Pear Therapeutics Looks For A Buyer As It Struggles To Get Paid For Prescription Apps

Pear Therapeutics, which has three FDA-cleared prescription apps to help treat substance use disorder and insomnia, announced Friday it was “exploring strategic alternatives,” including a sale, merger or licensing of assets, and would no longer hold a fourth quarter earnings call. The move highlights the main challenge facing companies developing software as medicine: getting commercial insurers and government health programs to pay for it.

Pear’s stock closed at 39 cents a share on Friday, down 34% from 59 cents at yesterday’s close. The Boston-based company had raised $250 million in venture funding from investors including SoftBank Vision Fund 2, before going public in a SPAC reverse merger in December 2021, which had valued the company at $1.6 billion. Its market capitalization at close of business Friday was less than $55 million.

In a press release, Pear said there was “no set timetable for this process” and if the company failed to complete a transaction, “it may be required to seek a reorganization, liquidation or other restructuring.” A spokesperson confirmed Pear executives would not comment until the board approved a course of action.

Pear’s apps, which guide users through behavioral therapy, are meant to be used in conjunction with ongoing treatment by a doctor. For example, its opioid use disorder app ReSET-O offers weekly cognitive behavioral therapy lessons for patients who are in an outpatient treatment program and taking buprenorphine. It also has an app for other substance use disorders and another for chronic insomnia.

The long-term opportunity in prescription digital therapeutics is easy access to noninvasive care – software doesn’t have the side effects or supply chain constraints of traditional pharmaceuticals. But this also means there’s a lot of uncertainty over how they should be reimbursed: that is, should they be paid for by medical insurance or a pharmacy plan?

“Reimbursement is a major hurdle,” says Natalie Schibell, a vice president and principal analyst in the healthcare division at Forrester. Some commercial insurers pay for prescription digital therapeutics, as well as a handful of state Medicaid programs, which is government-funded health insurance for low-income Americans. But Medicare, the government-funded health program for seniors, does not. This patchwork of coverage means “there is a lack of return on this investment,” says Schibell. “It’s not mainstream.”

There also remains a “digital divide” when it comes to accessing these new technologies, she says, especially for people who live in rural areas and may not have access to high-speed internet access.

The average price for a 3-month prescription is more than $1,300, according to Pear’s third quarter earnings report. There were more than 31,000 prescriptions written for Pear’s products in the first nine months of 2022, according to the filing. But the company reported only 58% of those were filled and it received payment for around half of them. Pear pointed to a number of risk factors, including “market acceptance” among insurers, doctors and patients, noting “only a limited number of healthcare insurers have agreed to reimburse purchases of our products.”

Pear withdrew its revenue and operating guidance for 2022 and 2023, but had previously reported $10.1 million in revenue with an operating loss of $94.1 million in the first nine months of 2022. Revenues had increased from $2.8 million in the same period in 2021, but operating losses continued to mount driven by a combination of research, development and commercialization costs.

The company had conducted two layoffs in 2022 to try and reduce cash burn – terminating 25 employees in July and 59 employees in September. Pear had an accumulated deficit of nearly $300 million and $60 million in cash as of September 30, 2022.