BehaVR and Oxford VR raise $13M to merge

BehaVR and OxfordVR, two virtual reality behavioral health companies, are set to merge with support from a $13 million Series B fundraise.

Why it matters: This deal could open the tap for a flood of M&A in mental health tech, particularly amid rumors of a tie-up between telehealth players Amwell and Talkspace.

Details: Optum Ventures and Oxford Science Enterprises led the round and were joined by Partners Group-backed Confluent Health, Accenture Ventures, Chrysalis Ventures and Thornton Capital.

• BehaVR CEO Aaron Gani will lead the combined entity, to be known as BehaVR.
• Series B capital will last through mid 2024 at least, Gani tells Axios. He declined to disclose terms and valuation.
• MTS Health Partners, along with law firms Waller Lansden Dortch & Davis and McDermott Will & Emery, advised BehaVR. Hogan Lovells advised OxfordVR.

How it works: Louisville, Ky.-based BehaVR serves more than 120 outpatient health care providers, Gani says.

• The company's virtual reality programs use tenets of exposure therapy to treat various mental health conditions.
• The VR programs are largely self-directed, and clinicians oversee and manage patients' treatment asynchronously.

What's next: Gani tells Axios the company will use proceeds from the raise to develop and clinically validate its products.

• These include a cognitive behavioral therapy-focused wellness program called First Resort and three therapeutic candidates for anxiety and depression that BehaVR is developing in partnership with Sumitomo Pharma.
• BehaVR also has a pain prescription therapeutic candidate in collaboration with Confluent, and an opioid use disorder candidate whose research is funded by the National Institute on Drug Abuse.
• Those candidates are undergoing the pre-submission process with the FDA.

Meanwhile, the FDA granted Breakthrough Device status in June to OxfordVR's gameChange digital therapeutic for the treatment of schizophrenia and other serious mental illnesses. It's a designation the agency has given nearly 700 products despite few actually reaching the market.

Reality check: The landscape for approved behavioral health digital therapeutics (DTx) is sparse because of murky reimbursement policies, little buy-in from providers and payers, and mixed efficacy results.

What they're saying: Gani says the ongoing provider shortage, coupled with the deepening global mental health crisis, could create a window of opportunity for companies like BehaVR by super-powering clinicians.

• "It is going to take digital therapeutics that can scale exponentially — whereas humans only scale linearly at best — to make a dent in this crisis," Gani says.