Novartis Invests in Digital Health "Unicorn" Company That Files for Bankruptcy! Valuation Once Reached as High as $1.5 Billion

Release date:

2020-06-19

Text | Ten Yuan

On the evening of June 16, Proteus Digital Health, a digital healthcare company focused on tracking patient medication adherence, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.

Proteus was founded in 2001 as a digital healthcare company dedicated to developing innovative smart pills that offer personalized medication delivery, intake management, and real-time monitoring of patients' physiological responses to drugs. In June 2014, Proteus made its debut on the unicorn list of the digital healthcare industry, with the company's valuation reaching as high as $1.5 billion at its peak.

The smart pill Helius is Proteus's flagship product. While Helius looks no different from a regular pill on the outside, it contains a sensor about the size of a grain of sand—capable of monitoring how the medication is metabolized and takes effect inside the body. After a patient swallows the smart pill, the internal sensor harnesses energy from stomach acid to transmit signals externally. Meanwhile, a matching smart patch adhered to the skin picks up various physiological data and displays the information on a connected mobile app. This allows both patients and doctors to track medication adherence, as well as monitor details like when and how the drug is taken. In 2010, Proteus's smart patch received FDA approval, and in July 2012, the smart pill Helius also earned FDA clearance.

Source: Proteus official website

According to the InvestGo database by PharmaCube, Proteus has completed 8 rounds of public financing, raising a total of US$443 million, with investments from pharmaceutical companies including Novartis, Yuheng Pharmaceutical, and Otsuka.

Proteus Digital Health Reveals Its Public Financing Journey

Source: PharmaCube InvestGo

In September 2009, Novartis partnered with Proteus and conducted a small 20-day study to track patients' adherence to their blood pressure medication regimens. In 2010, Novartis invested $24 million in Proteus and secured an exclusive global licensing agreement for Proteus Biomedical's organ-transplant sensing technology. In 2013, Novartis once again participated in the company's Series F funding round, bringing the total funding raised to $62.5 million.

In 2016, Yuheng Pharmaceutical invested a total of US$40 million—through its wholly-owned subsidiary Yuheng Hong Kong (direct investment) and Shanghai Sailong Boda Kol Investment Partnership Enterprise (indirect investment)—to subscribe for Proteus' Series H preferred shares. As a result, Yuheng Pharmaceutical also earned the right to appoint a board observer to Proteus' board of directors.

In 2017, Otsuka Pharmaceutical invested $88 million in Proteus and formed a partnership to jointly develop an intelligent pill called Abilify MyCite, designed to track medication adherence among patients with mental health conditions.

Abilify (aripiprazole, trade name: Abilify) is a widely used medication for treating mental illnesses such as schizophrenia and manic-depressive disorder (bipolar disorder). In 2002, aripiprazole was first approved by the FDA for marketing, initially targeting patients with schizophrenia. By 2013, it had become the best-selling drug in the U.S., and in 2014, its sales peaked at an impressive $8 billion. However, in 2015, the compound patent for aripiprazole expired in the U.S., dealing a severe blow to Otsuka Pharmaceutical's revenue. To counter the growing threat from generic competitors, Otsuka partnered with Proteus to upgrade aripiprazole into the first neurotherapeutic drug equipped with a tracking system, aiming to maintain its competitive edge. Unfortunately, according to a report by STAT, this collaboration was terminated in January 2020.

According to the legal filing, Proteus holds assets ranging from $100 million to $500 million and has liabilities between $50 million and $100 million. It is expected to have 200 to 999 creditors, with the largest creditors including PREI’s Westport Office Park ($1,035,300), Romaco North America ($510,800), Otsuka Pharmaceutical ($397,700), Workday ($288,000), and Xceliance ($215,600). Meanwhile, Spring Ridge Ventures holds nearly all of its Series A preferred shares.

What remains to be seen is whether any pharmaceutical or digital healthcare companies will bid to acquire Proteus's assets during the company's bankruptcy liquidation process.

Reference materials:

https://www.cnbc.com/2020/06/15/proteus-digital-health-once-worth-1.5-billion-files-for-chapter-11.html

https://www.mobihealthnews.com/6013/novartis-invests-24m-in-proteus-biomedical

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