Digital medicine company Akili gets a cold reception in the market after a blank check merger

Shares of Akili Interactive plunged on Monday and again on Tuesday after the digital therapies developer went public via a merger with a special-purpose acquisition company. The deal netted Akili more than $163 million, which she plans to use to commercialize her video game-based treatment for pediatric ADHD, the company said August 19.

Shares of Akili opened as high as $36 on Monday, before falling below $6 by mid-Tuesday morning. The Boston-based company is now valued at less than $200 million.

Nonetheless, Akili expects the new funds, combined with his cash on hand, to provide enough money to cover at least 24 months of operations. Other digital health companies, such as Pear Therapeutics, have trimmed staff as they seek to expand their track in tougher market conditions.

Akili merged with Social Capital Suvretta Holdings Corp. I, one of many special purpose acquisition companies created by Chamath Palihapitiya, a venture capitalist and former Facebook executive who is sometimes known as “SPAC King”. Shareholders of the so-called blank check company approved the deal at a meeting on August 18.

SPAC mergers offer private companies an alternative way to jump into the public markets, allowing them to bypass a lengthy process of courting investors. But the deals have fallen out of favor recently, even as the market for traditional IPOs has cooled considerably.

Traditional IPOs have to date raised around $5 billion so far in 2022, a sharp drop from the typical $30 billion in previous years and well below the more than $100 billion raised so far. stadium in 2021, according to Dealogic data cited by the Wall Street Journal.

The pain is particularly acute in the biotech sector, which produced nearly 200 IPOs in 2020 and 2021. To date, only 15 biotech startups have gone public via IPO this year, according to data from BioPharma Dive.

Eddie Martucci, founder and CEO of Akili, will continue to lead the company, while Palihapitiya will chair its board of directors.

Akili currently has a product, a video game called EndeavorRx that is intended to improve attention function in children with ADHD. The company received Food and Drug Administration clearance in 2020 and expects a full US launch in the fourth quarter of this year.

Akili plans to use a portion of the proceeds from the deal for marketing efforts, as well as developing other digital therapies for autism spectrum disorders, multiple sclerosis and major depressive disorder.

The company’s revenue has declined in recent years as it earns less from licensing deals and has yet to complete the commercial launch of EndeavorRx. In a July 14 regulatory filing, Akili recorded revenue of $66,000 for the first quarter of 2022, down 44% from the prior year period. For the year 2021, the company reported revenue of $538,000, compared to $3.94 million in 2020.

The decline resulted in a larger net loss of $61 million for Akili last year.

Ned Pagliarulo contributed to this story.


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