Akili Announces Business Transformation, Focusing on Non-prescription Model
- Transition to a non-prescription business model to increase consumer access and improve gross margins
- Success of EndeavorOTC in consumer demand, engagement, and retention
- None.
Non-prescription model will increase patient access to clinically-validated non-drug treatments and reduce Akili’s reliance on intermediaries
Continued growth in consumer demand and engagement for EndeavorOTC™ during its initial three months on the market affirms viability of consumer-led subscription model
Leaner non-prescription operating model will support reduced operating expenses and headcount, extend cash runway into 2H 2025, and improve gross margin profile
Akili’s focus on a consumer-led subscription model will reduce reliance on payers and enable the company to grow the business in line with the increasing demand for non-drug cognitive treatments. Akili believes that this non-prescription model will enable the company to increase consumer access and generate revenues that will support gross margins between 60 and 70 percent by late 2025.
“Today, we are evolving our business to remove barriers for patients trying to access safe and effective non-drug treatment options,” said Eddie Martucci, CEO and co-founder of Akili. “We have the unique ability to offer consumers the same clinically-proven technology as the world’s only FDA-approved prescription video game treatment, with the ease of access and convenience of a consumer tech product. A non-prescription model removes reliance on intermediaries, which we believe will give us more control over our growth and enable us to build a lasting, sustainable business.”
Martucci continued: “We have seen the non-prescription model play out with EndeavorOTC, which we released in June as a treatment for adults with ADHD. In its first three months on the market, consumer demand, engagement, and retention all surpassed our expectations. We believe that our shift to a consumer-led model across our business will maximize our reach in the ADHD patient community and allow us to potentially expand into other large markets, without many of the high cost centers of a prescription model.”
The non-prescription model allows Akili to give consumers access to differentiated and clinically-validated technology, while removing the reliance on payers that stand in the way of patients trying to access treatment. The decision to re-align the business around this new model is based on the strong demand and rapid and cost-efficient growth potential observed with EndeavorOTC in the adult market since its release.
EndeavorOTC was released in the Apple App Store on June 6, 2023 under FDA’s enforcement policy issued during the COVID public health emergency. In its first three months on the market, from June 6, 2023 through September 5, 2023, EndeavorOTC generated:
- 125,971 first time app downloads
- 4,170 active subscribers, defined as active paying users during the period
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average revenue per users who paid in the period (ARPU)$81.88 -
57% of total subscriber sessions were played for the full recommended 25 minutes of therapeutic time -
51% retention of monthly subscribers after 1 month and67% retention after 2 months -
EndeavorOTC GAAP revenue and billings (a non-GAAP financial measure defined as revenue plus the change in deferred revenue) were
$341 thousand
Financial Guidance
-
2023 Non-GAAP total operating expenses expected to be between
and$55 million , which excludes stock-based compensation expense, an impairment loss on certain assets associated with our sublease and severance and termination-related costs associated with reductions to our workforce$60 million -
2024 Non-GAAP total operating expenses expected to be between
and$42 million , which excludes stock-based compensation expense$47 million - Cash, cash equivalents, and short-term investments are expected to be sufficient to fund current and planned operations into the second half of 2025
-
By late 2025, non-prescription business model expected to operate at 60
-70% gross margins
Akili plans to pursue regulatory approval for over-the-counter labeling of its treatment products. The company is on track to submit its adult clinical trial data later this year to the FDA for OTC authorization of EndeavorOTC, and is planning to submit data to the FDA to convert its pediatric prescription product, EndeavorRxⓇ, to OTC in 2024. Akili expects that both EndeavorOTC and EndeavorRx will remain on the market as the company pursues these plans.
Akili plans to restructure the organization around executing this new business model to reflect expected lower costs to operate a non-prescription model. In connection with the restructuring, Akili will reduce staff and resources focused on its pediatric prescription business, while enabling continued support for existing pediatric customers. The company’s workforce will be reduced by approximately
Akili Webcast and Conference Call
Akili will host a conference call and webcast tomorrow, Thursday, September 14, 2023, at 8:30 a.m. ET to discuss its strategic shift and restructuring. A live audio webcast of the conference call and presentation will be available at www.akiliinteractive.com under Investor Relations, Events & Presentations, along with slides that may be referenced during the call. An archived version of the webcast will be available on the company’s website following the event.
To access the call, dial +1 888 259 6580 (toll-free) or +1 416 764 8624 (international) and reference “Akili Market Update.”
Note Regarding Revenue Recognition Policy
The Company generates EndeavorRx revenue from contracts with caregivers and patients who purchase subscriptions to the video game product. Along with the subscription to the video game product, the caregivers and patients also receive reporting metrics (through the Insight App) and technical support services. The subscription to the video game product, reporting metrics and technical support services are combined as a single stand-ready performance obligation and recognized ratably on an over time basis over the subscription period which begins once the access code is inputted into the game by the caregivers and patients and game play has started.
The Company released the EndeavorOTC product on June 6, 2023 and reported revenue through June 30, 2023 using the same over time revenue recognition pattern as that used for Endeavor Rx, noting that total revenue and billings for EndeavorOTC were de minimis during the period. The Company is currently working to determine the revenue recognition policy for its direct-to-consumer EndeavorOTC product. As the EndeavorOTC product currently does not include the companion Insight App for caregivers (or similar services) during the subscription term, the Company believes that revenue for EndeavorOTC will be recognized at the time of download and payment since control of the product has been transferred to the customers and the underlying performance obligations have been satisfied. EndeavorOTC revenue figures in this press release have been presented with that expectation. The Company’s independent registered public accounting firm has not conducted an audit or review of, and does not express any opinion or any other form of assurance with respect to, the anticipated, updated revenue recognition policy and there can be no assurance that such revenue recognition policy will be confirmed.
Note Regarding Preliminary and Unaudited Interim-Period Financial Results and Projections
The Company’s estimates of EndeavorOTC GAAP revenues and EndeavorOTC billings for the period from June 6, 2023 to September 5, 2023, the Company’s estimates of its ability to fund its current and planned operations into the second half of 2025 and future non-prescription business model margins are preliminary and unaudited, represent management estimates as of the date hereof and are subject to completion of and confirmation through the Company’s future financial closing procedures. As a result, the Company’s actual financial results may differ materially from the preliminary and unaudited estimated financial information and any projections set forth herein. The Company’s independent registered public accounting firm has not conducted an audit or review of, and does not express any opinion or any other form of assurance with respect to, any of these estimates or projections or any of the other figures or information in this press release.
Non-GAAP Financial Measures
In addition to financial information prepared and presented in accordance with generally accepted accounting principles in
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 8-12. EndeavorOTC is available under the
EndeavorRx Indication and Overview
EndeavorRx is the first-and-only FDA-authorized treatment delivered through a video game experience. EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages 8 to 12 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,” “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 Company’s strategic business shift and related restructuring; the Company’s plans to transition to a non-prescription model and to pursue regulatory approval for over-the-counter labeling for its products on certain timelines; that the consumer demand and engagement for EndeavorOTC in its initial three months on the market will continue in the future; the Company’s plans to invest in activities to drive consumer awareness and capital-efficient expansion of the business; the Company’s expectations regarding its ability to increase patient access to its treatments and to reduce its reliance on intermediaries; the Company’s expectations regarding its ability to reduce operating expenses and improve the gross margin profile of its business, including the Company’s expectations that by late 2025, its non-prescription model can operate at 60
Akili, Inc. | |||
GAAP to Non-GAAP Reconciliation | |||
Jun 6 2023 - Sept 5 2023 |
|||
EndeavorOTC Revenues | $ |
341,459 |
|
Deferred revenue, end of period |
|
- |
|
Deferred revenue, beginning of period |
|
- |
|
EndeavorOTC Billings | $ |
341,459 |
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Investors:
Santosh Shanbhag
Chief Financial Officer
InvestorRelations@akiliinteractive.com
Media:
Julie DiCarlo
SVP, Communications
PR@akiliinteractive.com
Source: Akili, Inc.