Pear Therapeutics is going public in a $1.6 billion SPAC deal. Its projected revenue reveals just how hard it is to make money with a doctor-prescribed app.

Pear Therapeutics is going public in a $1.6 billion SPAC deal. Its projected revenue reveals just how hard it is to make money with a doctor-prescribed app.

  • Pear Therapeutics, which makes apps to treat substance abuse and insomnia, is going public through a SPAC deal. 
  • Companies like Pear are experiencing slow commercial launches due to a lack of insurance reimbursement. 
  • The company is hoping to boost revenue from $4 million this year to $125 million in 2023.
  • See more stories on Insider’s business page.

One of the first companies to develop an app that doctors can prescribe to patients is going public at a $1.6 billion valuation. 

Pear Therapeutics, which is based in Boston, is merging with special purpose acquisition company Thimble Point Acquisition Corp., the duo announced Tuesday. 

The $276 million that Thimble Point raised in an initial public offering earlier in 2021 will be turned over to Pear. The company will also get $125 million in additional financing from the Neuberger Berman funds and the Pritzker Vlock Family Office in the form of a private investment in public equity, or “PIPE”.

In all, Pear will get $400 million in fresh capital through the deal.

Pear is one of the leaders in a new field called

digital therapeutics
, which are cell phone apps, video games, and other electronics that have been clinically tested and proven to improve a person’s health. The company sells three products that have been cleared by the Food and Drug Administration for substance abuse and insomnia. 

The hope has been that getting the FDA to sign off on these products will allow companies like Pear and Akili Interactive to get reimbursement from health insurers. But both companies are still trying to convince payers that these therapies are effective and long-lasting

Even with three FDA-cleared products, Pear is expecting to have just $4 million in revenue in 2021. It hopes to grow that to $125 million by 2023. 

“We presented the opportunity for Pear to lead the category it created. We believe our leadership position in the rapidly emerging prescription digital therapeutics category will allow for significant revenue ramp in the next few years,” Chief Operating Officer Chris Guiffre said. 

Pear wants to ‘lead the category it created’

Prior to announcing its plans to go public via

SPAC
, Pear in March closed a $100 million Series D round that included investors SoftBank, 5AM Ventures and Novartis.  

The $1.6 billion valuation attached to its SPAC deal puts Pear at the head of its rivals in terms of funding raised.

In May, fellow digital therapeutics company Akili raised new financing at a valuation between $516 million and $774 million, according to a person involved in the investment round.  And in April,

diabetes
-focused digital therapeutics company Better Therapeutics announced that it was going public via SPAC at a $187 million valuation.

Pear has persuaded 15 pharmacy benefit managers, self-insured employers and mental health and addiction departments for states like Indiana and Ohio to cover its app, Guiffre said. It has even launched a pilot program with Tufts Health Plan and a study with Kaiser. 

Pear has launched its commercial products with a small salesforce, after investor Novartis actually backed out of the pair’s substance abuse product collaboration 2019 (Another joint effort on a was hit with a clinical trial failure in January).

Akili also started with a small launch for its prescription video game for attention deficit hyperactivity disorder, or ADHD. Its game is currently not covered by insurers. 

The addiction and insomnia app developer had multiple SPAC suitors

There are dozens of healthcare SPACs looking for acquisition targets before a 24-month-window to spend capital closes. 

But SPACs are a tough sell for biotech and pharmaceutical companies, which can successfully go public via traditional IPO, investors and industry executives told Insider

So, health tech and digital therapeutics companies have become popular SPAC targets. 

Pear has been approached by multiple SPACs since the start of the year, Guiffre said. He declined to name them.

The Thimble Point merger is expected to close in the second half of 2021. 

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