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, Inc. (Nasdaq: AKLI), a leading digital medicine company,
today announced its strategic plan to transition from a
prescription to a non-prescription business model. The company
plans to pursue regulatory approval for over-the-counter labeling
of its products.
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
- $81.88 average revenue per users who paid in the period
(ARPU)
- 57% of total subscriber sessions were played for the full
recommended 25 minutes of therapeutic time
- 51% retention of monthly subscribers after 1 month and 67%
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
$55 million and $60 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
- 2024 Non-GAAP total operating expenses expected to be between
$42 million and $47 million, which excludes stock-based
compensation expense
- 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 40%, including an elimination of the
company’s field sales force and market access team which accounts
for approximately two-thirds of the reduction. The company plans to
invest a portion of the savings in activities to drive consumer
awareness and capital-efficient expansion of the business.
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 the
United States (GAAP), this press release includes the following
non-GAAP financial measures: EndeavorOTC billings on a historical
basis and non-GAAP total operating expenses on a projected basis.
Akili derives these non-GAAP financial measures by excluding
certain expenses and other items from the respective GAAP financial
measure that is most directly comparable to each non-GAAP financial
measure. Specifically, EndeavorOTC billings is defined as revenue
plus the change in deferred revenue during the period; 2023
non-GAAP total operating expenses on a projected basis exclude
stock-based compensation expense, an impairment loss on certain
assets associated with our sublease and severance and
termination-related costs associated with the workforce reductions
during the year; and 2024 non-GAAP total operating expenses on a
projected basis exclude stock-based compensation expense. Akili’s
management believes that these non-GAAP financial measures are
useful to both management and investors in analyzing its ongoing
business and operating performance. Management does not intend the
presentation of these non-GAAP financial measures to be considered
in isolation or as a substitute for results prepared in accordance
with GAAP, but as a complement to provide greater transparency. In
addition, these non-GAAP financial measures may differ from
similarly-named measures used by other companies. A reconciliation
of the historical non-GAAP financial measures to GAAP financial
measures is included in the attached financial tables. However, a
quantitative reconciliation of projected non-GAAP total operating
expenses to projected GAAP operating expenses is not available, nor
is the probable significance of such reconciling information, due
to Akili’s inability to predict with reasonable certainty the
amount of future stock-based compensation expense at this time.
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 U.S. Food and Drug Administration’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 U.S. Food and Drug Administration for
its 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 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 60-70% gross margins; the Company’s expectation that its
existing cash, cash equivalents, and short-term investments will be
sufficient to fund the Company’s current and planned operations
into the second half of 2025; the Company’s projections for 2023
and 2024 non-GAAP total operating expenses; the Company’s
expectations regarding the revenue recognition policy that will be
applicable to EndeavorOTC; and the Company’s expectations that
EndeavorOTC and EndeavorRx will remain on the market while the
Company pursues regulatory approval from FDA for EndeavorOTC and
conversion of its pediatric prescription product, EndeavorRx, to an
over-the-counter product. 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 further commercialize and obtain approval
from 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 successfully
commercialize and support its EndeavorRx prescription product and
to obtain further FDA approval to successfully convert its
EndeavorRx product to an over-the-counter product; 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 (SEC). 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.
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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230913220525/en/
Investors: Santosh Shanbhag Chief Financial Officer
InvestorRelations@akiliinteractive.com
Media: Julie DiCarlo SVP, Communications
PR@akiliinteractive.com
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