Proteus Digital Health, Backed by Novartis and Once Valued at $1.5 Billion, Files for Chapter 11 Bankruptcy

By Shi Yuan

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

Proteus, founded in 2001, is a digital health company dedicated to developing personalized visualization, medication ingestion management, and physiological response monitoring solutions based on its novel smart pill technology. In June 2014, Proteus entered the unicorn list of the digital health industry for the first time, with its valuation reaching as high as $1.5 billion.

Helius, the smart pill, is the core product of Proteus. While Helius appears indistinguishable from a conventional pill, it contains an internal sensor the size of a grain of sand that monitors how medication is metabolized and takes effect within the body. After a patient ingests the smart pill, the internal sensor is powered by gastric acid and transmits signals outward. A companion smart patch worn on the skin receives various physiological parameters and displays the data on a linked mobile app, enabling patients and physicians to track medication adherence and monitor information such as the timing and manner of drug intake. In 2010, Proteus’s smart patch received FDA clearance. In July 2012, the Helius smart pill also received FDA clearance.

Source: Proteus Official Website

According to the InvestGo database of PharmaCube, Proteus has completed eight rounds of public financing, with cumulative funding reaching $443 million, including investments from pharmaceutical companies such as Novartis, Yuheng Pharmaceutical, and Otsuka.

Proteus Digital Health Public Fundraising History

Source: PharmCube InvestGo

In September 2009, Novartis collaborated with Proteus to conduct a small-scale, 20-day study to track patient adherence to antihypertensive 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 participated again in the company’s Series F financing round, which raised a total of $62.5 million.

In 2016, Yuheng Pharmaceutical subscribed to USD 40 million worth of Series H preferred shares issued by Proteus Digital Health, Inc. through its wholly-owned subsidiary Yuheng Hong Kong (direct investment) and Shanghai Sailings Boda Ker Investment Partnership (indirect investment), thereby obtaining the right to appoint a board observer to the latter’s board of directors.

In 2017, Otsuka Pharmaceutical invested $88 million in Proteus Digital Health and established a partnership to jointly develop a smart pill called Abilify MyCite, designed to monitor medication adherence in patients with psychiatric disorders.

Abilify (aripiprazole, brand name: Abilify) is a medication widely used to treat psychiatric disorders such as schizophrenia and bipolar disorder (manic-depressive illness). Aripiprazole was first approved by the U.S. Food and Drug Administration (FDA) in 2002 for the treatment of patients with schizophrenia. In 2013, it became the best-selling drug in the United States, reaching peak sales of $8 billion in 2014. In 2015, the expiration of its compound patent in the United States dealt a severe blow to Otsuka Pharmaceutical’s revenue. To counter the surge of generic competitors, Otsuka partnered with Proteus Digital Health to upgrade aripiprazole into the first neuropsychiatric therapy equipped with a digital tracking system. However, according to STAT News, this partnership was terminated in January 2020.

According to legal filing documents, Proteus holds assets valued between $100 million and $500 million, with liabilities ranging from $50 million to $100 million. It is estimated to have between 200 and 999 creditors, among whom the largest include PREI’s Westport Office Park ($1.0353 million), 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 pharmaceutical or digital health companies will bid to acquire Proteus’s assets during its bankruptcy liquidation.

References:

https://www.cnbc.com/2020/06/15/proteus-digital-health-once-worth-1point5-billion-files-for-chapter-11.html

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