveCor’s algorithm for detecting hyperkalemia via ECG analysis.

Kardia Mobile 6L: AliveCor’s newest product is its six-lead ECG device, which launched in May 2019 for $149. The 6L’s debut coincided with the winding down of the company’s Kardia Band offering and it marks a strategic shift for the company to stick with its smartphone-enabled peripheral devices and away from smartwatches — for now. The company has kept this device in its back pocket for years as it was originally invented in 2013. By collecting heart rhythms from six leads instead of one, Kardia Mobile 6L gives interpreters and its own algorithms five additional views of the rhythm data, which will lead to more accuracy and new opportunities for analyses.

Kardia Accessories: The company also sells carrying pods ($29) and clips ($15) to attach the Kardia Mobile to a smartphone.

How AliveCor brings in revenue

Direct-to-consumer medical devices: The core business model for AliveCor has remained consistent since the years before its flagship product got FDA clearance to go to market: Sell smartphone-enabled medical devices directly to Baby Boomers with heart conditions or concerns. AliveCor has also sold devices to medical professionals like veterinarians, cardiologists, and other physicians both from past offerings and current ones, but the large majority of their revenues have come directly from patients who pay for AliveCor devices out of pocket. Pre-launch, AliveCor pitched investors and potential partners an expected $99 price tag for its over-the-counter ECG device, which is where the price stands today for its single-lead ECG. For one iteration AliveCor tinkered with a $75 price point a few years ago. It has sold older models at clearance prices (as low as $40) to move inventory, but the $99 price has stuck. AliveCor’s new six-lead device, however, has a starting price of $149.

Price it like a co-pay: That original $99 is meant to be around the price of a co-pay for the average Medicare patient. AliveCor has long-received pushback on this strategy because medtech incumbents believe the only way to sell a medical device is to ensure the physician or hospitals could make money off of it. When the company first launched its product, the idea that a heart patient would willingly pay $99 out-of-pocket also struck many AliveCor detractors as a non-starter. And yet that’s where the vast majority of AliveCor’s revenue comes from today.

Major heart centers as sales catalysts: AliveCor has published research with PIs from most of the big name cardiac care facilities in the US. Most of these now suggest their patients buy an AliveCor device, and a few use AliveCor’s Kardia Pro software to analyze ECGs sent in from their patients. The advent of CCM billing codes for remote patient monitoring has opened up a new reimbursement stream for these care providers, and Kardia Pro aims to make it easier for them to get paid via that reimbursement pathway. AliveCor gets paid by patients who send ECGs to their providers Kardia Pro accounts as this requires a subscription fee to unlock. AliveCor also does integration work to make Kardia Pro interface with some EHRs, but it is unclear if they charge providers for this service or they consider it a cost of doing business with that provider’s patient population.

Unregulated veterinarian market first: Before AliveCor had FDA clearance to market to human patients, it began selling its original device and its companion app to veterinarians who use it on dogs, cats, horses, and even grizzly bears, monkeys, and eagles. In its first year on the market for veterinarians, AliveCor brought in close to $1 million in veterinarian revenues for the startups before they were cleared to market in the human health market. Beginning in this unregulated market was great for AliveCor’s cash flow, but it also helped them fine-tune the product, which was the same as the device undergoing the FDA clearance process at the same time.

Selling DTC medical devices is hard: AliveCor has long struggled with CEOs — it has had six in the past eight years, as discussed more in-depth below — but one of those interim CEOs, Ira Bahr, has been the brains behind the company’s direct-to-consumer marketing strategy. Bahr is a longtime marketing executive who is perhaps most famous for naming Sirius satellite radio. He is currently AliveCor’s COO and has helped develop a series of television commercials with major ad agencies to drive AliveCor sales. The company’s ads have run alongside game shows like Wheel of Fortune and a number of popular Fox News shows like Sean Hannity’s, which has garnered the ire of protesters seeking to block conservative talk shows of any ad revenue. While AliveCor makes use of less expensive ads on Facebook and other platforms, its core demographic — the average AliveCor patient is 61 and up — is more likely watching TV. This expensive acquisition channel may explain why the company continues to take on debt and hasn’t ramped up its hiring dramatically in recent years. Its headcount has grown modestly over the years from around 50 in 2016 to around 70 today.

Competition from Apple drove revenues in 2018: AliveCor says its revenues in Q4 2018 jumped thanks to Apple’s announcement that it would add an FDA-cleared ECG function to its latest version of the Apple Watch, a near clone of AliveCor’s Kardia Band. While industry watchers roundly concluded this spelled the end for AliveCor, the company said that the media mentions it received in every article that covered the Apple ECG watch led to that revenue spike. It helped, of course, that Apple announced the product and the FDA clearance but its ECG function wasn’t activated until months later.

As a result, AliveCor raked in about $10 million in Q4 revenues for a total of $24 million for 2018. The company aims to bring in $40 million in revenues for 2019.

AliveCor’s regulatory foibles, tactics, and firsts

AliveCor has both pioneered new categories of regulated medical devices and creatively found ways to legally market its products outside of the regulator’s purview.

First, sell into an unregulated market: As discussed briefly above, AliveCor’s decision to market its iPhone-enabled ECG device to veterinarians brought in about $1 million in revenues the year before AliveCor secured FDA clearance to market its device for use with humans. While the FDA regulates how a company markets its devices and the language it uses around the claims it makes, selling the AliveCor ECG device to veterinarians also opened up the door for e-patients (and maybe even a few doctors?) to buy one for themselves. AliveCor never encouraged this behavior, but it is hard to tell how much of that initial $1 million was from veterinarians. While it’s not a focus today, AliveCor does continue to sell into the veterinarian market through resellers.

Accidental pre-FDA clearance marketing: AliveCor’s founder Dr. David Albert rose to fame in 2011 after he uploaded a four-minute video demo of his heart monitor prototype to YouTube. He uploaded the video because a handful of potential partners and investors told him they would not be making it to the Consumer Electronics Show that year, but they would still be interested in learning more about the iPhone ECG device. Albert also absent-mindedly clicked an option on YouTube to share the video with his network on LinkedIn, which inadvertently sent the video into viral territory. The viral video ended up on countless local news networks around the country and the world. Before long Albert was on The Today Show and some talked about the not-yet-legal-to-market iPhone ECG being the break out device of CES 2011. The media attention led the FDA to call Albert who convinced them it was all a big accident, and he never intended the video to be so widely viewed.

Get prescription-only clearance first, then over-the-counter: While AliveCor always intended its ECG device to be sold direct-to-consumer, its first FDA clearance was a prescription-only device. That meant only physicians could buy them directly and patients could only buy them via their physicians. The company decided to start with an Rx-only clearance because it believed it to be the easiest path to market. It likely made the FDA more comfortable, but it also helped get an initial community of physicians familiar with the device before patients began bringing ECGs in with them on their own. AliveCor held back from revealing which predicate device it used in its initial clearance, but the FDA has since made a redacted version of AliveCor’s first 510(k) document public. The predicate was: HeartCheck Pen Handheld Heart Rhythm with GEMS Home (K121009).

Smartphones, algorithms, smartwatches: AliveCor’s original iPhone-connected ECG device was part of the first wave of FDA-cleared medical devices that worked as a companion to smartphones. While Apple claimed to create the first “direct-to-consumer” FDA-cleared medical device for the Apple Watch when they announced their own homegrown ECG software, AliveCor should be recognized as the true innovator with the first FDA-cleared Apple Watch peripheral. Apple claimed it was truly direct-to-consumer (and, therefore, the “first”), because AliveCor’s ECG device requires a physician to remotely interpret the user’s ECG before the device is unlocked for the patient to use on their own. Both Apple’s and AliveCor’s devices are cleared as over-the-counter (OTC) devices, however, and so neither require a prescription. Finally, AliveCor has been a pioneer in FDA-cleared algorithms, including ones for detecting AFib and hyperkalemia (dangerously high potassium levels in the blood). While there are dozens of FDA-cleared algorithms now, AliveCor’s AFib algorithm, which the FDA cleared in 2014, is widely considered to be the first to secure 510(k) clearance.

Evidence first: More on this below, but as part of its first 510(k) submission, AliveCor collected clinical data that it had published and presented at the American College of Cardiology and Heart Rhythm Society scientific sessions. The data focused on both AliveCor’s accuracy as well as its clinical value.

AliveCor is a clinically-validated company first and foremost

With more than 75 studies published to date and well over 100 poster sessions at leading cardiology scientific sessions, AliveCor rightly stresses the body of clinical data that supports its product offerings. The company put together this helpful PDF that covers many of its studies and breaks them down into various subcategories.

AliveCor’s CEO problem

While I don’t have the data to prove it, I suspect AliveCor has had more CEOs than any other digital health company. In its eight years of existence, the company has had six CEOs. AliveCor’s messaging on this has remained consistent since the beginning: Inasmuch as the company is inventing a new category, it is creating a new type of corporate leader. Since AliveCor is both a consumer electronics company that sells DTC as well as a medical device company regulated by the FDA and beholden to various international standards, it has hired high-profile CEOs with experience in one but not the other of both of those worlds. An ideal CEO would understand both, but the company argues no such person exists in the business world today.

Here’s a rundown of AliveCor’s six CEOs.

Judy Wade, AliveCor CEO June 2012-December 2012: AliveCor’s first CEO lasted less than a year. Wade had been CEO of a mobile games and apps company named Hands-On Entertainment. She was an executive at Linden Lab, makers of the online game SecondLife, prior to Hands-On, and she spent much of her career climbing the ranks at McKinsey. AliveCor touted her consumer technology background. In those early days, however, AliveCor was very much a medical device company focused on R&D, building an evidence base, and trying to get through the FDA. It was too soon to focus on the DTC strategy.

Dan Sullivan, AliveCor CEO April 2013-August 2013: AliveCor’s second CEO had an even shorter tenure and a markedly different background. Sullivan had most recently grown and sold a medical device business named SuperDimension to Covidien for $300 million. AliveCor highlighted his medtech and global commercialization capabilities when they announced the hire. Sullivan and Wade both likely felt uncomfortable navigating digital health’s uncharted waters.

Euan Thompson, AliveCor interim CEO August 2013-November 2015: Khosla Ventures investor and longtime medtech executive Euan Thompson took over as CEO on a part-time basis while still working as a VC for Khosla. At the time Khosla Ventures owned a majority stake in AliveCor (it no longer does). While it was an interim CEO position, the company noted early on it was likely to be a longterm situation. Thompson deserves a lot of credit for building the foundations for AliveCor that led to it growing into the company it is today.

Vic Gundotra, AliveCor CEO November 2015-January 2019: Thompson only stepped down as interim CEO once the company had recruited Gundotra, a high-profile executive at Google. Gundotra’s appointment was transformative for the company as he brought on other former Googlers to lead both software and hardware at AliveCor. His appointment also elevated AliveCor’s brand in tech circles since Gundotra is well-known among the tech and business press. After serving as AliveCor’s longest-running CEO for almost 3.5 years, Gundotra stepped down for personal reasons unrelated to the business.

Ira Bahr, AliveCor interim CEO January 2019-July 2019: AliveCor’s marketing lead Ira Bahr stepped in briefly as the company and its lead VC Vinod Khosla searched for Gundotra’s replacement. As noted above, Bahr has leveraged his formidable experience in the ad agency world to build AliveCor’s direct-to-consumer marketing machine. While Bahr stepped down as interim CEO, he remains with the company as COO.

Priya Abani, AliveCor CEO July 2019-present: Vinod Khosla personally recruited Abani from Amazon, where she was general manager and director of the company’s Alexa group. Before joining Amazon three years ago, Abani spent a decade at Intel, but AliveCor marks her first healthcare venture. Vinod Khosla is also now the chairman of AliveCor’s board, which shows how focused he is on this particular portfolio company now.

How AliveCor competes with Apple, others

In September 2018 when Apple announced that it had secured two FDA clearances for heart sensing software on its Apple Watch, many industry watchers assumed this was the beginning of the end for AliveCor. After all, Apple’s announcement more or less made AliveCor’s latest product, the $199 Kardia Band, obsolete. In the short term, however, Apple’s move buoyed sales of AliveCor’s devices leading to a massive $10 million spike in revenues that quarter, which was about how long it took Apple to go from announcement to market launch. Apple’s entrance into the ECG market has had an impact on AliveCor’s strategy, but the company is well-positioned to compete against Apple and other comers. Here’s why.

Apple drove AliveCor to shutter two products: As noted above, AliveCor has quietly discontinued sales of its Kardia Band device as of the summer of 2019. The sunsetting of its smartwatch product line was timed with the launch of its six-lead ECG device and marked the beginning of AliveCor’s new hardware strategy in the face of competition from Cupertino. An earlier casualty inflicted by Apple was AliveCor’s SmartRhythm feature, a premium analysis feature that crunched heart rate data from the Apple Watch and prompted Kardia Band wearers to take an ECG reading if something appeared off in their HR. AliveCor users noticed that SmartRhythm was interfering with the accuracy of their activity data tracking on the Apple Watch, and AliveCor decided to shut the offering down because it could not control the underlying platform that it was built on. (This mentality is also highlighted in AliveCor’s decision early on to use a high-frequency chirping technology to transmit data between its hardware and smartphones instead of a smartphone’s data port or Bluetooth. The chirping tech only required the smartphone to have a microphone, so this tactic helped AliveCor avoid having to update their hardware every time a new smartphone model came out.)

Biggish data and a 50M ECG moat: Apple’s brilliant privacy strategy has led the company to forgo storing user’s health data on any company servers. Instead, health data is stored locally on the user’s device. Meanwhile, AliveCor is collecting 1.5 million ECGs every month right now, and it already has close to 50 million ECGs in its database. Apple won’t compete with AliveCor on this front, it has already established that. Meanwhile, the PatientsLikeMe-iCarbonX forced divestment makes clear that the US government won’t let companies from China build a massive database of US patients’ health data, including ECGs. (It’s an open question if that policy might expand and extend to companies headquartered in other countries, like, say, South Korea?)

Do AliveCor’s demographics trump Apple Watch’s? AliveCor’s typical user is a 61-year-old with a known or suspected heart condition. According to the company, more than half of its users have said their physician recommended they buy an AliveCor device, which again reinforces the idea that AliveCor users are heart patients. Apple Watch users, meanwhile, are likely much younger: Overall, growth in the smartwatch market has been driven by people aged 18 to 34, according to the NPD Group. Given that atrial fibrillation is typically an issue for an older demographic, the majority of Apple users probably won’t need the feature. Still, at the scale Apple is operating on, with tens of millions sold, it is likely that Apple has more Baby Boomers and seniors than AliveCor’s 200,000 monthly active users using its built-in Apple Watch ECG.

Big data (from the right patients) is machine learning opportunity: Despite Apple possibly having a larger patient population using its ECG software, AliveCor is in a position to mine its datasets to create new clinical products. The best example of this is AliveCor’s hyperkalemia algorithm, which is FDA-cleared to detect dangerous levels of potassium in the blood right from the ECG. No actual blood is required for AliveCor’s analysis. AliveCor will continue to launch FDA-cleared algorithms and products and services based on them. Some will be prescription-only algorithms.

Better hardware, better data: AliveCor discontinued sales of its Kardia Band in the wake of Apple’s move into ECG, but it managed to swap out that smartwatch peripheral for a six-lead version of its single-lead ECG device instead. AliveCor had actually invented its six-lead device way back in 2013, it only brought it to market once Apple closed off its immediate hardware opportunity in wearables. The Kardia Mobile 6L offers better quality data, which will lead to new, regulated algorithms as AliveCor’s database of six-lead ECGs grows. In light of the super quick launch of the 6L, however, the company’s likely deep bench of hardware inventions shouldn’t be underestimated.

Beyond hardware: Longterm AliveCor has the opportunity to grow beyond its hardware business. As FDA-cleared ECG-sensing becomes commoditized, in part thanks to Apple’s unprecedented and odd FDA clearances, AliveCor’s ability to develop algorithms from its massive ECG dataset will allow it to sell analytical services to patients using any ECG-sensing device on the market. That means even if Fitbit, Garmin, Samsung, and other wearable companies follow Apple’s lead into FDA-cleared ECG offerings, AliveCor would still be well-positioned to dominate the analytics layer.

3 min. read

Excerpts from the 4,400-word AliveCor Report.

Paying Subscribers Only

It's a good one, too.
This digital health research is for paying Exits & Outcomes subscribers only. Subscribe now to read this article, get the weekly newsletter, and receive unrestricted access to past and future research from the Exits & Outcomes archives. Smash the link above or below to subscribe yourself -- or head over to our pricing page to subscribe your team or your whole company!

Issue 015.

Get E&O weekly. | Subscribe | Digital health research from Brian Dolan.

Welcome to E&O.

Last week’s newsletter had a dog-days-of-summer 62 percent open rate. Here’s what’s happening this week:

  • Your editor met up with a few readers this week at the HealthTech Build mixer in Boston to discuss Livongo’s business model and the IPO trend. I’m also heading into the city for the DTx East event next month, so let me know if you want to grab a coffee and talk digital analogs for pharmaceutical active ingredients.
  • Mentioned the new, revised CPT Codes for CCM in the past few issues. This explainer on the changes from Foley is well worth a read.
  • Digital therapeutics for cancer patients seem to be trending up this summer. The latest from across the pond: NHS approves its first Cancer-Related Fatigue app, which is now included in the NHS Library. Read more here and I’ll be sure to write more about it once they publish their RCT results in the coming months.
  • The NHS also announced plans to expand its Digital Diabetes Prevention Program after a pilot that included 5,000 participants was deemed a success.
    * McKinsey published a paper focused on digital health ecosystems from the payer perspective that offers up some basic frameworks.

But really you should read on — this week’s newsletter includes excerpts from Exits & Outcomes latest effort: The AliveCor Report.

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How AliveCor will compete with Apple, others

In September 2018 when Apple announced that it had secured two FDA clearances for heart sensing software on its Apple Watch, many industry watchers assumed this was the beginning of the end for AliveCor. After all, Apple’s announcement more or less made AliveCor’s latest product, the $199 Kardia Band, obsolete. In the short term, however, Apple’s move buoyed sales of AliveCor’s devices leading to a massive $10 million spike in revenues that quarter, which was about how long it took Apple to go from announcement to market launch. That boost led to AliveCor having a banner year with $24 million in total 2018 revenues.

That said, Apple’s entrance into the ECG market has had an impact on AliveCor’s strategy, but it’s still well-positioned to compete against Apple and other digital health latecomers.

Apple ECG drove AliveCor to shutter two products: AliveCor has quietly discontinued sales of its Kardia Band device as of the summer of 2019. The sunsetting of its smartwatch product line was timed with the launch of its six-lead ECG device and marked the beginning of AliveCor’s new hardware strategy in the face of competition from Apple.

Another casualty inflicted by Apple was AliveCor’s SmartRhythm feature, a premium analysis feature that crunched heart rate data from the Apple Watch and prompted Kardia Band wearers to take an ECG reading if something appeared off in their HR. AliveCor users noticed that SmartRhythm was interfering with the accuracy of their activity data tracking on the Apple Watch, and AliveCor decided to shut the offering down because it could not control the underlying platform that it was built on.

Subscribers can read The AliveCor Report in full over at the E&O site.

That’s a wrap on Issue 015… please send feedback on The AliveCor Report by responding to this email.

4 min. read

Samsung’s quiet CardioBand FDA clearance. HealthXL’s evidence report.

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Issue 014.

Get E&O weekly. | Subscribe | Digital health research from Brian Dolan.

Welcome to E&O.

Last week’s newsletter had another sky-high 77 percent open rate. Here’s what’s happening this week:

  • Your editor has consumed all articles, videos, reports, interviews and podcasts about AliveCor. I’ve done my own calls too with some trusted sources. If you might have something to add to this imminent in-depth before it goes live, hit reply to this newsletter and fill me in.
  • Lilly’s broad, multi-year partnership with Evidation, which the two announced late last year, is already leading to published results. This week the two companies announced a project with Apple that used mobile devices and health apps to try to identify mild cognitive issues or mild Alzheimer’s. The study used passively collected data from the Apple Watch, Apple Beddit devices, surveys about mood and energy, and app-based psychomotor tasks, like dragging one shape onto another. Full study here.
  • Khosla Ventures led a $12 million round of funding in Hello Heart, which offers a digital hypertension program that uses a connected blood pressure cuff and an app. Hello Heart is also adding data from glucose meters to move into diabetes management next. (This was Livongo’s strategy too — but in reverse.)
  • Andreessen Horowitz has a lengthy but worthwhile breakdown of the opportunities it sees for digital health startups focused on care delivery. The firm’s partner Julie Yoo, who previously co-founded Kyruus, argues software can transform how we access, pay for and experience healthcare.

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FDA quietly cleared Samsung’s AliveCor Kardia clone “CardioBand” back in November 2018

Samsung announced this week that it would add an ECG function to its Galaxy Watch Active 2, which will begin taking preorders in September. The device does not yet have FDA clearance, however, as most of the press reports covering the announcement have noted.

Oddly, I can’t find any mention in the press of an FDA clearance Samsung received at the end of last year: The FDA cleared a Samsung ECG wearable as a Class II medical device in November 2018. The device, called CardioBand (and pictured above), is a single-lead ECG wearable with similar indications to the original AliveCor Kardia Mobile. Unlike AliveCor’s devices and Apple’s ECG software, this one from Samsung is not cleared as an over-the-counter device — it’s prescription only. Other differences with AliveCor: Samsung’s device is only cleared to work with certain Android operating systems and it transfers data via Bluetooth LE.

Importantly, the Samsung business unit that the FDA corresponded with for the clearance is the San Jose-based Samsung Strategy and Innovation Center. Based on the way it looks and the corresponding party this was either a move to develop an ECG for clinical trials and other research projects or it was an attempt to speed up a future clearance for its flagship wearable, the Galaxy Watch Active 2. Or both.

Read the FDA clearance summary document here.

HealthXL’s digital health evidence report finds most studies on musculoskeletal and neurology

This week Ireland-based digital health research group HealthXL published a report that digs into digital health studies published in the medical literature from the past two decades. The report found more studies had a focus on musculoskeletal (11,515 studies) and neurology (9,244 studies) than other conditions.

Here’s how the team described their methodology:

“We sourced publications from Pubmed for the years 2000-2018, and cross-referenced them with Microsoft Academic. We then assigned a digital health status which yielded 150,982 publications, did multiple rounds of data validation, and grouped for disease burdens using keywords and terms that could be bundled into each disease area (for eg, ‘heart’, ‘artery’, ‘aortic’, ‘chronic heart failure’, etc were all grouped under ‘Cardiovascular Disease’).”

Report: VR, voice and MSK, neurological trending up for digital therapeutics

A recent report on global trends in digital health funding from CB Insights included a section on digital therapeutics, which saw more funding deals in the second quarter of 2019 than the previous two.

Two funding deals pointed to emerging technologies entering the DTx space: virtual reality and voice-based tools. CB Insights highlighted Psious, which uses VR for its ADHD digital therapeutic program, as well as Sonde Health, which is developing voice-based biomarkers to monitor neurological, cardiovascular, and respiratory diseases. Psious raised about $9 million during the quarter and Sonde raised $16 million.

The report also noted that musculoskeletal and neurological-focused digital therapeutics companies raised funding during the quarter (echoing the rise in the number of digital health evidence focused on those conditions, mentioned above). Sword Health raised $8 million for its digital physical therapy business, while Neurotrack raised $21 million for its digital products focused on cognitive health, including Alzheimer’s. Khosla Ventures led both of their rounds.

Pear shares two key reasons their Novartis partnership works

These comments might seem like platitudes or just a digital health company buttering up their main customer, but Pear Therapeutics’ VP of Alliance Management Brooke Paige shared a little insight into the digital therapeutics company’s partnership with big pharmaco Novartis during a panel session in Boston a few weeks ago.

Paige said that two key reasons the partnership is working so well are that the deal had buy-in from senior leadership at Novartis from day-one and (perhaps as a result) Novartis is also quick to adapt their long-standing internal processes to support their prescription digital therapeutics partner better. Paige explained:

“We have been partnering extensively with Novartis at Pear. We have development programs in schizophrenia and [multiple sclerosis] with Novartis. I have been consistently impressed with their leadership’s engagement: For example, when we signed our development deal with Novartis, it was Jay Bradner, [the president of Novartis Institutes for BioMedical Research] himself who sat down with the alliance teams and said, ‘If there is anything getting in the way of pulling through value from these collaborations, I want to be the first to hear about it.'”

That’s a wrap on Issue 014… but remember: Send on over any thoughts on AliveCor’s past, present or future by hitting reply to the newsletter.