Akili Announces Amended Agreement with Shionogi, Shift in Corporate Strategy and Release Date for First Quarter 2024 Financial Results

Rhea-AI Summary

Akili, Inc. (Nasdaq: AKLI), a digital medicine company, announced an amended agreement with Shionogi, including cash payments and debt forgiveness, strategic business exploration with workforce reduction, and the release date for first quarter 2024 financial results. Shionogi canceled a $5.0 million debt and will make payments for SDT-001. Akili will receive $10.5 million upfront, up to $4.5 million for development and support services, and up to $3.0 million in potential regulatory milestone payments. The board is exploring strategic alternatives to maximize shareholder value, leading to a revised operating plan and budget for 2024, a 46% reduction in workforce, and a focus on Shionogi’s activities. The Company plans to release financial results on May 14, 2024, and continue marketing authorization efforts for EndeavorOTC.

Positive

• Amended agreement with Shionogi provides Akili with near-term cash payments and debt forgiveness, improving financial position.

• Exploration of strategic alternatives aimed at maximizing shareholder value reflects proactive management approach.

• Revised operating plan and budget for 2024 demonstrates a commitment to cost-efficiency and operational focus.

• Continued marketing authorization efforts for EndeavorOTC show dedication to product development and commercialization.

Negative

• Workforce reduction of approximately 46% may impact internal capabilities and workflow efficiency.

• Reduction in promotional activities for EndeavorRx and EndeavorOTC products could affect market visibility and sales performance.

• No assurance that the strategic review process will result in a transaction or generate attractive terms, potentially leading to uncertainty for investors.

Insights

Financial Analyst

The amendment to Akili's distribution agreement with Shionogi, which includes the cancellation of debt and upfront cash payments, signifies an immediate strengthening of Akili's balance sheet. The influx of $10.5 million boosts liquidity, potentially improving the short-term financial stability of the company. In addition, the potential for up to $7.5 million more from regulatory milestones and development services could provide further financial cushioning. However, investors should be cautious about the elimination of future royalty payments which indicates a trade-off between immediate cash inflow and long-term revenue streams. This could imply that the company is positioning for near-term survival rather than long-term growth, paralleling the decision to explore strategic alternatives which might include the sale of the company, mergers, or restructuring. Investors should keep an eye on the May 14 financial results for further insight into the company's fiscal health and operational direction.

Pharmaceutical Industry Analyst

Akili's move to restructure and reduce its workforce by 46% while halting promotional activity for its digital therapeutic products is a defensive strategy aimed at reducing costs and preserving capital. This is often a sign of a company under financial pressure or in the midst of a strategic pivot. Such restructuring can lead to short-term savings but may also impact the company's ability to grow and market its products long-term. The ongoing FDA review of EndeavorOTC suggests that Akili is still pursuing opportunities in the digital therapeutics space, although now with a more narrowed focus. This indicates a shift in corporate strategy towards leaner operations with a concentrated effort on regulatory approvals rather than broad market promotion. For investors, these changes could be a signal to re-evaluate the company's long-term growth potential and its ability to capitalize on its products in the competitive pharmaceutical industry.

Corporate Strategy Analyst

Akili's announcement of exploring strategic alternatives is indicative of a potentially significant shift in the company's direction and could have a substantial effect on shareholder value. This strategic evaluation process, while lacking certainty in outcome, signals that the company's board is considering a range of actions that could dramatically transform the company's future, such as partnerships, mergers, or asset sales. The absence of a future schedule for the strategic review process adds an element of uncertainty for investors, creating potential volatility in the company's stock. A critical aspect for investors to monitor will be the company's ability to maintain its operational effectiveness and market position during this period of internal review. It is also noteworthy that there will not be an earnings call post financial results release, which limits investors' ability to gain insights directly from company leadership regarding the first-quarter performance and strategic outlook.

Shionogi amendment provides Akili with near-term cash payments and cancellation of debt obligation

Company announces exploration of strategic alternatives and associated workforce reduction

Company to release first quarter 2024 financial results on May 14, 2024

BOSTON--(BUSINESS WIRE)-- Akili, Inc. (Nasdaq: AKLI), a leading digital medicine company, today provided several corporate updates, including an amendment to its strategic distribution agreement with Shionogi & Co., Ltd. (“Shionogi”), a leading global pharmaceutical company. Under the terms of the amended agreement, Shionogi has canceled and forgiven a $5.0 million long-term debt obligation and agreed to make certain payments for SDT-001 (the Japanese, localized version of Akili’s AKL-T01 digital treatment, marketed as EndeavorRx^® in the United States). Per the amendment, Akili will receive an upfront payment of $10.5 million in consideration for the elimination of future royalty payments and certain future milestone payments. Akili will also be eligible to receive up to a total of $4.5 million from Shionogi in consideration of Akili development and support services, with at least $1.5 million of such services fees payable up front, and up to a total of $3.0 million from Shionogi in potential regulatory milestone payments. SDT-001 is currently under marketing approval review in Japan as a potential digital treatment for children and adolescents with attention-deficit/hyperactivity disorder (“ADHD”).

In parallel, Akili’s board of directors has initiated a process that is currently ongoing to evaluate potential strategic alternatives to maximize shareholder value. As part of the process, the board of directors will evaluate, together with its external advisors, a range of potential strategic alternatives. There can be no assurance that this process will result in Akili pursuing a transaction or that any transaction, if pursued, will be completed on attractive terms, if at all. The Company does not intend, assume any obligation, or promise to publicly update or revise any information regarding this strategic review process or communicate a timetable for completion of the evaluation process.

As a part of this evaluation of strategic alternatives, Akili announced today that its board of directors approved a revised operating plan and budget for the remainder of 2024 and related restructuring of the organization to lower operating expenses while focusing on supporting Shionogi’s regulatory and commercialization activities. The Company’s workforce will be reduced by approximately 46% including an elimination of the Company’s marketing and medical affairs teams. In conjunction with this restructuring, the Company has substantially reduced promotional activity for its EndeavorRx and EndeavorOTC products, but plans to continue to support current users of its products and make its products available for purchase. Additionally, the Company plans to continue to pursue marketing authorization from the U.S. Food and Drug Administration (the “FDA”) of the Company’s EndeavorOTC product, which remains under review, in parallel with exploration of broader strategic options.

Finally, Akili plans to report first quarter 2024 financial results and a business update via press release on Tuesday, May 14, 2024 after the market closes. The Company will not be hosting an earnings conference call for that release.

EndeavorOTC Indication and Overview

EndeavorOTC is a digital therapeutic indicated to improve attention function, ADHD symptoms and quality of life in adults 18 years of age and older with primarily inattentive or combined-type ADHD. EndeavorOTC utilizes the same proprietary technology underlying EndeavorRx, a prescription digital therapeutic indicated to improve attention function in children ages 8 - 17. EndeavorOTC is available under the FDA’s current Enforcement Policy for Digital Health Devices for Treating Psychiatric Disorders During the Coronavirus Disease 2019 (COVID-19) Public Health Emergency. EndeavorOTC has not been cleared or authorized by the FDA for any indications. It is recommended that patients speak to their health care provider before starting EndeavorOTC treatment. No serious adverse events have been reported in any of our clinical studies. To learn more, visit EndeavorOTC.com.

EndeavorRx Indication and Overview

EndeavorRx is a digital therapeutic indicated to improve attention function as measured by computer-based testing in children ages 8-17 years old with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of Attention (TOVA®) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication. The most common side effect observed in children in EndeavorRx’s clinical trials was a feeling of frustration, as the game can be quite challenging at times. No serious adverse events were associated with its use. EndeavorRx is recommended to be used for approximately 25 minutes a day, 5 days a week, over initially at least 4 consecutive weeks, or as recommended by your child’s health care provider. To learn more about EndeavorRx, please visit EndeavorRx.com.

About Akili

Akili is pioneering the development of cognitive treatments through game-changing technologies. Akili’s approach of leveraging technologies designed to directly target the brain establishes a new category of medicine – medicine that is validated through clinical trials like a drug or medical device but experienced like entertainment. Akili’s platform is powered by proprietary therapeutic engines designed to target cognitive impairment at its source in the brain, informed by decades of research and validated through rigorous clinical programs. Driven by Akili’s belief that effective medicine can also be fun and engaging, Akili’s products are delivered through captivating action video game experiences. For more information, please visit www.akiliinteractive.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “evaluate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. These forward-looking statements include, without limitation, statements in this press release related to: the benefits expected from the amendment of the Company’s agreement with its partner, Shionogi; the Company’s shift in corporate strategy; the Company and Board’s exploration of strategic alternatives; and the Company’s revised operating plan and budget for the remainder of 2024 and related restructuring including a significant workforce reduction; the Company’s plans to focus on supporting the Shionogi partnership and to eliminate the Company’s marketing and medical affairs teams; the Company’s expectations regarding its ability to lower operating expenses; and the Company’s expectations that EndeavorOTC and EndeavorRx will remain on the market while the Company continue to pursue regulatory approval from the FDA for EndeavorOTC in parallel with exploration of broader strategic options. Any forward-looking statements in this press release are based on management’s current expectations and beliefs and are subject to a number of risks, uncertainties and important factors that may cause actual events or results to differ materially from those expressed or implied by any forward-looking statements contained in this press release, including, without limitation, risks and uncertainties related to: the Company’s ability to successfully support and generate revenue from its EndeavorOTC and EndeavorRx products and its partnerships; the Company’s ability to successfully perform its obligations and achieve the milestones under the amended agreement with Shionogi and Shionogi’s ability to successfully obtain regulatory approval of the SDT-001 product; the Company’s ability to complete the evaluation of potential strategic alternatives and to identify, pursue, and complete a transaction on terms that are in the best interests of and favorable to the Company and its stockholders, if at all; the Company’s ability to manage its business as a result of the workforce reduction; the Company’s ability to successfully obtain approval from the FDA for EndeavorOTC; the Company’s ability to successfully create, and navigate, a new category of medicine and to achieve broad adoption of digital therapeutics among healthcare providers, caregivers, and patients; the Company’s ability to defend its intellectual property and satisfy various FDA and other regulatory requirements in and outside of the United States; the risk of downturns and a changing regulatory landscape in the highly competitive industry in which the Company operates; the timing and results expected from the Company’s and its partners’ clinical trials and its reliance on third parties for certain aspects of its business; the Company’s ability to accurately estimate expenses, capital requirements, and needs for additional financing; and other risks identified in the Company’s current filings and any subsequent filings made with the Securities and Exchange Commission. The Company cautions you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof and should not be relied upon as representing the Company’s views as of any subsequent date. The Company disclaims any obligation to publicly update or revise any such statements to reflect any change in expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240430639511/en/

Investor and Media Contact:

Matt Franklin

President and Chief Executive Officer

InvestorRelations@akiliinteractive.com or PR@akiliinteractive.com

Source: Akili, Inc.

FAQ

What was announced in the press release regarding Akili's agreement with Shionogi?

Akili announced an amended agreement with Shionogi, including cash payments, debt forgiveness, and future milestone opportunities for SDT-001.

When will Akili release its first quarter 2024 financial results?

Akili will release its first quarter 2024 financial results on May 14, 2024, after the market closes.

What strategic action did Akili take regarding its workforce?

Akili approved a revised operating plan for 2024, leading to a 46% reduction in its workforce, including the elimination of marketing and medical affairs teams.

What is the focus of Akili's marketing efforts moving forward?

Akili plans to continue marketing authorization efforts for its EndeavorOTC product while exploring broader strategic options.