Proteus Digital Health
A digital medicine company valued at USD 1.5 billion that put ingestible sensors into pills
- Founded
- 2001
- Closed
- 2020
- Lifespan
- 19 years
- Total funding
- $500 million
- Peak valuation
- $1.5 billion
- Country
- United States
- City
- Redwood City
- Sector
- Health
- Founders
- Andrew Thompson
- Investors
- Novartis, Otsuka
- At its peak
- Around 300 employees in 2019
- Cause of closure
- Business model failed
What did it do?
Proteus Digital Health was a Redwood City-based digital medicine company that tracked whether patients took their medication using ingestible sensors embedded in pills. Sensor data reached a mobile device and the doctor via a patch worn on the body. Abilify MyCite, developed with Otsuka, became the first drug with a sensor to win FDA approval, in 2017.
Why did it shut down?
The system was expensive and cumbersome to use; insurers and patients were not persuaded to cover the extra cost, and no strong evidence could be offered that the product improved adherence. A USD 100 million funding round expected at the end of 2019 did not close, and the company put its staff on two weeks' leave. In January 2020, when its licensing agreement with Otsuka ended early, a major source of revenue disappeared. The company filed for bankruptcy in June 2020, and its assets were sold to Otsuka in August for USD 15 million.
The story
In November 2017 the US Food and Drug Administration (FDA) approved the first drug with an embedded sensor. Otsuka's antipsychotic Abilify had been combined with an ingestible sensor developed by Proteus Digital Health and named Abilify MyCite. When the patient swallowed the pill, the sensor's signal was relayed to a mobile device via a patch worn on the body. With the patient's consent, the doctor would be able to see whether the medication had actually been taken.
Redwood City-based Proteus had been founded in 2001 and, under co-founder and chief executive Andrew Thompson, rested on the thesis that medicines not being taken as prescribed cost the health system between USD 100 billion and USD 300 billion a year. The company raised around USD 500 million from investors, including pharmaceutical giants such as Novartis and Otsuka, and reached a USD 1.5 billion valuation. In 2019 it moved into oncology, launching a digital medicine version for chemotherapy patients.
In practice the system was complex and expensive. Abilify MyCite was reported to cost around USD 1,650, at least twice the price of the branded drug; patients had to wear a patch constantly, and insurers were not persuaded of why they should pay extra. Some psychiatrists voiced hesitation about prescribing a tracked antipsychotic to schizophrenia patients, who may fear being watched. At the end of 2019 the company failed to close the USD 100 million round it had been counting on and put its staff on two weeks' compulsory leave. In January 2020 its licensing agreement with Otsuka ended early, and a major source of revenue disappeared too.
In June 2020 Proteus filed for Chapter 11 bankruptcy. Its headcount, around 300 a year earlier, had fallen to 93. In August 2020 the bankruptcy court in Delaware approved the sale of the company's assets to Otsuka for USD 15 million, despite objections from a group of investors that included Novartis; Otsuka had been the only bidder.
Proteus became an expensive lesson that a technically ground-breaking product cannot turn into commercial success without winning over both the patient's daily experience and the payer's calculations.
Lessons for founders
- Even if your technology is medically feasible, if it requires patients to wear an extra device every day, measure usage rates separately in pilots.
- Start gathering the health economics data that shows payers your product saves money before it goes to market.
- Do not tie your revenue to a single pharmaceutical partnership; the moment that partner pulls out, the company runs out of air.
Sources
- Smart pill maker Proteus files for bankruptcy, reveals it has held acquisition talks with Otsuka (STAT, 2020-06-16)
- Proteus files for bankruptcy: Where did it falter? (MedCity News, 2020-06-16)
- Otsuka approved to buy bankrupt smart-pill maker Proteus’ assets, overcoming opposition from Novartis (STAT, 2020-08-19)
- Proteus Digital Health CEO talks about significance of FDA’s digital pill approval (MedCity News, 2017-11-17)
This section is compiled from public sources (Wikidata, news archives and company announcements). Figures are given as they appear in those sources; unknown fields are left blank. If you spot a mistake in an entry, you can send us a correction.
Is something in this entry wrong? Request a correction → Method