reSET-ing the Treatment Paradigm for Mental Health

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Charles Rhyee:
Hello, my name is Charles Rhyee, Cowen's healthcare technology analyst and welcome to the Cowen FutureHealth Podcast. Today's podcast is part of our monthly series that continues Cowen's efforts to bring together thought leaders, innovators and investors to discuss how the convergence of healthcare, technology and consumerism is changing the way we look at health, healthcare and the healthcare system.
With me today is Dr. Corey McCann, president and CEO of Pear Therapeutics, a pioneer in prescription digital therapeutics and the first company to receive FDA market authorization for software to treat disease.
Prior to Pear, Corey was an investor with MPM Capital, where he evaluated new healthcare investment opportunities and oversaw strategy and execution of portfolio companies. Prior to that, he was an engagement manager with McKinsey and Company where he advised pharmaceutical, medical device and biotechnology companies on the acquisition, development and commercialization of life science technologies.
Corey, thanks for being with us today.
Corey McCann:
Hey, Charles, it's a pleasure to be here. Thanks to you and the Cowen team for having me.
Charles Rhyee:
I think before talking about the interesting digital therapeutics that you have at Pear, I think it probably makes a bit of sense to talk about the backdrop we find ourselves in, which has been a global pandemic. I think beyond obviously the immediate tragedy of those who have died, unfortunately, due to the virus can you talk about some of the other impacts long term social distancing has had on people, such as mental health?
Corey McCann:
Yeah, absolutely, Charles, and I think when we think about mental health within the context of COVID we're really dealing with an epidemic inside of a pandemic. Before COVID these were huge and pressing issues and I think if you just look at some of the numbers around the conditions for which Pear's lead products treat there were 20 million Americans with substance use disorder prior to COVID and there were 30 million Americans with chronic insomnia prior to COVID.
I think as you saw social distancing come into place really it created this perfect storm where there were more triggering events and there was less access to care and really when you look at the implications of that squeeze you've seen just a tremendous, tremendous worsening of mental health conditions in the context of COVID.
And if we were to look at some different addiction conditions there was a JAMA study that looked at use of different illicit substances between November of 2019 and July of 2020 and for example, you saw things like a 67% increase in positive tests for Fentanyl. You saw a 33% positive increase in positive tests for heroin. You saw similar trends for methamphetamine and cocaine. I think it really just speaks to the exacerbation of what was a previously difficult issue within the U.S.
Charles Rhyee:
You mentioned earlier about a lot of the issues that we're dealing with, right. Obviously, even before COVID this epidemic with opioids. Obviously, before COVID that seemed like a long time ago. Maybe remind us specifically about the problems of opioids in our society. Obviously, that's been plaguing us for some time now.
Corey McCann:
Yeah. I mean, certainly if we look across both substance use and opiate use disorder, I mean this is a major American health crisis, again in excess of 20 million Americans that are the incident population for both of those conditions and if you look within opiate use disorder specifically these are patients who create higher healthcare costs per unit patient.
They're patients whose costs are higher when untreated but diagnosed with opiate use disorder and it's a set of patients for whom there are efficacious pharmacotherapies but there's just a tremendous need for an ability to provide wraparound behavioral support for those pharmacotherapies and that's really right where our ReSET-O product comes to play.
Charles Rhyee:
You have three products on the market currently. Can you walk us through each of them?
Corey McCann:
Yeah, sure. We have three currently marketed products. There are ReSET, ReSET-O and Somryst products. ReSET is a 90 day prescription product for the treatment of addiction related to alcohol, cannabis, cocaine and stimulants. And of note, that particular product is a monotherapy. So said differently, it is not for use in combination with a pharmacotherapy. It treats addiction to those conditions in and of itself.
The product that came after it was called the ReSET-O and that was the first prescription digital therapeutic of PDT to receive breakthrough designation. ReSET-O is an 84 day program to treat opiate use disorder specifically and the product is indicated for use in combination with buprenorphine as the first drug software combination.
Our third product is called Somryst and Somryst is a nine week prescription digital therapeutic that is intended for use by patients age 22 years of age and older and it is for the treatment of chronic insomnia. Of note, this is actually the first product with a label for chronic insomnia. The pharmacotherapies that came before it, things like benzodiazepines and zolpidem are actually contraindicated for chronic use and they're only indicated for acute exacerbation of insomnia.
Charles Rhyee:
That's an interesting point there and maybe we can talk a little bit about how are your products different than the ... What is the current standard of care in each of these cases currently?
Corey McCann:
Yeah, so across each of these cases really these are conditions which are very heavily dependent on human care, which in many cases is not available. And so, for example for patients who are addicted to things like alcohol, cannabis, cocaine and stimulants in many cases they'll receive some sort of behavioral therapy.
In some of those cases the therapists will be appropriately trained but in many of the cases the therapist will not and the patient essentially has to leave their home, drive to a face-to-face therapeutic encounter and sit in front of a clinician and work through some of these different cognitive paradigms.
In the case of substance use disorder that's usually called intensive outpatient therapy or IOT or IOP, depending on who you ask. In the context of ReSET-O, really it's dogma that patients who are opiate dependent need to be on some form of medication assisted therapy. That can be methadone. It can be Vivitrol. It can be buprenorphine but none of those pharmacotherapy products are approved for use in and of themselves.
They're only approved for use in combination with intensive behavioral support and really what you have is a dearth of clinicians who are capable of being able to administer that behavioral support and so you find ReSET-O as plugging into that existing drug therapy paradigm but for use as a drug software combination.
In the case of Somryst it's a little bit different. There you have something that's called CBTI, which is a specific type of talk therapy for insomnia, which is known to be guideline recommended first-line treatment but there are literally hundreds of clinicians who are capable and trained of administering CBTI but there are 10s of millions of patients in need. And so, as you can imagine from that patient provider mismatch many of the patients who need access to CBTI just are not able to access it due to clinician shortages.
So in all of these cases really these products are intended to work within existing care paradigms to enhance rates of efficacy versus best of breed human intervention, to improve access and patient engagement, to provide data and transparency for clinicians via dashboards and then to also provide opportunities for population health management for payers.
Charles Rhyee:
I think the key point in all of this, right, is you're embedding known guidelines and known treatment paradigms, right, particularly in this case, right, cognitive behavioral therapy underpins all these products. Talk about how that gets delivered to patients and why this actually creates a, it seems to me a much higher level of care that you can now deliver to patients.
Corey McCann:
Yeah, so I think if you think about really optimizing different behavioral therapies for digital use you're able to address the access issue and you can make these products and you can make behavioral therapies available when the patient needs them and where the patient needs them and certainly we see use patterns which are consistent with use in the middle of the night for patients with insomnia but also for patients with different addiction conditions.
You're able to standardize these different therapeutic paradigms and really make sure that the fidelity of care is best of breed for every single patient use case and that's something which is very different from what you might see in the real world with a human intervention. But then lastly, you're able to do things like embed different learning algorithms and ultimately customize the therapeutic products in real time, on the fly, on the basis of individual patients. And that's certainly not an opportunity which is possible for traditional human interventions.
I think, Charles, you make a really good point and I just want to make sure to loop back around and reinforce the notion that digital therapeutics and prescription digital therapeutics are not necessarily just about CBT and Pear is certainly not a CBT company. Really what we're trying to do is to build out this whole new modality and build a platform around the modality.
We just really think about different behavioral therapies and behavioral health conditions as being the logical place to start because that's a place where unmet need is as high as it can possibly be and many of these products have a high probability of technical and clinical success.
Charles Rhyee:
Yeah, no certainly. I'd like to talk more about the platform in a second but just before we get there I think another key distinction which you highlighted right here in this case we're talking prescription digital therapeutics. So all of your products require prescriptions. Can you talk about the importance you think here is in having products, your products requiring a physician to write a prescription?
Corey McCann:
Yes. I think this is really a question of focus and just to be really clear Pear does not create health and wellness products. We only create products which are directly intended for use to treat serious medical conditions. And really you find that the space bifurcates almost very much like the drugs versus supplements dichotomy.
I think you have a number of digital products that are for health and wellness uses and then you're seeing this emergence of digital products which are for direct disease treatment. To the best of my knowledge really the only option, if one is creating a frank disease treatment, is to go down a regulated path and we strongly believe that this degree of regulatory clarity is unbelievably important for patients and for clinicians to be able to safely and appropriately use these products.
I mentioned both patients and clinicians because there's something that's incredibly important about the virtuous cycle that one sets up when a patient is using a product in the real world and the clinician is tuning in to the dashboard in order to be able to understand all of the data that's being collected in real time in the real world. You really only get that virtuous cycle when one has a product which is for use in combination with a clinician's supervision.
Charles Rhyee:
Yeah, and then it leads into talking about the platform itself. Can you talk about the Pear platform, maybe a little bit more what it is and why it's important as you think about developing other therapeutics?
Corey McCann:
Yeah. I mean, when we think about this space we think that scale is unbelievably important. I think it is difficult, if not prohibitive, to build up all of the different pieces of infrastructure that are required in order to access single indications and single therapeutic areas.
And so really what we've done at Pear is to build what we think of as the first fully integrated digital therapeutic company. And when I say fully integrated digital therapeutic company, what I mean is that we start with what is foundational and granted the IP and an ongoing asset rollout. We've been quite aggressive in in-licensing a whole host of different academic assets.
We develop these assets, both in house but on what is an FDA precertified software as a medical device or SAMD manufacturing engine. So essentially everything that we do is built according to 21 CFR 820 compliant quality management systems. So essentially medical device grade. We layer that into what is the first end-to-end modular platform that includes a virtual care experience, so the ability to be prescribed via a telemedicine encounter but then also a backend patient services center. That's our PearConnect capability.
And then, really importantly here, we marry that with a commercial [inaudible 00:14:05], which is able to detail each one of these products to clinicians, to support patients and then to work with payers on the backend. And so everything that I just mentioned we built for ReSET but we use exactly that same infrastructure and platform for ReSET-O and we used exactly that same platform and infrastructure for Somryst to the point where we're now starting to see some of our payer coverage contracts including all of our assets.
And so very long story short, we have some big aspirations in this space. Really what we're trying to build is the platform to host not just our assets but the assets of other companies and that platform is both a platform in the traditional tech sense but it's also a platform in the traditional pharma or healthcare sense in that it includes a vertically integrated set of capabilities.
Charles Rhyee:
When you say it that way obviously you've gotten approval from the FDA for your first three products. Does this accelerate your process now with the FDA as you go and that's because they've already approved the underlying infrastructure, the engine that your powers are built on ... how much does that accelerate development? And then maybe talk about not only maybe speed to market, scale that it delivers but also maybe cost to deliver as well and maybe compare that to what a traditional development drug timeline looks like.
Corey McCann:
Yeah, I think it's still early days for the space and so I don't have crisp numbers like we will maybe this time next year as we're moving into our fourth and fifth products. But I think, suffice to say if you think about traditional drugs as costing $1 billion and taking a decade we're able to create products that have drug-like efficacy and ultimately some degree of drug-like price for risk, cost and time, which is much more favorable for risk capital.
And so I think we're still starting to understand what that looks like at scale but in the realm of let's say four to five years as opposed to the 10 to 15 year time span for development of a traditional drug. So there are a tremendous amount of savings there.
Your question around regulatory synergies is also a really interesting one and as people may know, Pear is one of the members of the FDA's precertification program, got big tech companies like Google, Apple, Samsung and then big pharma companies like Roche and J&J and Pear has really had the privilege of being one of the small companies that sits in between those industries.
We actually were the first company to be examined as part of the FDA's precertification path and then our Somryst asset was the first asset to be reviewed and then ultimately cleared involving the FDA's precertification path. And so we believe that this is an incredible leg up in terms of developing additional products down our portfolio.
But then as people know software is really a living breathing entity and part of the advantage of a prescription digital therapeutic is the ability to improve the product on the basis of every single patient who uses it in a commercial context.
And so that agility to be able to in a regulatorally compliant fashion iterate the product in real time on the basis of commercial user data is something which is really part of our secret sauce and we see the FDA's precertification program as being incredibly helpful there as well.
Charles Rhyee:
Yeah, no, and that makes a lot of sense and it leads to my next question here is I want to switch gears a little bit and talk about the progress that you're seeing now with the products in the market. I think in the middle of 2019, so long ago, you took back marketing ReSET and ReSET-O back internally but then we had COVID, right. What was it like trying to launch not only a new therapeutic but a whole new class of drugs really in the middle of a pandemic?
Corey McCann:
I would simply call it a multi-variable experiment. I think at that particular time and if we rewind to about a year ago today you had patients who were becoming afraid to leave their homes because of social distancing and because of that you had many clinics who were transitioning to a fully telemodel and many of the clinics in the addiction space have been consolidated over the course of the past year.
So this is something that was quite difficult for them and you also then had Pear out educating these clinics and these patients on how to use an entirely new therapeutic modality. And as you can imagine, there's a good deal of complexity in that situation and in the messaging that it takes to be successful there.
And so that's really what's driven a good part of our tele-first approach and so prior to COVID we always knew that the end state for prescription digital therapeutics would be prescription via a telemedicine encounter. So said differently, a patient would periodically see a telemedicine clinician, that could be monthly, it could be quarterly but then there would need to be something that would fill in the gaps in between those telemedicine encounters.
And that's very simply for us prescription digital therapeutics. So we always knew that we would get there. We just didn't know that we would get there in Q1 of 2020. And so we very, very quickly shifted to a digital first approach, making all of our training and all of our prescribing, things which were possible from a fully remote situation and then we've since taken it even a step further by integrating a telemedicine diagnostic environment in front of some of our different prescription digital therapeutics like Somryst.
And I think it's anyone's guess as to what equilibrium looks like after we eventually emerge from the pandemic but I think it's safe to say that some fraction of previously face-to-face care will transition into telemedicine encounters and really what we've built is a commercial infrastructure that's capable of addressing both tele as well as traditional boots on the ground in traditional clinics but all the while optimizing on creating a delightful clinician experience and then a similarly useful and delightful patient experience.
Charles Rhyee:
And when you talk about this digital first experience is it Pear that is building the network of clinicians to interface with patients or are your facilitating existing clinicians who are treating these other patients to be able in effect almost get referrals as ...? For example, if I go to the Somryst website and I go through the questionnaire and I get to the point to talk to a clinician, who am I reaching out to at that point?
Corey McCann:
Yeah. It's a great question and there are telemedicine companies that are not us. That's not a core competency of us and we're effectively a product manufacturer so we're not in the business of being a clinical services' provider. That said, we do see the opportunity to really create this infrastructure that brings together clinicians and then prescribable digital therapeutics.
And so you can think about this as being a fully integrated infrastructure that allows the patient and the clinician to come together, allows the patient to be screened and prequalified, allows the clinician to diagnose, write a script and then does things like dispensation and adjudication of fulfillment, all seamlessly in real time, all digitally, such that the patient gets on the digital product or the prescription digital therapeutic without leaving their home.
Charles Rhyee:
That's great, Corey. What we've mostly have been talking about though if I think about it, right, it's following more of a traditional drug launch model where it's about physician education, helping them set up the infrastructure, how to prescribe, teach them and their office staff how to use it. More recently though it seems like you guys been going more direct to payers having those discussions. I know you have now coverage decisions from a number of payers. Obviously, opportunity is going directly to states as well. What led to the change in strategy there?
Corey McCann:
I think a lot of this was largely precipitated by COVID and just the way in which COVID upended the entirety of the American healthcare infrastructure. In a lot of ways a "non-traditional launch" plays exactly to the strategies of controlled therapeutics as a space. I mean, we're one part traditional pharma, one part traditional tech and there's a huge opportunity to pull from both.
And so when we think about pulling from both, again, this is really opportunities for a non-traditional launch via tele. You're still engaging clinicians. You're still training clinicians but you don't necessarily have to put a [inaudible 00:23:32] force on the ground in order to go into clinician offices that are unoccupied. So you can see that that's one way in which COVID has accelerated the transition.
Another way in which we're able to have a "non-traditional launch" is that PDTs have the opportunity to collect really robust per patient datasets in commercial patients. So if this was a traditional drug you would essentially run clinical trials, you would run registries but you would only be able to have data which was collected by some sort of an independent observer and that's what would roll into all sorts of label expansion and market access studies.
And we've been able to do that quite differently here, which is to collect large dossiers of data from commercial patients and we actually just put out two at the end of last year. One which was a more than 4000 patient real world examination, showing rates of patient retention and abstinence that mirrored our pivotal clinical studies. The other was a health economic exploration that showed in more than 350 patients about a $2150 meter turn in cost avoidance for each individual treated ReSET-O patient.
And you'll really see us continue to build up that data dossier, again, in commercial patients. Maybe the last big opportunity here is to directly engage in contract with different payers. Traditionally in the drug world you would think about an intermediary, like a PBM. Because of the data that we have associated with each one of our commercial patients it puts us in the position where we can do the at risk contracting and in many cases disintermediate the PBM.
And so you've seen us go out and contract with employers directly. You've seen us contract with some commercial payers directly. You've seen us [inaudible 00:25:31] in some cases some PBMs as well, but you'll see a continued drumbeat around direct contracting with some non-traditional groups. In some cases for us, like state Medicaid organizations.
Charles Rhyee:
The point about direct contracting obviously that requires a different type of sales first model, typically if you're going into the employer market. You did mention that you are working with PBMs as well. I mean, at the end of the day is that still ... I would still think that that's a pretty efficient way to get to the market through coverage by big PBMs. Should we still look forward to that in particularly one, to be on formulary can be a big importance, right because it could be the preferred therapeutic class and it really directs patients to choose something.
Corey McCann:
Yes and I think you'll see some exciting PBM news coming from us maybe in the next couple months. I think that's the end state, which is where you have these prescription digital therapeutic formularies which ultimately streamline coverage to get from the manufacturer through to the end payer.
I think we're in a little bit of an early state there where we have health and wellness products that are being pushed as buy ups to self insured employers and I think that's the beginning of PBMs involvement but certainly we're really excited about PBMs creating coverage infrastructure for prescription digital therapeutics, frankly.
Charles Rhyee:
Do you see that there's an understanding particularly at the PBM level because you would think with their experience with PNC committees, understanding and looking at the efficacy of products that they're recognizing the differences in digital products themselves. I know at the beginning maybe they were trying to provide some access to it if you look at the Express Scripts digital formulary when it first came out. Are you starting to see a greater maybe savviness maybe in understanding the differences?
Corey McCann:
Highly varies PBM to PBM but we are seeing an evolution in the understanding of the industry. I think if you look at some of the more recent PBM surveys there tends to be a dramatically increased understanding of PBTs and again, I think if you look at the work that we've done with some more forward thinking PBMs I think that there's ample evidence that says that they get it and that will be a part of the story that we continue to advance throughout 2021.
Charles Rhyee:
Right. So I know you have an extensive pipeline beyond the three products that we talked about. Any that you'd like to share that you're really excited about that's coming around here? I know you mentioned a fourth and fifth coming down the road.
Corey McCann:
When we think about what gets us most excited on the pipeline side it's really pipeline scale and the ability to be able to develop new assets via exactly the same infrastructure that we've built previously. So I think that's the theme that is most interesting for us.
As I think about what gets me personally most interested it's really the ability for these products to become more complex and more tailored to individual patients and so to that end we've been rolling up different digital biomarkers looking across a whole host of different axes to be able to do digital phenotyping, ultimately to direct digital therapeutic content as well as pharmaceutical drug dosing.
So it's really watching each one of these products evolve into places where these are no longer thought of as apps but they're thought of as really complex and sophisticated first-line medical treatments.
Charles Rhyee:
Maybe just to close out here, you mentioned before there could be some interesting announcements coming in the next few months, any other milestones that we should be looking out for in the next year or so as we think about the progress that Pear's making?
Corey McCann:
You'll see continued reimbursement milestones, for sure, and because of the nature of the opiate dependent population you'll see some of these coverage decisions coming from state fee for service and MCO organizations. I mean, Medicaid is just unbelievably important for us as a business and it's important to be able to scale ReSET and ReSET-O to patients that need it.
You'll see some large commercial insurers jumping on board and you'll see that by and large because of the continued drumbeat of real world data. So we're really excited about some of the long term data that's emerging. We're excited about some of the real world registries we've been running and where we're comparing patients on product to patients who are in a control condition and then we're starting to see, in some cases, some really innovative use cases like in an ED step down, really going to some of the patients who are really costly and in most need of acute support.
So you'll see that data driving coverage. You'll see that coverage driving increased script volume and like I said, you'll see really a robustness come of our offerings across the pipeline. Roll all that together and we're excited. We think this is the year that PDTs become first=line standard of care and I guess I would just encourage you to stay tuned.
Charles Rhyee:
So I think we'll end it there. Corey, thanks so much for joining us. I really enjoyed the discussion. It sounds like a lot of things are happening at Pear and I really look forward to watching the progress and seeing the growth of this sector.
Corey McCann:
Always a pleasure and I hope the next time we do this we get the opportunity to do it face-to-face.
Charles Rhyee:
Yeah, absolutely, same here. So thanks, Corey, and thanks everyone for listening to this episode and I look forward to having you join us on a future Cowen FutureHealth podcast.
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