Akili (AKLI) Announces Business Transformation, Focusing on Non-prescription Model

Akili, Inc. (Nasdaq: AKLI), a leading digital medicine company, today announced its strategic plan to transition from a prescription to a non-prescription business model. The company plans to pursue regulatory approval for over-the-counter labeling of its products.

Akili’s focus on a consumer-led subscription model will reduce reliance on payers and enable the company to grow the business in line with the increasing demand for non-drug cognitive treatments. Akili believes that this non-prescription model will enable the company to increase consumer access and generate revenues that will support gross margins between 60 and 70 percent by late 2025.

“Today, we are evolving our business to remove barriers for patients trying to access safe and effective non-drug treatment options,” said Eddie Martucci, CEO and co-founder of Akili. “We have the unique ability to offer consumers the same clinically-proven technology as the world’s only FDA-approved prescription video game treatment, with the ease of access and convenience of a consumer tech product. A non-prescription model removes reliance on intermediaries, which we believe will give us more control over our growth and enable us to build a lasting, sustainable business.”

Martucci continued: “We have seen the non-prescription model play out with EndeavorOTC, which we released in June as a treatment for adults with ADHD. In its first three months on the market, consumer demand, engagement, and retention all surpassed our expectations. We believe that our shift to a consumer-led model across our business will maximize our reach in the ADHD patient community and allow us to potentially expand into other large markets, without many of the high cost centers of a prescription model.”

The non-prescription model allows Akili to give consumers access to differentiated and clinically-validated technology, while removing the reliance on payers that stand in the way of patients trying to access treatment. The decision to re-align the business around this new model is based on the strong demand and rapid and cost-efficient growth potential observed with EndeavorOTC in the adult market since its release.

EndeavorOTC was released in the Apple App Store on June 6, 2023 under FDA’s enforcement policy issued during the COVID public health emergency. In its first three months on the market, from June 6, 2023 through September 5, 2023, EndeavorOTC generated:

• 125,971 first time app downloads
• 4,170 active subscribers, defined as active paying users during the period
• $81.88 average revenue per users who paid in the period (ARPU)
• 57% of total subscriber sessions were played for the full recommended 25 minutes of therapeutic time
• 51% retention of monthly subscribers after 1 month and 67% retention after 2 months
• EndeavorOTC GAAP revenue and billings (a non-GAAP financial measure defined as revenue plus the change in deferred revenue) were $341 thousand

Financial Guidance

• 2023 Non-GAAP total operating expenses expected to be between $55 million and $60 million, which excludes stock-based compensation expense, an impairment loss on certain assets associated with our sublease and severance and termination-related costs associated with reductions to our workforce
• 2024 Non-GAAP total operating expenses expected to be between $42 million and $47 million, which excludes stock-based compensation expense
• Cash, cash equivalents, and short-term investments are expected to be sufficient to fund current and planned operations into the second half of 2025
• By late 2025, non-prescription business model expected to operate at 60-70% gross margins

Akili plans to pursue regulatory approval for over-the-counter labeling of its treatment products. The company is on track to submit its adult clinical trial data later this year to the FDA for OTC authorization of EndeavorOTC, and is planning to submit data to the FDA to convert its pediatric prescription product, EndeavorRxⓇ, to OTC in 2024. Akili expects that both EndeavorOTC and EndeavorRx will remain on the market as the company pursues these plans.

Akili plans to restructure the organization around executing this new business model to reflect expected lower costs to operate a non-prescription model. In connection with the restructuring, Akili will reduce staff and resources focused on its pediatric prescription business, while enabling continued support for existing pediatric customers. The company’s workforce will be reduced by approximately 40%, including an elimination of the company’s field sales force and market access team which accounts for approximately two-thirds of the reduction. The company plans to invest a portion of the savings in activities to drive consumer awareness and capital-efficient expansion of the business.

Akili Webcast and Conference Call

Akili will host a conference call and webcast tomorrow, Thursday, September 14, 2023, at 8:30 a.m. ET to discuss its strategic shift and restructuring. A live audio webcast of the conference call and presentation will be available at www.akiliinteractive.com under Investor Relations, Events & Presentations, along with slides that may be referenced during the call. An archived version of the webcast will be available on the company’s website following the event.

To access the call, dial +1 888 259 6580 (toll-free) or +1 416 764 8624 (international) and reference “Akili Market Update.”

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