Akili Interactive, maker of a video game-based digital therapeutic for treating pediatric ADHD, announced Wednesday it plans to go public through a merger with special-purpose acquisition company Social Capital Suvretta Holdings Corp. I.

The deal is expected to net the digital therapeutics startup up to $412 million in gross cash proceeds, valuing the combined company at about $1 billion. The transaction includes a $162 million private investment in public equity (PIPE) raise, with $100 million coming from Social Capital and the rest coming from new and existing investors.

The companies are planning for the transaction to close in the middle of the year. Akili will then trade on Nasdaq under the ticker symbol "AKLI."

"This transaction represents the next step in our journey to become the world’s leading digital medicine company directly targeting neurological function. Over the past 10 years, we have created a platform representing a new era of cognitive medicine, driven by our fundamental focus on patients, advanced science and proprietary technology, and the mission-driven hard work of our entire team," Akili CEO Eddie Martucci said in a statement.

"We believe medicine now can be both effective and engaging. Social Capital Suvretta shares our vision for the future, and we look forward to applying our combined experience as we drive the commercialization of our platform and advance our deep pipeline of prescription digital therapeutics to help people living with cognitive impairments across the globe."

WHY IT MATTERS

Akili said it will use the proceeds from the merger to support the commercial launch of its FDA-cleared EndeavorRx digital therapeutic in the second half of 2022 and expand its pipeline of products to treat other cognitive disorders, including autism spectrum disorder, major depressive disorder and multiple sclerosis.

The EndeavorRx product, currently approved for children between the ages of 8 and 12, could also be targeted to other groups of people with ADHD, like younger kids, teens and adults. The company is working to get the product approved for pediatric ADHD in Japan as well.

"Beyond ADHD, there is a potential for long-term growth as each patient uses their product and the product suite grows, which potentially creates an ability to create a household brand that is known for cognitive improvement across ages and conditions," Chamath Palihapitiya, founder and CEO of Social Capital and chairman and CEO of SCS, said during an investor presentation.

THE LARGER TREND

Akili scored $110 million in Series D funding plus another $50 million in debt financing in May. The company said it planned to use those funds to expand its scope of care and conduct research on how it could treat other cognitive disorders. 

EndeavorRx scored FDA De Novo clearance in June 2020, which the agency noted was the first game-based therapeutic it had approved for any condition. The product was initially launched for a limited time in April 2020, when the FDA relaxed requirements for digital health devices treating psychiatric disorders due to the pandemic. 

SPACs have become a popular path to the public markets for digital health companies. Last year, digital prescription therapeutic company Pear Therapeutics, baby tech company Owlet, teletherapy company Talkspace and digital health chatbot Babylon closed SPAC mergers. 

However, health tech companies so far have struggled after going public, a report by Silicon Valley Bank found. In healthcare overall, average post-IPO performance was -12%, but average de-SPAC performance was -32%. It was even worse for the health tech sector, where de-SPAC performance was -44%. (The term "de-SPAC" refers to the process of merging with an SPAC.)