Digital therapeutics firm Akili agrees $34 million takeover

Virtual Therapeutics and Akili

In another deal that highlights the pressures facing companies in the digital health sector, Akili Interactive has agreed to go private in a merger with Virtual Therapeutics.

The announcement comes just weeks after Akili said it was seeking strategic alternatives for its business, which focuses on game-like digital therapeutics (DTx) for attention-deficit hyperactivity disorder (ADHD).

Akili went public via a merger with a special purpose acquisition company (SPAC) in 2022 that raised around $163 million and briefly elevated its value above the $1 billion mark, before swiftly falling back below the $200 million mark. It is now trading just above $0.40, with a market cap of $33 million.

The company initially focused on a business strategy based on its EndeavorRx prescription DTx aimed at children with ADHD – one of the first DTx to get FDA approval - but failed to gain traction commercially. Last year, it changed tack to also focus on direct-to-consumer (DTC) sales of the software to adults with ADHD under the EndeavorOTC brand.

The move brought in some sales growth and the company has also taken steps to reduce losses with job cuts and other cost-saving measures. However, in its last quarterly update, revenues were still low at $383,000 and Akili recorded an operating loss of almost $11 million. On the plus side, it has paid down its debt and was still sitting on cash reserves of $63 million, down from $75 million at the end of 2023.

Virtual – which focuses on the development of game-like software for mental health disorders – has offered just over 43 cents per share for Akili, slightly above its closing share price before the deal was announced, but 85% above the price before it announced the strategic review of its business at the end of April.

As its name suggests, Virtual’s focus is on virtual reality (VR) software. Its two main products are Breakthrough, a mental fitness training app aimed at businesses that promises to reduce stress and burnout and fight “quiet quitting”, and attention-training and meditation app Bloom.

In a statement, the two companies said the merger would create a “diversified, leading digital health company” that will operate under the Virtual Therapeutics name, with Akili operating as a wholly-owned subsidiary.

“The team at Akili has been successful in applying clinical and scientific rigour to bring new products forward, and we believe their expertise will complement our efforts,” said Virtual’s co-founder and chief executive, Dan Elenbas.

“Together, we can build a company that brings these behavioural services to as many patients as possible – regardless of where they are or barriers that exist for them today.”

Akili’s absorption into Virtual is further evidence of the struggles that digital health companies which blossomed during COVID-19 lockdowns have faced trying to build sustainable businesses, even with FDA-approved DTx.

The merger comes just a few days after the assets of another digital health pioneer – Better Therapeutics – were sold to Click Therapeutics after it shut down operations, three years after its own IPO. Click also bought some of the assets of Pear Therapeutics, another DTx developer that went down the IPO route, but filed for bankruptcy last year.

The Virtual/Akili transaction has been approved by the boards of both companies and is expected to close in the third quarter.