Pear Therapeutics Stock – A Digital Therapeutics Platform
It seems mental health is on everyone’s mind of late. Our MBAs have been working like crazy to keep up with what has suddenly become a very tech-dominated industry, especially in the area of telehealth. It wasn’t that long ago (nearly 18 months to be exact) that we first published a list of some of the leading companies offering various riffs on computerized cognitive behavioral therapy. Apparently, that was just the beginning. In 2020, as the world suffered a collective mental breakdown, investors poured more than $1.5 billion into mental health startups, according to data research firm CB Insights. This year is already on pace to surpass those numbers, with funding hitting $852 million in the first quarter alone, a 54% jump from a year ago. There are at least seven mental health startups valued at more than $7 billion.
In general, many of these companies offer app-based platforms that help people deal with their
First World problems anxiety and depression using some kind of clinically validated click-thru program. Others claim to have developed AI-powered algorithms to help diagnose or otherwise support mental health treatment. A few specialize in meditation, providing content (imagine Matthew McConaughey’s silky voice reading bedtime stories) to help you chill. Another subset of mental health companies are tackling one of the biggest challenges in the world today – addiction – through what’s been labeled as digital therapeutics.
Digital therapeutics (DTx) are products that “deliver evidence-based therapeutic interventions to patients that are driven by high quality software programs to prevent, manage, or treat a medical disorder or disease.”1 DTx are distinct from digital medicines or “smart pills,” which combine a prescription medication with an ingestible sensor that is designed to communicate with a software application to track compliance.
About Pear Therapeutics Stock
One of the leading companies developing software-based therapies to help people kick their bad habits, Boston-based Pear Therapeutics, plans to go public via a merger with a special purpose acquisition company (SPAC). Founded in 2013, the startup has raised a total of $248 million across seven funding rounds, the latest being a $100 million Series D that was completed in March. The round was led by SoftBank (9984.T) and its $100 billion Vision Fund. Swiss pharmaceutical giant Novartis (NVS) has been one of the company’s most consistent investors, helping fund Series A to D, despite pulling out of an agreement in 2019 to help commercialize Pear’s digital therapeutics. Novartis even continued to invest in Pear despite disappointing results of a 2021 clinical trial conducted by Novartis that showed Pear’s app for treating schizophrenia was no better than a placebo app.
The SPAC Pear Therapeutics plans to merge with is Thimble Point Acquisition Corp (THMA), a transaction that’s expected to value Pear at $1.6 billion. It will also net the newly formed company about $450 million to continue commercialization of its three FDA-authorized digital therapeutics and develop more than a dozen other products. The company’s first product, reSET, is a 90-day prescription digital therapeutic to treat substance use disorder, which affects about 20 million people in the United States alone. Pear’s second product, reSET-O, is specifically for opioid addiction, which kills more than 100 Americans every day.
Its third product is Somryst for the treatment of chronic insomnia, with widely varying estimates on how many people can’t get a good night’s sleep, but the number is likely in the tens of millions.
Products Beyond Addiction and Mental Health
In other words, there’s no lack of customers for Pear’s digital therapeutics products, which the company says represent a total addressable market (TAM) of about $11 billion. That doesn’t include a pipeline that extends well beyond addiction and mental health into pain management and other conditions like irritable bowel syndrome.
Pear is also expanding its platform for developing digital therapeutics to include digital biomarkers and remote patient monitoring, mainly through agreements with other technology companies.
In 2020, for example, Pear licensed tech from a Canadian startup called Winterlight Labs, which has raised about $5.2 million to develop machine learning-based voice digital biomarkers that analyze and assess cognitive health. Pear licensed the technology to develop and clinically validate digital biomarkers for a variety of diseases, including Alzheimer’s disease, depression, insomnia, schizophrenia, as well as opioid and substance use disorders. Earlier this year, the company added several more partnerships:
- Another Boston-based startup, Empatica, has raised $7.8 million to develop AI-powered wearables for various conditions, such as the early detection of seizures associated with epilepsy. Pear is investigating the technology to evaluate withdrawal symptoms in patients with addictions to drugs, opioids, and alcohol. The FDA-cleared smartwatches track heart rate, fine locomotor behaviors, skin temperature, and skin conductance to quantify autonomic nervous system response.
- etectRx out of Florida has developed a smart pill technology called ID-Cap that transmits a very low power digital message from within the patient’s stomach to confirm when a medication has been ingested. The patient’s own stomach fluids power the wireless sensor.
- Chicago-based KeyWise is another company that reputedly uses AI for digital biomarkers, with algorithms designed to provide insights through smartphone keyboard interactions.
Pear is far from being the only digital therapeutics company on the market that is treating addiction and other mental health disorders. Here are some of the other players out there, courtesy of Evidera.
A review last month by Crunchbase found that companies working on therapies and other services around addiction have raised more than $1 billion in recent years, a number that is probably much higher given that the article apparently omits one very direct competitor.
Click Therapeutics is a New Yawk-based startup that has raised a staggering $860 million in funding, including a $500 million round in September 2020 led by French pharmaceutical giant Sanofi (SNY). The Click Neurobehavioral Intervention platform is powered by what it calls Clickometrics, a machine learning and data science engine. That’s a lot of buzzy words, but the bottom line is that Click also uses software as an adjunct therapy to addiction and a bunch of other health conditions, including insomnia and schizophrenia:
Its first and only commercial product to date, Clickotine, is a smoking cessation program. The company is currently in the midst of a clinical trial to assess the effectiveness of digital therapeutics in helping treat major depressive disorder in adults. (Interesting side note: Alphabet subsidiary Verily is managing the fully remote clinical trial, as yet another competitor to Science 37, a SPAC hopeful we recently deconstructed that is trying to corner the market on decentralized clinical trials. It’s one more example of how competitive and broad the digital health market has become, with companies developing multiple software solutions across multiple verticals.)
To Buy or Not to Buy
There are more reasons to avoid Pear Therapeutics than just a glut of competition in the mental health space. We’ve long argued that SPACS, at least initially, offer little value to retail investors. We recently bolstered that argument by looking at why popular SPACs are falling in value. All those metrics apply to Pear, which projects it will make only $4 million in revenue this year. While we don’t consider pre-revenue companies or those that haven’t earned at least $10 million in income in one year of business, the company does have some traction:
However, we’re skeptical of the company’s value proposition. There have only been a handful of clinical trials to date on Pear’s products and on digital therapeutics in general. While the results of those studies have been encouraging, the research is often conducted by the company itself, such as a 2020 paper on opioid use and the benefits of digital therapeutics. Less convincing is the company’s published analyses on cost benefit. One study projected a cost savings of $765,321 per million covered lives over five years thanks to reSET-O versus standard treatments. That seems pretty miniscule given the $248 million the company has raised to date. A second cost-benefit analysis offered more appealing optics, with the company estimating that a drop in healthcare visits by patients using reSET-O reduced costs by up to $2,654 per person over a six-month period.
Pear’s investment in additional technologies around digital biomarkers is an intriguing but risky bet, given the unknowns around the efficacy, adoptability, and cost-effectiveness of these tools, as well as the company’s ability to integrate them into its platform.
One addiction that Pear Therapeutics and others isn’t addressing is screen dependency, a condition that afflicts many of us today, especially younger people. That makes us wonder if we need yet another reason to be glued to our devices. In fact, who needs computer software when you can hack human software with drugs! Tons of companies are investigating the psychic healing powers of psychedelics, including publicly traded ventures like MindMed (MMED.NE) and Atai Life Sciences (ATAI). These companies use mind-expanding drugs to treat addiction and other mental health disorders. We’ll remain on the sidelines for now, as the sector is still too volatile and risky given the regulatory environment and long-term outlook. Similarly, we’ll also swipe left on Pear Therapeutics, which will trade under the ticker symbol “PEAR” if the deal goes through.
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