Proteus Digital Health, maker of an ingestible sensor for tracking medication adherence, filed for Chapter 11 bankruptcy protection yesterday.
The news comes months after word that the company had furloughed much of its staff, reassessed its high-profile partnership with Otsuka Pharmaceutical and shifted away from its primary focus area of mental disorder treatment.
The "smart pill" maker indicated in the filing that it has between $100 million and $500 million in estimated assets, and between $50 million and $100 million in estimated liabilities. The company also reported between 200 and 999 estimated creditors, top among which were PREI's Westport Office Park (a $1.04 million unsecured claim), Romanco North America ($510,848), Otsuka America Pharmaceutical ($397,721) and Workday ($288,000).
In addition, Andrew Thompson has stepped back from his role as CEO. Lawrence Perkins of SierraConstellation Partners, who had previously been retained as the company's chief restructuring officer, has now been appointed by the Proteus board as its interim CEO.
“Filing for bankruptcy protection allows Proteus to continue its sales process in a more concerted and efficient manner while continuing to run the business as usual,” the company said in a statement provided to MobiHealthNews.
A representative from Otsuka said that the company won't be putting out any official statement on its business partner's bankruptcy, but said that delivery of Abilify MyCite – a sensor-enabled version of Otsuka's schizophrenia drug that was developed as a result of the companies' collaboration – will not be affected.
"We want to make it clear that this development is not expected to have an impact on our digital medicine program. Nor do we expect it will impact Otsuka’s ability to deliver the Abilify MyCite System to patients and physicians," the Otsuka representative said. "Otsuka remains committed to building a successful digital healthcare business that includes digital medicine as well as digital therapeutics."
An additional document filed by the company on Tuesday and acquired by STAT mentions that Proteus "has had fruitful discussions with Otsuka and other interested parties regarding a potential sale transaction."
WHY IT MATTERS
The writing may have been on the wall for the past few months, but this bankruptcy filing still signals a major fall from grace for one of digital health's best-known players.
Proteus had raised more than $500 million across several investment rounds, at a valuation of $1.5 billion. Abilify MyCite made waves when it received the FDA's green light back in late 2017, with some musing that the adherence technology could become a game changer for the pharmaceutical industry. The $88 million deal it signed with Otsuka in 2018 was a major digital health buy-in from an international pharma player, and a common topic of panel conversation at industry events.
The major question going forward will be whether or not Proteus' failure was a result of its technology or its business strategy. Bill Evans, managing director of digital health venture fund and research group Rock Health, told MobiHealthNews a few months ago, when signs of Proteus' troubles began to emerge, that the company probably "shouldn't have put all their eggs in one basket," and doubly so when that basket is a patient population uniquely distrustful of tracking devices.
“Proteus may have picked [a] therapeutic area with a degree of difficulty that’s an eight or nine out of 10, right?" Evans said at the time. "They may be paying the price for that tactical choice, because it’s such a challenging therapeutic modality for their particular intervention to take hold. If that’s true, it’s unfortunate, but it doesn’t disprove the value of Proteus itself. It simply means the evidence is yet to be seen.”
But on that note, some of the reports on Proteus' woes over the past few months also highlighted limited uptake among clinicians and a dearth of supporting real-world evidence. These would likely play a role when courting new investors – or in convincing prior backers to keep ponying up, and that their millions weren't misspent.
THE LARGER TREND
As Proteus makes plans to liquidate, it will be worth keeping an eye out to see whether or not other pharmas, digital health companies or other players make a bid on any Proteus assets that are up for sale. Still, there are several examples of ingestible sensor technology already out in the wild.
Meanwhile Gainesville, Florida-based etectRx received a 510(k) clearance for its own ingestible adherence product, called the ID-Cap System, in December. This company's approach involves a receiving device worn on a lanyard – not adhered to the user's skin like Proteus' technology.