Issue 183
Welcome back to E&O Fridays, a paying subscribers-only weekly newsletter focused on the world of digital pharma products and FDA-regulated digital health.
E&O Fridays.
Here are recent happenings in FDA-regulated and pharma-focused digital health…
- Wise Therapeutics, which is developing a portfolio of prescription digital therapeutics embedded in video games, changed its name to Arcade Therapeutics. Wise move. The company also let it slip that it plans to launch its first digital therapeutic soon: “We are now just a couple months away from a limited launch of the first game-based digital therapeutic targeting the treatment of the most common anxiety diagnosis: Social Anxiety Disorder.”
- The FDA cleared a handful of digital health devices in the past week, but it has yet to add summary documents for any of them. So, I’ll update this list on the site once the agency posts those or the companies make official announcements. Consider these sneak peeks and heads-ups in the meantime:
- Theranica, the maker of Nerivio, an FDA-cleared wearable that treats acute migraines via electrical stimulation on the arm, secured another clearance from the FDA. While the company hasn’t announced the specifics around this new clearance yet, last we read it was planning to submit an Indications for Use that covered the prevention of migraines — not just the treatment of chronic and episodic ones. At least that’s what I get from reading the October 2022 announcement about the study results that likely supported this recent clearance from the agency.
- Adherium, makers of Hailie, an FDA-cleared connected sensor add-ons for various inhaler medications, also received another new 510(k) that likely adds another medication to its portfolio of connected therapies. Read more about Adherium here.
- No other details on this one yet either but Optum-owned remote patient monitoring company Vivify Health secured its very first FDA 510(k) this past week for its Care Team Portal software. (Sort of surprised by this but I assume up until this point Vivify’s software was just a Medical Device Data System that would collect data from partners’ FDA-regulated devices?)
- One more FDA OK… The FDA granted a 510(k) clearance to the Perifit device, which is a kegel exercise device that also acts as a controller for mobile games. The Paris-based company’s pelvic floor device was already registered as a Class I. Site.
- Point32Health, the health insurance company formed via the merger of Harvard Pilgrim and Tufts Health Plan, submitted a comment to CMS about its proposed rule focused on tweaking the rules around medical record confidentiality for people with substance use disorders. Point32 suggested CMS take a close look at supporting prescription digital therapeutics focused on SUD. Here’s the insurance company’s suggestion: “Support Ability of Health System to Leverage Digital Therapeutics: Effective digital therapeutics have successful randomized controlled trials (RCTs) that demonstrate efficacy in treating a wide range of behavioral health issues including depression, PTSD, and insomnia. Unfortunately, clinicians and patients struggle to differentiate effective digital therapeutics from other ineffective digital products. This hinders the ability to use technology to augment the shortage of behavioral health clinicians. CMS could remedy this by creating an easily accessible database of effective digital therapeutics with strong RCTs, organized by treatment category (e.g., depression). Furthermore, CMMI could pilot a model where primary care physicians and emergency rooms are provided incentives to ‘prescribe’ effective digital therapeutics when appropriate to patients. Today, a significant percentage of patients that visit primary providers or emergency rooms with mental health conditions fail to secure follow-up care from behavioral health clinicians.” (The scare quotes around “prescribe” confused me.)
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Why Oui Therapeutics spun out a virtual clinic or The PDT + Friendly MSO+PC model
Fifteen months ago, a mental health virtual clinic named Vita Health spun out of a prescription digital therapeutics company named Oui Therapeutics. It might be the first time a PDT company incubated and launched an entirely new business entity that could serve as a future go-to-market channel for its FDA-cleared interventions.
To be clear: Vita Health is very much its own company. It’s not a subsidiary of Oui. While it shares at least two of the same investors as Oui Therapeutics (Flare Capital and Athyrium), Vita’s CEO Lynn Hamilton is a former employee at Oui, and Oui’s CEO and Founder Dr. Seth Feuerstein is also chairman of the board at Vita — that’s more or less where the overlap ends. Currently, the key connection between Vita Health and Oui Therapeutics is that Oui developed the software that Vita Health’s therapists use when treating patients with its suicide prevention program.
Not FDA-regulated software: Feuerstein explained that these software components are not FDA-regulated digital therapeutics but rather more like collaborative software that clinicians use with patients or to track patients. Historically, therapists give out chapters for patients to read before they come to a session and they may work together with therapists on these assignments during sessions too. One functionality the software enables is similar to a virtual whiteboard that clinicians and patients can both use together. The software Oui built for Vita helps enable that kind of work. Some of those modules are included in the software as a medical device that Oui will submit to the FDA as part of its bit to obtain clearance for its first prescription digital therapeutic, but it’s not the software that includes the “treatment” or the “active ingredient” of Oui’s future therapies.
Market need for Vita: While Oui Therapeutics was piloting its prescription digital therapeutics with strategic partners (just guessing, but I think this was with Aetna), one strategic partner asked Oui to set up a virtual clinic that had suicide prevention care as a key focus. Given the severity of the issue, it’s not one newer virtual clinics are typically willing to address. As Vita Health scoped out the market it expanded its focus to include not just suicide prevention care for all ages but also mental health care for teens and adolescents, which was another demographic that this early Oui supporter flagged.
Why Vita’s been quiet: Vita Health’s CEO Lynn Hamilton told me the company has kept relatively quiet because they are just finishing up their Series A round, which my friends over at Behavioral Health Business scooped back in December. Once that financing is fully topped up, Vita plans to discuss its plans more openly. Here’s a little bit about what they’re up to, according to Hamilton: “Vita Health is a telehealth behavioral health organization that treats high acuity suicidal patients (all ages) as well as general teen and adolescent mental health conditions. We treat a broad range of mental health conditions for teens including common conditions with lower acuity and high prevalence like depression and anxiety.”
In-network at Aetna already? While I was digging through Adobe’s benefit offerings for its employees, I stumbled upon a list of in-network behavioral health-focused virtual clinics for Aetna members. “Vita Health (Oui Therapeutics)” was among the virtual clinics listed as in-network and available to employees at Adobe on an Aetna-administered health plan.
Speculation: Considering how difficult the first wave of prescription digital therapeutics companies have found this last mile of go-to-market — the end game of convincing payers to pay for them and prescribers to distribute them to patients — it seems like Oui Therapeutics already has a group of clinicians ready and waiting to use its first PDT once it gets through the FDA. And, while I’m sure it’s not as locked-in as it may appear on the Adobe benefits document, it sure looks like Aetna has already given Oui the greenlight too.
Two final thoughts here:
This PDT+Virtual Clinic relationship made me think of The Friendly MSO-PC model that national virtual clinics companies use to create the right legal structure for their digital health technology company and their medical practice affiliate. Vita is a therapist-driven practice so it’s not a P.C. or a P.A. (it is actually a P.L.L.C., which is a new one for me.) And what Oui Therapeutics has done here is different — especially because Oui and Vita are two separate businesses with their own independent destinies and roadmaps — but it’s similar, right?
Most of the above analysis is just my read on this situation as someone focused primarily on go-to-market strategies in digital health. I think from Oui Therapeutics’ perspective this was less about creating another future market channel for its yet-to-be-FDA-cleared prescription digital therapeutic (although I think it was that too) and more about agreeing with a strategic partner (probably Aetna) who said there was a pressing need for suicide-related care right now. The primary reason Oui spun out Vita Health was to create another way — a quicker way — to help people access a version of this specialized care program.
physIQ’s 2022 profit and loss, FDA-cleared digital biomarker pipeline, and bankruptcy drama
Last month physIQ, which markets an FDA-cleared software platform (that analyzes data from wearables and other sources) to health care providers and life sciences companies, filed for bankruptcy as part of an attempt to raise new debt. The bankruptcy court filings offer up a rare window into the financial details of a struggling venture-backed digital health company. physIQ’s description of the company’s business and its brief mentions of challenges are worth a read. (One data point: As of the date of the filing in mid-January, the company had whittled down its headcount from around 90 at its peak down to 58 full-time and part-time employees.)
Here are a few other excerpts that include general info about what the company does as well as how it describes its challenges so far:
“[physIQ] is a startup company that provides analytics through a software platform to health care and life science providers. Specifically, the [physIQ] provides an FDA-cleared data analytic platform that allows for its health care and life science customers to accurately detect, assess and analyze the physiologic changes to an individual based upon various internal and external stimuli. Stimuli include pharmaceuticals, exercise, vaccines, sleep, stress, and other internal and external factors that impact an individual and the physiologic response from the individual in terms of objectively measured data, such as heart rate, temperature, respiration, blood pressure, etc.
“By combining its proprietary artificial intelligence with several commercially available wearable biosensors, the [physIQ]’s analytic platform permits continuous monitoring of individual patients. That real-time monitoring allows clinical trial sponsors and clinicians to more accurately understand an individual’s physiology, proactively detect and act upon physiological decompositions, improve safety and efficacy of new therapies, and deliver clinical interventions to improve patient outcomes.”
The company’s descriptions of its assets including this summary of its digital biomarker progress to date:
“[physIQ] does own valuable proprietary technology and intellectual property, including 21 global patents (7 pending) and 5 FDA-cleared digital biomarkers (with 9 more in development) and a data trove that is valuable in the development and validation of additional digital biomarkers. This proprietary technology and its further development by the [physIQ]’s dedicated scientists and clinicians are the cornerstones of the [physIQ]’s business.”
Events leading to bankruptcy and the Scrapper kerfuffle:
physIQ acknowledges that like most health startups, it is aware that its key customers, life sciences companies and health care providers, are slow to adopt new technology. Even so, physIQ found the sales cycle for its products to be slower than expected. So slow that it ran out of money:
“After advancing its product to achieve a perceived market fit, which included receiving FDA clearance of its medical device platform and gaining some customer feedback and commercial traction, [physIQ] believed its customer base was prepared to expand commercial use of the product, and after receiving funding in May 2021, it hired sales personnel and other staff with an eye toward rapid sales revenue growth. Despite the promise that [physIQ] saw from the market, and for a variety of reasons, the rapid growth did not materialize in the time anticipated. [physIQ] deployed its available capital based on its anticipated plans and budgets, but with the delay in anticipated sales, [physIQ] is again in need of additional financing. [physIQ] has since dedicated its efforts to generating additional capital.”
The decision to file for Subchapter V bankruptcy was a contentious one. physIQ was running out of cash at the end of 2022 and was only able to garner interest from one lender for a loan, but that group was unwilling to provide the loan without the consent of physIQ’s shareholders, including the lead on physIQ’s Series C round, Scrapper Technology Funder. physIQ alleges that the “disruptive actions” of Scrapper “has had a material chilling effect on its ability to raise new capital and traditional venture debt.”
(I don’t think this spat is super relevant for this audience but it’s important to have a bit of context from both sides of the issue before we move onto some of physIQ’s financials.)
Scrapper and physIQ are already battling it out in a separate court, but in this bankruptcy proceeding Scrapper has weighed in too. Scrapper alleges that physIQ is attempting to use this bankruptcy move to “effect a business divorce”:
“Less than two years ago, [Scrapper] purchased 9,676,442 shares of the [physIQ]’s Series C Preferred Stock for $25,000,000. Now, the [physIQ] proposes to issue to the Lender 4,295,387 Shares of Series C Preferred Stock. The Court should consider whether the Lender Warrants are an additional incentive for Lender to lend $8,000,000 or whether this Subchapter V is being used to effect a business divorce, relief typically resolved by Delaware law in the Court of Chancery.”
Yeesh. As I said above — messy. The most interesting part of these filings, of course, is that physIQ had to open its books. The filings include 11 months worth of physIQ’s 2022 P&L. Here’s a peek at the company’s recent financial performance:
physIQ’s Profit and Loss for first 11 months of 2022
physIQ included financial statements for the first 11 months of 2022: January through November. So, this isn’t a look at the company’s annual finances but it’s pretty close:
- Total income (excluding interest income): $5,705,765
- Total income from Life Sciences business: $5,586,361
- Total income from HealthCare Delivery business: $119,405
- Total Cost of Goods Sold: $967,122
- Total Expenses: $19,694,618
- Net Income This is actually a net loss… (includes stock comp expenses and interest income too): ($15,302,641)
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