# Pear Therapeutics (2013 – 2023)

- URL: https://girisimcikafasi.com/en/startup-graveyard/pear-therapeutics/
- Sector: Health
- Country: United States
- Total funding: unknown
- Cause of closure: Business model failed

## What did it do?

Pear Therapeutics was a Boston-based company developing software-based treatments, known as digital therapeutics, that doctors prescribed and that received FDA authorisation. It launched three products, for substance and opioid use disorder and for insomnia. It went public through a SPAC merger in 2021.

## Why did it shut down?

Although doctors prescribed the products, only a limited number of insurers agreed to pay for these treatments, and revenue fell far short of expectations. The SPAC merger brought in $175 million instead of the expected $400 million. Attempts to raise funding in 2022 and early 2023 came to nothing; a target of selling up to $150 million in shares raised only $1 million. In April 2023 the company filed for Chapter 11 bankruptcy, and in May its assets were sold to four buyers for $6.05 million.

## The story

In January 2023, as its cash ran out fast, Pear Therapeutics tried to throw itself a lifeline by selling up to $150 million in shares. By the end of March the sale had brought in only $1 million. As STAT put it, it was now clear that investors had no intention of putting money into the company again.

Pear was founded in Boston in 2013 on the idea that software, like a drug, could be prescribed. In 2017, with reSET, an app offering cognitive behavioural therapy for substance use disorder, it became the first company to receive FDA authorisation for a standalone digital therapy. This was followed by reSET-O for opioid use disorder and Somryst for insomnia. In June 2021 a SPAC merger with Thimble Point Acquisition Corp. valued the company at $1.6 billion. At the time Pear was forecasting that its revenue would rise to $125 million in 2023.

Doctors wrote prescriptions and patients used the apps; but the last link in the payment chain was broken, because only a limited number of insurers agreed to cover the cost of these treatments. The SPAC merger also brought in only $175 million instead of the expected $400 million. In 2022 product revenue rose 178 per cent to $10.4 million, but sales fell in the final quarter. The company went through two waves of layoffs and halted its development pipeline. The shares, which entered Nasdaq at around $9.30, had fallen to 39 cents by March 2023.

On 7 April 2023 Pear filed for Chapter 11 bankruptcy and laid off 170 employees, about 92 per cent of its workforce. CEO Corey McCann stepped down; McCann wrote that insurers were able to refuse to pay for clinically necessary, cost-reducing treatments. At an auction in May, Click Therapeutics, Welt Corp, Harvest Bio and Nox Health Group bought the company's assets piecemeal for a total of $6.05 million. That sum was far below Pear's $32 million of debt.

Pear's collapse shows that in healthcare, clinical success and regulatory approval are not a business model in themselves. Unless the payer puts a product on its reimbursement list, even the most innovative treatment cannot become a revenue stream that scales.

## Lessons

- For a healthcare product, put the price negotiation with the reimbursing body (Turkey's SGK social security institution or private insurers) at the top of your business plan, just as much as regulatory approval.
- Base your revenue forecasts not on the number of prescriptions but on the number of patients covered by reimbursement.
- Plan in advance which costs you will cut if an IPO or SPAC brings in half the amount you expected.

## Sources

- [Pear Therapeutics to go public in $1.6 billion SPAC merger](https://www.statnews.com/2021/06/22/pear-therapeutics-spac-ipo/)
- [Pear Therapeutics’ Cuts Are Not Enough; ‘Strategic Alternatives’ Among Next Steps](https://medcitynews.com/2023/03/pear-therapeutics-cuts-are-not-enough-strategic-alternatives-among-next-steps/)
- [Pear Therapeutics Files for Bankruptcy and Plans for Asset Auction in May](https://medcitynews.com/2023/04/pear-therapeutics-files-for-bankruptcy-and-plans-for-asset-auction-in-may/)
- [Pear Therapeutics dreamt of huge revenues and ‘commercial scale.’ It never came close](https://www.statnews.com/2023/04/13/pear-therapeutics-goals/)
- [Pear Therapeutics sold for parts at $6 million auction](https://www.statnews.com/2023/05/19/pear-therapeutics-auction/)