“Pear needs deep pockets to fight the long battle of reimbursement if they try to go it alone. Transforming into an around-the-pill solution where they don’t need to worry about reimbursement makes the pharma play more compelling.”

“If the current PDT solutions don’t just go out of business, it will be pharma companies that will buy out digital therapeutic platforms for cheap. Pharma has the sales model, wants to be viewed as doing innovation/digital, and it can help their brand/reps by adding value ‘beyond the pill’. But overall the PDT market will suffer from a cycle of subpar business results and less investment. Standalone PDT companies will not exist at scale.”

“Pear bought by another digital health co is the logical outcome. The assets are valuable and another digital health company would be well-positioned to make good use of them. But who has the capital to do it?”

“I believe that Pear has been for sale for over four months now. Their recent public statement was a last-ditch effort to find interest. It is a failed sale. Bankruptcy is next. This has been a slow-motion train wreck, which means that Pear going bankrupt isn’t new news.”

• “Pear’s high public profile and demise have already had a knock-on effect on all others in the space. ‘Look at Pear’ has become the refrain. Personally, I think they have set the digital health space back.”

• “Venture funding will be extremely hard to come by for digital therapeutics companies until we demonstrate annual recurring revenue.”

• “Unfortunately, yes, this will have an impact, particularly on those who are in need of funding as this will most certainly put a chill on future investment. When one biotech goes bankrupt, the entire industry isn’t damned, but sadly this is not the case in the prescription digital therapeutic industry. Too many continue to believe a PDT is a PDT is a PDT. They can’t see the significant difference that disease state, unmet needs in that disease state and the unique value proposition of a particular PDT can make on its potential.”

• “The tide has gone out and we can now see that most of the industry isn’t wearing pants. These aren’t biotechs. They shouldn’t be operated or capitalized like they are.”

• “Investors will continue to back virtual care solutions over PDTs.”

• “With today’s macroeconomics and with the track record to date of failed deals, pre-revenue and low revenue prescription digital therapeutics companies will likely not be able to raise significant additional capital. Most will probably be sold off for parts or cease operations.”

• “If I’m an investor, I’m definitely asking myself if the cost, effort, and time of taking a PDT through a pivotal trial and the FDA is worth the risk of a product that simply might not find meaningful market adoption. The ‘prescription’ and regulated aspect of PDTs might be useful for payer coverage and legislative approvals, but I think Pear has shown that big wins on those fronts don’t necessarily translate into revenue.”

• “Early-stage capital will be much more expensive now that the limits of the reimbursement revenue pathway have been tested. Pear was never capitalized to run a state-by-state lobbying operation to generate $100k’s of revenue for those same efforts.”

“Pear never should have been a public company, but they did it because they became overvalued in the hype of 2020/2021. Venture capitalists look to successful exits to excite them about a space. Regardless of the quality of other prescription digital therapeutics, most will pay a price. A lot of PDTs will have a hard time raising capital. Those that do raise will be hit with a valuation discount in an already tough market.”

• “It will dampen investment and discourage adoption.”

• “Pear was also blazing the trail getting reimbursement. Without them, it will be slower for the whole industry.”

• “This will clearly have an impact on valuations. Also, it will create some needed scrutiny of PDT company partnerships, commercial traction, and topline development.”

• “PDTs will lose a player that has been spearheading coverage. This will slow down industry maturity.”

• “PDTs are now dead.”

• “I am a bit biased admittedly, but personally think the PDT market is unfortunately doomed to fail.”

• “I don’t think it’s a valid GTM — Pear has burned a ton of money with very little value or revenue created.”

• “Companies better figure out a non-prescription path. This will certainly impact commercial strategy.”

• “The business model that most are pursuing is not viable. Pear has spent a ton of time and effort trying to make it work. I don’t think other companies have sufficient resources to keep pushing.”

• “While there were certainly operating failures specific to Pear that accelerated this crash (big spend on lobbying efforts, over-indexing on difficult-to-capture revenue from opioid settlement grants, lack of focus on health systems strategy), most PDT companies should take this as a blunt reality check on the barriers to commercializing the technology.”

• “This will only have a negative impact in the short term. Pear has proved there is a real market and demand for prescription digital therapeutics, generating thousands of prescriptions and opened reimbursement routes for their ancient web-based digital therapeutics (stuffed into apps) that have poor user experience and don’t drive well-known clinically meaningful outcomes. Pear’s reSET-O is ‘intended to increase retention of patients with OUD in outpatient treatment by providing cognitive behavioral therapy.’ Historically, payors have not paid for this endpoint and providers have not written for it, so the fact that they had any traction at all serves to prove that good, modern products that drive well-understood clinically meaningful outcomes will be very successful with patients, providers, and payers, and that the demand is there.”

• “This will have a negative impact on other PDT companies, but Pear was an early trailblazer and did manage to execute well. It had a diversified pipeline.”

• “If they get bought by pharma, then I think this will be good for the industry longterm. In the short term, it will be painful for all manufacturers.”

• “No impact. This is a US problem and a Pear problem.”

• “It will be very bad for US-focused digital prescription therapeutics businesses. And a little less bad for European/DiGA ones. Overall, it’s really not great.”

• “However, I think this might be a classic case of being too early, and not doing enough for the industry overall (ie, per your point in today’s newsletter about them lobbying for their specific solution vs. valuing the industry overall. I think that hurt them.). In order for the nascent industry to succeed, the ecosystem needs to rally to support all players. Pear is the Myspace of DTx.”

• “Pioneers don’t often survive — settlers usually do and prosper. The settlers will be companies that leverage the healthcare system to their advantage — not try to reinvent the entire system.”

• “The key for others in the space will be the ability to show that they don’t have the same burdens and barriers to reimbursement as Pear did. The ability to get a unique code/category or the ability to demonstrate an alternative business model will go a long way to getting out from under the pall that Pear is casting.”

• “Valuations have taken a dive and investor sentiment on prescription digital therapeutics as a whole is down. PDTs will all continue to differentiate from Pear and continue to look for analogs, such as whether a failed cholesterol pill would reduce a cancer pill’s chances at success. PDTs have diverse mechanisms of action and span dozens of disease areas, yet we’re all (currently) being viewed as just one.”