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Akili wraps up Palihapitiya-led SPAC deal

Aug 22, 2022
Illustration of a stethoscope with a video game controller at the end

Illustration: Sarah Grillo/Axios

Akili Interactive, maker of a prescription video game for children with ADHD, started trading Monday after completing its merger with Chamath Palihapitiya's Social Capital Suvretta Holdings Corp. SPAC, Sarah writes.

Why it matters: Following digital health's bubble burst, public markets remain volatile — making Akili one of a scant number of public health tech debuts this year.

Be smart: Add the above to the fact that Akili is using what's become a largely out-of-favor strategy — SPAC deals — plus growing concern around potential SEC rule changes, and you've got us scratching our heads.

What they're saying: "The most important thing for us is just getting the capital and being able to have the flexibility to grow for the future," Akili CEO Eddie Martucci tells Axios.

  • Unlike many SPAC candidates, Akili locked down the PIPE capital it needed through its expected $1B combination with Social Capital Suvretta Holdings Corp. I, first announced in February.
  • "We engineered a deal that essentially got and exceeded the minimum cash needs of the transaction... it was early enough where people were still looking to allocate money in good companies and good strategies," Martucci says.

Details: Boston-based Akili raised more than $163 million from the transaction — enough to fund at least 24 months of operations, it says. (And to hit all of its milestones, the CEO adds.)

  • The raise included new and existing investors Suvretta Capital Management’s Averill strategy, Apeiron Investment Group, Temasek, co-founder PureTech Health, Polaris Partners, Evidity Health Capital, JAZZ Venture Partners and Omidyar Technology Ventures.
  • Palihapitiya, dubbed the SPAC King, will chair Akili's board. The tech investor noted on Twitter that he is investing $100 million into Akili.
  • Funds will support its planned Q4 commercial launch of EndeavorRx, as well as potential expansion into ADHD populations beyond pediatrics.
  • Akili sees an opportunity to apply its technology to other cognitive areas like depression or autoimmune disorders like lupus, Martucci says.

👾 How it works: Akili's EndeavorRx is both the first and only FDA-cleared prescription video game, and the first FDA-approved commercial product targeting cognitive treatments for inattentiveness or ADHD.

  • Aimed at ages 8-12, the video game — which involves racing an alien — measures a child's attention function to determine cognitive weaknesses, with the technology adapting to address focus issues.

Between the lines: The CEO's big dream is for Akili to be integrated into mainstream medicine.

  • "That's where the [digital therapeutics] industry needs to go," Martucci tells Sarah. "To do that, you need the type of clinical data that is just as rigorous as any other medicine."
  • That will depend on the relatively new market attaining greater insurance coverage, with just 25% of payors saying they are willing to cover prescription digital therapeutics, per MMIT research.
  • Martucci is still hopeful an unlocking moment will come: "We're looking for insurers to step up."

Context: Despite an overall slowdown in funding for telemental health companies, startups developing digital therapeutics — prescription treatments for acute mental illnesses — have seen recent investor interest.

  • For example, Pear Therapeutics (Nasdaq: PEAR), last December merged with SPAC Thimble Point Acquisition Corp. at a valuation of $1.6 billion.

Yes, and: As new digital therapeutics startups continue to enter the market, Akili has the chance to become the acquirer of choice, he says.

  • "As this world grows, I'm not sure the market supports hundreds and hundreds of [digital therapeutics products]," Martucci says.

State of play: The cognition crisis is growing.

  • "Pediatric and teenage [behavioral health or cognitive] issues are at an all-time high, and services are at an all-time low, because of COVID," the CEO says. "Parents have been pounding the tables for new options."

Of note: Palihapitiya has sponsored a growing list of SPAC transactions, including Clover Health, Virgin Galactic, Opendoor and SoFi — all of which have seen their stocks deteriorate considerably — while two other SPACs he launched are pushing back their deadlines earlier this month.

What we're watching: Whether Akili can kill digital health's downward post-SPAC performance trend.

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