After blazing a trail in digital therapeutics, Pear goes bankrupt

Digital therapeutics trailblazer Pear Therapeutics filed for Chapter 11 bankruptcy on Friday following months of setbacks.

Why it matters: The Boston-based company made history as the first to secure regulatory clearance for a prescription digital therapeutic — but ran into issues securing insurance reimbursement.

Details: With financial advice from boutique investment bank MTS Health Partners, Pear plans to sell through an auction process. It has terminated 170 employees, or roughly 92% of its employees.

• CEO Corey McCann has stepped down from his role but will continue to serve on the company’s board.
• The company said it evaluated a range of options in an effort to optimize value for all stakeholders and significantly shrink operating expenses before deciding on Chapter 11.
• Foley Hoag and Gibbons are offering legal counsel, while Sonoran Capital Advisors was appointed as restructuring adviser.

Catch up quick: Pear, whose therapeutics are designed to address conditions including insomnia and substance use disorder (SUD), merged with SPAC Thimble Point Acquisition Corp. at a valuation of $1.6 billion in 2021.

• In 2022, the company underwent two rounds of layoffs and, finding itself short on cash, paused work on its clinical pipeline.
• Pear said in a regulatory filing last month that it was exploring strategic options via MTS ahead of a formal restructuring.
• The company in Q2 2022 reduced its revenue forecasts for the year to between $14 million and $16 million (down from $22 million), citing slow progress with private payers, per MedTech Dive.
• Of the 11,000 prescriptions it saw written for its apps that quarter, just over half were fulfilled. Of those, only 45% were paid for, falling below Pear’s target rate of 50% to 65% payment for the year.

How it worked: The company had three digital therapeutics on the market for insomnia, SUD and opioid use disorder (OUD).

• Through clinical trials, Pear succeeded in getting clearance from federal regulators to market its products.
• Yet the company struggled to secure reimbursement for its novel treatments, especially among commercial and government payers.
• The average selling price for one of its treatments was $1,195, per its annual report.

What they [were] saying: “There’s a lot of work before we can imagine a world where there’s universal coverage for [prescription digital therapeutics],” Pear CFO Chris Guiffre said during Q2 '22 earnings.

What we're watching: With reimbursement being a sticking point, Pear's business is likely to be stripped and sold for parts — like its intellectual property, clinical trial base and its technology.