Digital Therapeutics Provider Files for Bankruptcy, Cuts 92% of Workforce

Digital therapeutics pioneer Pear Therapeutics has filed for bankruptcy, noting plans to sell the business or its assets.

Founded in 2013, the company provides software-based prescription therapeutics for substance use disorder, opioid use disorder, and chronic insomnia. Its products, which have all received Food and Drug Administration approval, provide cognitive behavioral therapy to help users combat the disorders.

On April 7, Pear Therapeutics voluntarily filed for protection under Chapter 11 of the US Bankruptcy Code, planning to pursue a sale of the business or its assets.

"Our hope is that our business and/or products will be purchased so that another company can provide them to patients," the company stated on its website. It is no longer accepting new prescriptions for its products or providing refills.

Additionally, the company announced plans to scale down operations during the bankruptcy process. In an April 5 Securities and Exchange Commission filing, Pear stated it would lay off 170 employees, or 92 percent of full-time employees, effective April 7. This will leave 15 employees to continue operations in connection with the bankruptcy process.  

The filing further notes that CEO Corey McCann, MD, PhD, has stepped down. Christopher D.T. Guiffre, chief operating officer and chief financial officer, will serve as the company's principal executive officer through the bankruptcy process.

In a LinkedIn post, McCann blamed insurance denials and market conditions for the company's demise.   

"The Pear team has accomplished a lot together in bringing the first Prescription Digital Therapeutics (PDTs) to market," he wrote. "We've shown that clinicians will readily prescribe PDTs. We've shown that patients will engage with the products. We've shown that our products can improve clinical outcomes. We've shown that our products can save payors money. Most importantly, we've shown that our products can truly help patients and their clinicians.

"But that isn't enough," he continued. "Payors have the ability to deny payment for therapies that are clinically necessary, effective, and cost-saving. In addition, market conditions over the last two years have challenged many growth-stage companies, including us."

Alarm bells have been ringing for Pear Therapeutics for several months.

Last July, the company announced it would terminate 25 employees, or 9 percent of its workforce, due "to the macroeconomic environment." Later in the year, the company announced in its third-quarter earnings statement that 59 employees would be laid off, representing approximately 22 percent of the workforce.

But, in the same earnings report — the company's most recent — Pear reaffirmed its full-year revenue guidance of $14 to $16 million.

Then, last month, the company announced that it was exploring "strategic alternatives to maximize shareholder value," engaging investment bank MTS Health Partners, L.P., to act as its financial advisor.

"As part of its process, Pear is exploring the potential for an acquisition, company sale, merger, divestiture of assets, licensing, or other strategic transactions and/or seeking additional financing," Pear stated in a press release.

In its bankruptcy filing, the company stated that it evaluated "a wide range of strategic alternatives" and "also significantly reduced operating expenses."