Shulou(Shulou.com)11/24 Report--

Recently, Akili, an American digital therapy company, successfully landed on Nasdaq through SPAC, which is another listed head digital therapy company after Pear Therapeutics (hereinafter referred to as "Pear").

Akili was founded in 2011 to focus on developing digital therapy software for cognitive impairment.

In June 2020, Akili's product Endeavor Rx successfully obtained FDA certification, which is the first approved "game prescription drug" and has attracted much attention from the market.

Head companies have IPO, symbolizing the market potential of the digital therapy industry.

However, judging from the performance of the secondary market, both Akili and Pear are in danger of plummeting share prices.

On the first day of trading, Akili shares were forced to suspend trading several times because of wild fluctuations, rising 20 per cent to $37.58 per share, but then plummeted, closing the day with Akili falling to $7.15 per share, 81 per cent below its peak.

As its first-day share price shows, despite getting FDA certification faster, Akili's "fate" did not go smoothly. Although the market attention has been gained, there is no convincing commercial achievement-the revenue is not on a large scale and the loss is gradually expanding.

This is undoubtedly ripping off the revenue "fig leaf" of the industry.

In recent years, digital therapy has been favored by capital, and there have been hundreds of financing incidents, but the fundamental injuries cannot be hidden. Today's prosperity is just a temporary bubble.

In one quarter, with an income of only US $66000, catalyzed by the COVID-19 epidemic, the digital therapy industry has developed rapidly in recent years, but there are a lot of questions about the clinical efficacy. Akili, which is certified by FDA, has the strength to resist these doubts.

It took AKili five years to verify the effectiveness of the first product and published data from five clinical trials, including a prospective, randomized controlled study published in the Lancet Digital Health.

It wasn't until June 2020 that Endeavor Rx, its prescription digital therapy product for 8-to 12-year-olds with ADHD, was finally approved by FDA.

One of the highlights of Endeavor Rx is the treatment provided by video games, which is a "game prescription drug".

Endeavor Rx is designed with adaptive algorithm, which can automatically adjust the cognitive challenge game according to the treatment needs of patients, and continuously monitor and evaluate the treatment effect.

Although it is also prescribed by physicians, Endeavor Rx is not a substitute for traditional drugs for ADHD and can improve patients' attention problems as part of an overall treatment plan.

The Endeavor Rx is just Akili's first product in the field of cognitive impairment.

Akili has three major treatment engines, including selective stimulation Management engine (SSME), body brain trainer (BBT) and Spatial Navigation engine (SNAV).

Using these engines, Akili can migrate technology to autism spectrum disorder (ASD), multiple sclerosis (MS), severe depression (MDD), post-traumatic stress disorder (PTSD), and, in many cases, acute cognitive impairment.

This is a vast market.

According to reports, in the United States, a total of 85 million people are deeply affected by cognitive impairment. Among them, the total population affected by ADHD is 10.8 million, and the approved Endeavor Rx targets about 1.8 million people.

According to the Centers for Disease Control and Prevention, nearly half of ADHD children in the United States use behavioral therapy. This sends a positive signal that people's acceptance of non-traditional drug treatments is not low.

But back to Akili's financial data, the situation is not so optimistic.

Despite the mature products, the embarrassment for Akili is that the pace of commercialization has not yet begun, and the existing earnings data do not prove the potential for growth.

Akili revenue data (Medical and Health AI Gold Journal Cartography)

According to the prospectus, Akili earned $3.939 million and $538000 respectively in 2020 and 2021, while Q1 earned $66000 in 2022, down 43.59 per cent from $117000 in the same period last year.

From 2020 to the present, Akili's income mainly comes from the cooperation agreement with Japan's Yano Pharmaceutical Company.

By the end of 2021, Akili had fulfilled all its obligations under the cooperation agreement, resulting in a sharp decline in Q1 revenue in 2022 compared with the same period last year.

I can't make money, but R & D and other operating expenses still have to go down exponentially.

In 2020 and 2021, the total operating expenses of Akili were $28.959 million and $60.902 million, respectively; in 2022, Q1 was $21.695 million, compared with $8.801 million in the same period last year.

Among them, the research and development costs of Akili in 2020 and 2021 were US $15.418 million and US $18.234 million, respectively.

This makes the net loss of Akili expand year by year. In 2020 and 2021, the net loss of Akili was $25.646 million and $61.348 million, respectively, and the net loss of Q1 in 2022 was $21.892 million, close to the net loss for the whole of 2020.

The education market or be educated by the market? To go public at a loss is to prepare for the commercialization of products.

As of March 31, 2022, Akili had cash and cash equivalents of $39.754 million and short-term investments of $15 million.

Through the merger, Akili will receive $412 million in cash, some of which will be used to start the commercialization of Endeavor Rx.

Physicians, patients and payers are the three key subjects in the process of commercialization of Endeavor Rx.

Akili will adopt a sales model combined with telemedicine, allowing physicians to seamlessly connect patients and improve product awareness among ADHD caregivers through e-commerce closed-loop marketing.

Referring to the price of generic drugs to treat ADHD, Akili set the price of Endeavor Rx at $450 for a 90-day course.

Next, Akili plans to promote Endeavor Rx to be reimbursed by commercial insurance and public health insurance, and the charging model is a mixture of self-payment and reimbursement.

Judging from the commercial test data previously conducted by Akili, Endeavor Rx has a certain cash potential.

In 2021, Akili cooperative medical institutions issued 1713 prescriptions including Endeavor Rx, with a payment rate of 57%, out-of-pocket rate of 86%, and reimbursement rate of 10%.

Q1 in 2022, a total of 668 prescriptions including Endeavor Rx were issued, the number increased by 229% over the same period last year, the payment rate was 53%, the out-of-pocket rate was 89%, and the reimbursement rate was 4.3%.

In addition to commercializing Endeavor Rx, Akili will also promote the progress of other pipelines, with five pipelines for different age groups of ADHD patients expected to complete clinical trials by 2023.

Akili pipeline progress

In addition to widening the pipeline, another game of Akili cloth is to go out to sea.

In 2019, Akili reached a strategic partnership with Yano Pharmaceuticals to develop and license SDT-001, a digital therapy product based on SSME, for Japanese ADHD patients between the ages of 6 and 17.

In order to facilitate the release of the product in Japan, Akili has localized the product at the language and cultural level.

In addition, Endeavor Rx also received CE certification in June 2020 and is eligible to be listed in EU countries.

As a digital therapy company whose products were approved earlier, Akili undoubtedly has its own advantages. while the competitive products have not been certified, Akili can quickly seize the market by virtue of the first-mover advantage.

But it is not easy to open this market, after all, for most doctors and patients, digital therapy is still a new concept. Akili needs to educate both doctors and patients (caregivers), which inevitably costs a lot of marketing expenses.

According to the prospectus, Akili's sales and general administrative expenses were $13.541 million in 2020 and more than tripled to $42.668 million in 2021, with marketing and advertising costs rising by $18.9 million.

At the same time, whether the product can be widely used also depends on the recognition of the third-party payer. If commercial insurance and public health insurance do not support reimbursement, the enthusiasm of doctors and patients (caregivers) will be greatly reduced.

Another challenge looms. Akili said in its prospectus that its competitors also include companies that offer unregulated products, such as Cogstate, C8 Sciences, Cogmed, MindMaze and Posit Science, some of which are available directly through mobile app stores.

Although it has not been certified, it may also attract consumers for other reasons, bringing continuous pricing pressure to the sales of products.

Secondary market: digital therapy has many advantages, such as low cost, high accessibility, strong sense of experience, personalized service, easy data collection and so on. In recent years, a number of products have been recognized by regulators and gradually become an industry favored by capital.

According to the Global Digital Therapy report (2022) released by Arterial Network, from 2019 to 2021, there were 210 financing events in the global digital therapy field, involving 144 enterprises, with a financing amount of nearly 10 billion yuan.

In 2022, there will still be a huge amount of financing of up to US $55 million around the world, invested by Sidekick, a cutting-edge European company in gaming digital therapy.

In China, there were 19 financing incidents in the field of digital therapy by the end of the first half of this year.

The primary market has high hopes for digital therapy, but the reality is that the secondary market is not optimistic about this "new thing".

Both Akili and Pear, which was listed earlier, have failed in the secondary market.

After only a brief first-day rally, Akili shares fell all the way, closing at $4.11 per share on August 29, down nearly 90 per cent from their peak.

Pear is in a similar situation. As of August 29, Pear closed at $1.62 per share, down nearly 90% from its peak, with a total market capitalization of $225 million.

Although Pear has the name of "the first stock of psychotherapy" and is the first digital therapy company approved by FDA in 2017, it has three FDA certified products, but its commercialization road is not easy.

In the first half of 2022, Pear's revenue was $6.046 million, up 283.4% from $1.577 million in the same period last year.

The growth rate is bright, but the absolute value is not high, and the operating loss is also further expanding. In the first half of 2022, Pear's operating loss was $67.561 million, an increase of 54.6 per cent from $43.1 million in the same period last year.

In July, due to the macroeconomic downturn, Pear even launched layoffs, accounting for about 9 per cent of its workforce.

Perhaps the "chill" in the secondary market stems from the biggest obstacle to prescribing digital therapy today-how willing can doctors be to prescribe digital therapy for patients?

Generally speaking, after prescribing the right medicine to the case, the doctor basically completes more than half of the task, but if he prescribes digital therapy, the doctor also needs to learn new tools, train patients, monitor the course of treatment, process data, and so on. To a certain extent, it disrupts the original workflow and methods.

If the data recording system of digital therapy can not be connected with the original system, it is easy to give rise to the problem of "data isolated island" and add obstacles to the work of doctors.

Chris Wasden, chief strategy officer of Happify Health, a digital therapy company, has publicly said that clinicians are the key to the application of digital therapy.

Wasden has spoken to diabetes doctors and found that doctors are very concerned about the data left behind by digital therapy products.

With digital therapy, it is good to have more data on patients, but it also places a burden on doctors: which data are urgent and need to be valued, and which data are redundant and can be ignored? the rules on these aspects are not clear.

In addition, should doctors be compensated for spending more time processing the data?

"clinicians have a lot of concerns and fears about digital therapy because it is new and uncertain. So we have to solve all these workflow problems, salary issues, not just the product itself, but doctors want to be paid accordingly." Wasden said.

It can be said that the use of digital therapy is not a simple "addition", but the renewal or even reshaping of the original treatment system, which requires the joint efforts of many forces, so that digital therapy can be better integrated into the diagnosis and treatment process without increasing the burden on doctors.

Change will not happen overnight. Post-market Akili and Pear, and the entire digital therapy industry, still have a long way to go.

Reference:

Https://www.mobihealthnews.com/news/qa-why-adopting-digital-therapeutics-requires-healthcare-paradigm-shift

Https://www.mobihealthnews.com/news/why-providers-are-key-digital-therapeutic-uptake

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