Pier Therapeutics was one of the most notable companies in digital therapeutics and its downfall Could be an ominous sign for other industry players.
“I worry that this is a sign for the immediate future of digital therapeutics,” said Dr. Rishad Usmani, founder of Healthtech Investors. Usmani has mentored and mentored founders in the digital therapeutics industry to help physicians adopt these tools.
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While most industry observers, including Osmani, are bullish on the long-term potential of digital medical technology, it is being acknowledged that the business model needs improvements. There is also general agreement that those reforms need to be done quickly as the challenges come at a time when the digital health industry is dealing with less favorable funding conditions.
Usmani said companies that develop prescription digital therapeutics, software applications that must be prescribed by physicians, sometimes pave the way for drug companies to be reimbursed. The problem, he said, is that biotech companies have more opportunities for growth before revenue generation is expected.
Rick Anderson, president of DarioHealth, agreed with this assessment and said that this route is difficult for companies in digital health to go down.
“Biotech startups spend hundreds of millions of dollars developing a product and then if it’s successful, they essentially sell it to a pharmaceutical company for commercialization,” Anderson said. “There is a heavy lift to go to the market.”
Peer Therapeutics, which developed applications for opioid use and substance use disorders, was emblematic of this challenge. Last Friday, the Boston-based company filed for Chapter 11 bankruptcy protection and laid off most of its workforce. In the bankruptcy petition, the company listed $65.6 million in assets and $51 million in debt.
Founded in 2013, the company has taken strides that few others in the industry have been able to achieve. Three of its prescription digital prescription tools were approved by the Food and Drug Administration. It was one of the first prescription digital therapeutics companies to receive FDA approval and take its product to market. Its therapeutic 15 blues were covered by carriers and multiple state Medicaid plans. Founder and Former CEO Corey McCann,
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Nevertheless, Pear continued to struggle financially. The company generated less than $13 million in revenue in 2022, with a loss of approximately $123 million.
In a post on LinkedIn last Friday, McCann said the company failed because of denial from payers and market conditions. McCann stepped down as CEO prior to the Chapter 11 filing, but will serve as a paid consultant during the company’s dissolution. He did not respond to an interview request.
Andy Molnar, CEO of the industry trade group Digital Therapeutics Alliance, said payer reimbursement is the biggest challenge facing companies, along with a low funding environment. Pear’s demise is already having an impact, he said.
Molnar said, “The question everyone’s getting right now is, ‘How come you’re not like a pear?’
Arun Gupta, CEO of digital therapeutics company Big Health, said he would not like to raise money right now. He said his company is well funded and is diligent in reducing its expenses.
“Investors are shy, rightly so, because they are losing money on one of the biggest platforms in the space,” Gupta said.