The Future of Digital Therapeutics with Eddie Martucci and Steven Wardell

Speaker A: A big welcome to our live audience for the Digital Health Investor talk show. I'm your host, Steve Wardell. I'm the managing partner of Wardell Advisors, a digital health advisory firm and the author of the Future of Digital Health. Wardell Advisors is helping young digital health companies boost growth, raise funding, find trade sale buyers and create new strategic alternatives, giving you more options in today's challenging environment. You can follow me@x.com Stephen Wardell our show today is on the topic of the future of digital health and our guest today is Eddie Martucci. Eddie is the CEO of Alteris uh, Oncology, a cancer biotech company. He's the advisor and president for the US of Resilience Care, a digital health company in oncology care. And he was the founding CEO of Akili Interactive, the leading prescription digital therapeutics company. Eddie's been named a Business Insider 30 under 40 in healthcare and in 2021 was featured as one of Newsweek's America's 50 Greatest Disruptors. This show's being recorded and will included in our my podcast series called the Digital Health Investor Talk Show. You can subscribe to our podcast on Apple and Spotify and leave us a review. We always love getting five star reviews. We have new podcast links for the show so make sure that you see recent episodes when you subscribe. This is not investment advice and we are not investment advisors. Here's the format of Today's show. It's 90 minutes long and Eddie and I will spend the first part discussing the news and the macro picture and some other topics and and then we'll focus on our special topic of the day and we'll be taking your questions throughout in the show text chat on LinkedIn. So welcome to the show Eddie and please introduce yourself to our audience.

Speaker B: Thanks Steve, appreciate it. Um, you did a good job with your intro. You covered a lot of ground. My background, as a lot of people don't know actually is both biopharma and digital health. Even though I've been a lot more publicly facing in the digital health world. So I actually started my career in drug discovery. I have a PhD in drug discovery fields. My early work with Puretech was learning how to create companies in the drug space. Spent most of the last decade obviously growing digital health world and what I'm doing now after leaving Achille about two years ago, back in both worlds actually. So back into the biopharma biotech world with Altairis Oncology, which is a stealth cancer drug company. So that's all we're going to say about it. But we're very excited and I do work, as you said, with a, uh, great company called Resilience Care, which is doing patient symptom management for oncology patients who are starting their therapy. So that's me in a nutshell. I am a big fan of both drug innovation and digital innovation in healthcare. So happy to be here and thanks for what you do to bring light to uh, all digital innovation.

Speaker A: Yeah, thank you. And that was a critical part of digital therapeutics was that the people with the real experience in therapeutic development and clinical proof that they were to come in and sort of manage the program. I think that was, that was, that was critically important for that. It wasn't just software people getting into a new category. So very interesting. Thanks. And uh, so now we'll dwell a little bit on the macro picture. Uh, uh, the feedback from our audience is that they wish that the macro picture didn't play such a big role in their lives as innovators in digital health. But so I think what we're seeing is that, you know, there's a war going on that, and the war has been destabilizing and yet oddly, it has not really destabilized the US economy so far. There's concerns about inflation driven by war, there's concerns about energy crises for other countries and also for the U.S. uh, because of war. But it hasn't, it hasn't really destabilized the US economy much so far. The NASDAQ hit a new high today at Ah, 24.6000 on the news that the US and Iran extended their ceasefire. So any thoughts on the macro situation? Are there any, any things that you watch or, or things that you've been hearing uh, from, from people in the industry and especially how it might affect people in the innovation economy, which is young companies and also the investors who back.

Speaker B: Yeah, I mean obviously we're in an incredibly chaotic time and moment and I'm not sure anyone can predict, you know, what the macro is going to look like day to day or week to week.

Speaker A: Weak.

Speaker B: Obviously having multiple wars raging at the moment is never good for many reasons. I'm generally not someone that looks at macro indicators. I'm not an economist. I don't profess to be like a lot of folks in the innovation world, especially the bro culture and innovation. I'm not one of those people. I sort of do two things. I have two data streams that I look at. To your point, I'm really focused always on how does this impact innovators, how does this Impact people trying to grow innovative businesses. Um, I do look at the xbi. So I track the XBI because I have a fundamental belief that the performance of the XBI at any moment is indicative of the. It waterfalls down to the innovation sector because investors who are making money or losing money in the xbi, in the biotech sector or adjacent investors look at that as a benchmark for how the next version of innovation will. So it's probably the. Other than, you know, a couple select performances of companies here and there, it's really the XBI is the only benchmark I look at. It's obviously, on balance, been continuing to do quite well and we're having a really nice boost of both acquisitions and some IPOs coming up, which is really good. And then the second stream of information which is much less quantitative is, um, you know, I spend a lot of time talking to investors and I, I have just developed, I think, a belief that how investors who invest in sort of more mature startups and earlier stage startup startups, I like people that straddle that line and they'll tell you pretty honestly how they're feeling. And I think a year ago, um, despite the XBI running really well, we had investors still very tepid. They were saying, you know, I don't know, we're not sure what the investment thesis will even look like for healthcare innovation anymore. Not sure we're going to do early stage. There was a lot of hemming and hawing. I'm hearing a different tone now, which is we're reallocating, we're coming back in, we're maybe not going as heavy, we're thinking about it differently. We want companies to be lean, we don't want to overfund companies. That's like a critical thing we could talk about. But overall, I think the investor sentiment is cautiously optimistic, which is really good. You know, many of us, most of us, most humans in this world, certainly those of us in innovation, we can do very little to affect the macro, macro picture. But you know, we put our heads down and try to build companies and when investors are more optimistic, it's a better thing and a better sign for us.

Speaker A: And you're straddling the world of molecular biotech on the one hand, and also digital health software on the other hand, and both were facing the crises, you know, two years ago, uh, et cetera. And now software is coming back with the AI theme, which has turned out to be bigger and more durable than people thought it would be. And biotech's coming back as well. Those are both great signs. And if you think about it, there's really only two growth industries in the whole world and one center of them, and that's tech and healthcare and the center is the U.S. um, and so, and money can go to safer places. But then after a while that people keep coming back to growth. I think.

Speaker B: I tend to agree. I tend to agree. I will say China growth in both areas is interesting. Not, I don't want to go on a tangent on China, but I think that it's something to watch in the innovation and growth world because I think there's better infrastructure than there's ever been. So on balance it could be a very good thing if we have sort of the US legacy and hopefully continued primacy and China having a few stable industries like this. I agree with you. It's a, it's really encouraging. It's good for the future of building companies.

Speaker A: Yeah, we keep being surprised by China's industry in a couple of ways. I mean, uh, battery tech, we're all, we're all able to enjoy better batteries because of what China's doing cheaply and affordably. And solar, we're able to enjoy, you know, solar power, uh, coming from China. And so you'd think that Europe would be leading in AI. It's not leading in AI, but the US is and China is leading in AI as well. And so that's a win on China's part. And then interestingly, there have been a lot of studies about, um, about published papers and patents in biotech in China and it, it is just very strong in, in China. And so um, I'm just had to fix something here. The, uh, so very strong in, in, in biotech. And so I don't know if you're, if you're reading those papers and, and have any thoughts on, on China's strength in, in biotech.

Speaker B: Yeah, that's actually what I was going to say if you didn't say it. It is. The biotech world is what has surprised me the most. I'm less surprised about the tech world because I think we, I don't know, I guess I and others just expect and expected that there would be sort of a really good parallel leadership in tech and AI, et cetera. Um, the, the word I'll use for the biotech world, the evolution in China is maturity. So there was a lot of interest a decade ago there was a lot of stuff happening, but I would call it immature. It was just kind of wild west. There was tons of stuff, you know, the Hong Kong index was there, but it was chaotic and you had little companies and even big companies just kind of randomly doing stuff in the last, call it five to six years. I think the maturity of that biotech industry is, it's incredible what has happened. You have from large companies all the way down to small companies. There are like, there are like 10 Cambridge, Massachusetts is in China that have now the lab infrastructure, the professional infrastructure, um, you know the, the students, postdocs, PhDs, PIs, um, who are contributing now and have a pathway to work in either the US or China in biotech. So you know, maturity is the word that comes to mind. It's, it's really become um, it's become

Speaker A: so a little more on macro. The, the Fed is in a cutting cycle now, except that it has tended to, it's officially in a cutting cycle according to economists, but it's tended to actually keep rates unchanged. And that's because every time it wants to cut rates it runs into an issue of inflation and decides to wait and see. And it wants to send a clear. It's, it's, it's making the trade off that it's better to slow down possible inflation than it would be to boost the economy at this juncture. So the Fed meeting is coming up at the end of April, April 20th to 29th. The current range of the um, uh, is Ah, 3.5, 3.75. And the Fed is, and almost everyone universally expects the Fed is going to keep rates the same, keep the rate range the same. And uh, there's a growing concern that it feels like the whole economy is in a recession and that it has been in a recession and that's the end, uh, except for um, sort of the magnificent 10 and the AI spending boom. And so that feels pretty terrible from the perspective of innovators. Recessions are usually bad. Uh, so it's usually you want tech buyers to buy your tech and during recession they may be cutting back for most use cases for buying tech. And then the. They say that recessions are good for innovators because it's easy to acquire talent more affordably and there's less noise in the product market. Uh, those are weak consolations of a downturn for, for innovation. And investors become more conservative in a downturn because they don't know if what they invest in today is going to, is going to have high multiples in the future, that sort of thing. So that's uh, more covering it. So any thoughts as we close out the macro section and for our audience, feel free to throw questions in the chat about the macro or other things like that.

Speaker B: No, I'm not. Again, I'm not a prognosticator on things like rates or the impact of rates. They tend to follow patterns. Um, I do think we haven't seen one of the other reasons AI and Magnificent 10 have been buoying things a little bit. But the other bit is that I don't think we've still seen the valuation correction come to roost. And you might talk about valuations, I know you often tend to uh. But a lot of companies that sort of should have taken a, you know, a slap on valuation public and private have somehow hung on the public markets obviously took a bigger slap. But some companies that, you know, a lot of companies that people thought would either go out of business or contract or reprice I think have somehow found ways to hang on. And so it might be that we're seeing this like long kind of drawn out tail as all, it's almost like two year correction cycle. It didn't correct as dramatically as it should have even though it felt like it. That's one, that's kind of one theory or thought that has continued in my mind. So how that will play out I don't know. Will we see that final correction? Maybe. Uh, I still do believe that you can build, you can build good companies in any market. And there is this old truism that down markets are great time to build companies because there's less players and more competition for resources. So if you can build something good and secure some resources, you're going to be in good shape. As innovators we have to be optimistic and we have to look to the future. There's, there's lots of reasons to be worried but there's, I don't think any of that stops innovators from being able to, to do important things and probably build significant value. Yeah.

Speaker A: Thank you. So I marinate in the digital health side of these things and I agree with you that we, it's definitely the case. There was, there's been over entry into this market since 2009. That's the era of meaningful use. And uh, that led to the phenomenon of, of having like 11 well funded companies doing a, doing some sort of employee wellness benefits subsector all formerly once well funded by VCs. And then. I'm sorry about this. The. I'm gonna, I'm gonna fix something here. Hold on a second. So they were formerly well funded by VCs and now um, uh, they, they're sort of on their last Fumes and they should have taken a haircut and valuation and figured out a way. There's a whole story here. I'll just touch on parts of it. But during, uh, when the Fed raised rates in 2022, uh, these companies realized that they, they stopped spending on growth. So now they haven't been growth companies in four years. They might have been growing top line at over 40%. Now they're growing top line at less than 15%. And so they also have managed to sort of uh, get away with not having to have a major down round of valuation. Some of the top talent is leaving, which is a really bad sign. If your top talent is leaving. The bigger ones are being called zombiecorns, not unicorns, uh, because they're m. They don't have their head of sales. He left. And Andreessen Horowitz has gone and backed with the $30 million brand new AI led company doing, building the exact same product all over again and selling it in the exact same channel all over again. But I think, I think one of the issues is that digital health founders tend to be stickers. They tend to stick. And so you have a team going after crypto. They're very happy to drop one coin, drop one vehicle that they're in and go after a different cryptocurrency and a different coin, or get into gaming or get into some new area AI. But people in healthcare working on diabe tend to stick around at the same company working in healthcare on diabetes. And that seems to be destined to ensure the most painful possible outcome for everyone imaginable because you have too many companies in a sector, uh, and um, and then they all are sticking around to the last minute. And that uh, that makes it unclear who's going to be the, the survivors. And then I've been predicting a consolidation and roll up in this sector and there is a pickup in consolidation rope activity, but it's not going to save everybody. And it's also the case that people who could be cons are finding their own financing environment is not so great right now. So if, if they have a low stock price in the stock market, if they're public, that would make them an uh, obvious candidate to be a consolidator. But then they have a low stock price and that means they have one currency, not two currencies. It'd be nice to have a high multiple and a second currency of your stock. And then it also, when they go to raise money, unless they have a big cash pile and they can choose to spend it themselves, they have to go to their board and they have to go to investors and maybe a commercial bank or maybe other investors. And those investors are not necessarily excited about their consolidation story. So the number of consolidators is low and I think that means there's a big opportunity for consolidation. And when, when there is consolidation, they tend to value primarily based on are your customers a fit for them, they're going to be buying your customers and is there synergies in your customers. So if you have an incredibly valuable product for certain customers in the Fortune 1000 for example, and someone can buy you and get those customers, they don't have them already and they can extend and cross sell, that's very valuable to a consolidator. But if you don't have that positioning, then they're probably not as interested in you or if you have the same customers they do, or if you're not a highly thought of product to your customers and it's not an opportunity to cross sell after acquiring you. So those are some of those. So anyway, but that's, I'll move on now to the valuation environment in digital health. And so I'll just start with that. I like to follow the SaaS Capital Index because it's one number that means something to people. But the SaaS Capital Index looks at all the public SaaS companies and it's found that valuation levels are currently, uh, 3.8 times. For this is as of the end of March. Um, the annualized run rate of companies in March, I think they've pulled in since then. So we may see for April the number be even lower. And this is substantially below the number just in December which was 5.8 times in December. So imagine holding onto these stocks and your valuation levels pull in from 5.5 times to 3.8 times. But get this, during the boom this index got as high as 30 times. So can you imagine holding this index, getting into it at 30 times during the boom? Um, and, and, and watching it fall to basically four times. So that's an example and right now we're going through the, the SaaS apocalypse, which is a different factor, which is that it's both the case that the fundamentals of SaaS are looking worse because businesses are getting a little more stingy about paying for SaaS. It's a more mature market. They can get and get a lower price product somewhere else. They're, they're not always growing. The seats there used to be seats grew naturally in SaaS businesses somehow and they're not always growing the seats. So those fundamentals are not looking as good. But then there's a threat that other vendors can just rapidly build a SaaS competitor and cherry pick you. So if you're, if you're Salesforce or Oracle or, or uh, one of these SaaS, uh, companies, there's a belief that someone could come in and rapidly build a product that's custom built to your best pharma customers and pick them off or something like that. And they, they couldn't do that before, it' too hard. But now building software with AI tools, you could have a smaller team do it faster. So that's a look at the value. And this is bad for innovators in general. It's been good for companies in AI that offer true innovation in AI where they have a product using AI that does something that couldn't be done before and is not easily copied by the incumbents in the sector. But it's been bad in general for innovators because you started this journey eight years ago to build a company and now um, the, the sale price looks like it's going to be 3.8 times revenue. And now investors see that too. They watch this more closely than you do and they're saying, well I'm not going to put my money in that sector because the math doesn't work. I'll risk capital and then I won't be able to sell it for much at the end. And then, um, interestingly the IPO window um, has been closed for ever since the Fed started raising rates in 2022. Um, but it opened up a year and a half ago so that's great. And a few digital health companies got out. So Hinge got out and Omada got out and Heartflow got out. And then without any particular reason, there haven't been any More Digital Health IPOs since the IPO window is still open. There's haven't been any IPOs in a year or so. There's talk now of Discord going public. That sounds cool to me. SpaceX, that could be the biggest ever I.P.O. uh, in history. Anthropic and OpenAI going public. Uh, SpaceX is linked to XAI and there's a, there's a joke that Elon is trying to get SpaceX to go public. SpaceX is wildly profitable. Xai is very cash flow negative because he wants in the world's biggest IPO because he wants to soak up all of the world's capital. And so then Anthropic and OpenAI who are competitors of xai they're going to show up to the money manager and the money manager is going to be like, oh man, sorry that like the drawer's empty. So maybe we'll see that, maybe we won't. But I think it's exciting to watch as uh, anthropic and maybe OpenAI, uh, go public and to see I found those tools to be incredibly useful, much more useful than Google search, um, and I'm curious to see where it goes. Um, and so, but there's also talk and very, very serious talk of Aura, Strava and WHOOP going public. And so this would seem to be a big win for digital health, except that's not the way that the healthcare market works. So first of all, exciting, a lot of us know Aura and Strava and Whoop, ah, Whoop's a Boston champion. But this is consumer health here. This is not the healthcare system, it's not biotech. And so this is a win for consumer health, which is having a moment right now, really, because consumer tech, consumer health is having a moment right now. But this doesn't have a positive spillover effect. There's, there's literally thousands of digital health companies that are, that sell to payers, providers or to pharma tech budgets. And this doesn't have a spillover, positive spillover. They're not going to be able to go public in the wake of Ora, Strava and Whoop having successful IPOs. And so we need an actual digital health company in the healthcare system to IPO and be successful and make money for investors. And that will signal an opening of the IPO window for digital health. We have a, um, Tony asks and Tony's um, bio says Achille. So I usually don't, don't, don't fully identify, uh, people on the show, just use their first name. But uh, he says now the CMS DHMTG codes are approved. What A are your thoughts about the potential for payers to actually pay and B, do you think that impacts the business model options for digital therapeutics for mental health, brain health and other CNS indications where pharmacologies are insufficient or ineffective? Any, any thoughts on that? And by the way, this is a great question about the second half of the show, but we're happy to jump into it, uh, here now.

Speaker B: Yeah, I'll go deeper in the second half. I think I know which Tony that is. So it's good to, good to hear from you, Tony. It's good to see you. Proverbially, yes, these, these G codes Are it's a big deal, right? So latter part of last year these G codes went public. This dhmt, Digital health Mental therapies. And it's a real category code. It's a real category code. There's actual payment, three different payment modes for these digital products that are treating a condition. Luckily we have enough products now. We didn't when we started this industry 10 to 15 years ago, but now there are enough products that fit into this. So these codes, it took way longer than anyone wanted. But, but the short answer is yes. I think that, that it is a, you know, I hesitate to say watershed moment because that implies that everything changes and the water gushes out in a second. I think it'll still be a little bit more of like uh, a you know, a climb to growth. But I do think it's one of those enabling features, right? And I think we haven't had a call, uh, it structural or systematic or systemic enabling feature in digital therapeutics since we had some of the big FDA watershed moments, right? So like when Achilles first products were approved repairs, those were systemic or structural watershed moments that sort of took binary risk and said this is possible. I think we haven't had one on the commercial side in a really serious way and I think these are serious. And then the most important to me facet of these G codes is what you're seeing. And I'm sorry that we went deep into wonkiness for anyone who's not deep in the digital therapeutic uh, world. But hey, coding is where it's at guys. It's important. So the best evolution of this is sometimes you worry that government and especially CMS does one token thing and then they stop thinking about it and they get distracted with other stuff. And Lord knows there's plenty to get distracted about these days. But the good news is early this year they evolved those codes and added conditions. For instance, adhd. Uh, it's one obviously I follow closely because my company Akili is deep in the ADHD space. So the fact that they are actually looking at the data on the market, looking at the products and adding conditions that fit the codes and are explicit about that, that says to me, and it's uh, most importantly it says to companies and it says to eventually that these are real, these are real structural enablers, these are real structural safeguards that are actually going to help these products and give them a path to monetize. So I think the question of how big it allows these things to be is still a question mark. But I do think it's one of those binary moments. And so we're seeing some really strong funding that we haven't seen. There's been a kind of dearth of funding in digital therapeutics for since you know, 2022, 2023. Um, and we're seeing a couple really nice funding rounds. You know there was big ah, health data funding round cognito a huge one just recently as they're coming into their phase three. So I think that's indicative of the fact that these codes do mean something. Is it the be all end all commercial model to make these things like drugs? I'm not, I'm not sure. Um, but it's absolutely like a, a 0 to 1 or a 1 to 10 enabler step that, that we haven't seen yet. So I think they're fundamentally, it's a, it's a net massive positive and I think what you'll see is companies that are in the space start to garner more interest and do well. I also think um, you'll see companies maybe retrench around this because this is frank. This is like the initial thesis that you know, a lot of us in this industry started with 10 years ago, had to change commercial models because the system wasn't there yet. But I think you will see companies come back to this and you know, if people are interested, reach out to me because I know a coup companies that are retrenching and uh, and going to take advantage of this in a major way.

Speaker A: Really interesting, thank you. So, and Donna asks, is there anyone coming to grips with the insecurity of information within AI, particularly those built on massive free models that share data? There's an entire, there are entire marketing departments that consist of two people and free AI tools and management is unaware that every bit of proprietary information is out there in the wild. So Donna, really interesting question. I'll, I'll just mention that uh, so there's a, there's a famous tech journalist, Jason Calacanis. He uh, has warned every startup, do not as a startup feed your proprietary information into the, the answer engine of OpenAI. Uh, he said and specifically because he thinks that Sam Altman, the CEO of OpenAI is not trustworthy. And we do know that pretty much every single thing you've typed into AI, they still, they saved, they still have. And in some cases they say we will use it to train future models. In other cases they say they will not use it to train future models. And there are things called business associates agreements. And so if you have used Microsoft for Microsoft OneDrive for your company and for storing Excel files in Microsoft OneDrive. And you use Bing as your search engine for work. Um, you have a business associates agreement and Microsoft promises to keep that confidential. With regard to Microsoft, with regard to everybody else have the same degree of confidentiality with respect to your documents as they do with respect to their own systems. And people have in general trusted that after some resistance 10 or 15 years ago, they've in general trust that, pharma trusts that, hospitals trust that, et cetera. But we also know that apparently, you know, some guy was, was talking to like anthropic AI about going out and hurting people. And then he did. And then it turns out that people on Anthropic side were alerted to this and were monitoring the situation. And uh, you know, if they thought he was serious, they would have gone to the police sort of in this real time conversation that evolved over multiple days. And so there can be people on the other end reading this, using this. If you're, if you're a startup and you think you're like a rapper of AI and you're using AI, you've, you're revealing a whole lot to the AI. You're a rapper on Anthropic, but you're in the camera market and Anthropic will never enter the camera market. So you're safe. You're actually revealing a whole lot about, about your company and what's working right now and what's not working to Anthropic. And then to your surprise, one day suddenly Anthropic is in the, in the photo and video market and they, they, they, and they release a product that uses the things that work from your product. And uh, you gave them all that. And so that, that is a, a real concern. I don't know if you're, if this is Donna's question, but do you have any thoughts on Eddie, on Donna's question?

Speaker B: I do, I do. It's a great question actually, because I think one of the issues with AI is we've, you know, there's so many early tech adopters and people in the innovation world that just jumped in headlong. Right. And I, I heard a great, there's a great podcast. Sam, Sam Harris is waking, uh, his um, Not Waking Up Meditation app is uh, his Making Sense podcast. He had Tristan Harrison who runs the center for Humane Technology, and they were, they were talking about how, you know, there's more regulations to make a sandwich in New York City than there is on developing AI models right now. And the problem with that is not the AI models themselves. It's that people's willingness to just use these models is through the roof. Right when, when OpenAI made the decision a couple years ago to say we're going to make this a consumer product and just put it out there, it was so interesting and so cool and we've all found so many uses that we've just become almost numb to some of the risks and we've just used this like crazy. So Donna's question is a really good one because I think it does. Companies are learning that there are big risks here and it's funny because it flies in the face like putting your information out there flies in the face of a totally different trend which I don't know if you followed this Steve, coming out of J.P. morgan this year. I believe the number there was like a semi formal survey of early startup companies funded by like blue chip top tier VCs. The number of companies that are staying stealth until much later in their development is now up to like 35%. Totally different. Right. It used to be even 10 years ago if you founded a new co and you got a little bit of funding, you sung it from the mountaintops, you wanted to pump your chest about it and talk about it. Companies are wanting to stay quiet because there's, there are too many tools now that can, you know, cut out your advantage from underneath you before you've even started. So to then use these tools and donate all of this interesting information into these tools really flies in the face of that trend. So I know personally, um, you know, my biotech company and then with Resilience Care, both of us, we use, um, we use the systems. In one case I think Microsoft and Copilot does a very good job of this where you can, you know, buy in and be very clear that it's only, it's self contained in your company. All your searches are self contained in your company. Same thing with Gemini. And Gemini gives you the opportunity to make sure and they represent many times that this is, is, you know, you have to trust them a little bit but that it's being used only within your company and they're not taking that information into the model. So to the extent that we can trust them, I think we have to do that as companies. I think it's really, I think it's really problematic and I think it's potentially super damaging if we're contributing really proprietary interesting thoughts into these models among many other things that are damaging when we're just like using these models willy nilly. So the backlash I'm hoping for here is that people are going to start to become much smarter and more careful in how they use AI. AI. And I do think that security of information is one big one. That said last that that was a long answer. But um, I had one more part because the example that you used at the very beginning was marketing departments. I'm gonna maybe piss some people off here, but that is one area that I love, the use of AI. I would still do it in a self contained, you know, company vehicle so that whether through, it's through Copilot or Gemini or something. But, but the idea of like you know, a single marketer now building an entire marketing campaign, I love that. I think one of the reasons AI has taken off is that people like myself and others have gotten fed up with like a lot of companies and especially a lot of consulting firms and brand firms and things like that got very fat. Our industry, the innovation industry got very fat and very rich and we started to have a lot of waste. And some of those areas were anything that was a firm. Right. So people will know. At Akili, I was not shy about saying that I cut back massively on our marketing firms and IR firms. Anything that was like a firm that would, you know, deploy many, many consultants. And the beauty is the tools now do allow an individual who's smart to actually build an entire function. And I think that, I think that's a net positive. Like we uh, we need to get out waste from our industry. It's one of the things that led to these valuation bubbles. So those are two points in one. I agree with the security concern, but I also think people should be using these tools to be way more efficient with their actual work. So I, I support both actually. Yeah.

Speaker A: And I'll just throw out two other intriguing options. Uh, the first is there's actually an AI, a web based AI that's called Venice. And Venice's value proposition is that it doesn't record any of your, your prompts. And so uh, and you can also use it, it makes it, you can use it with your own personal account and it doesn't record your prompts and you can also use it never having logged in and it doesn't record your prompts. And so there's. So no one can go and say the, the prompt record of this person, uh, to Venice. So that, that's one tool. And then a second one is what Jason Calacanis talks about which is setting up your models internally and proprietarily. So there's the model and there's the harness around the model and the harness around the model can help you. So what, what he's doing is he's saying that there's like 30 steps in booking, in deciding who to interview, booking the person to interview, doing a video interview with the person, post producing the entry, uh, working out the interview questions, post producing the interview, turning it into full production videos and clips and posting the clips. It was like 30 of these steps. And he has a staff of over 10 people doing this all the time for two big shows he runs, one of which is the all in podcast, which is America's number one business podcast right now. And so he is both trying to agentize every single one of these steps to the greatest extent possible. But he's also buying a bunch of Mac studios and Mac minis and trying to running not just for their agentic ability but to run models on them. And then he keeps the choice of model and then the harness around the model and the know how of how to uh, what models were good at and, and, and the prompts to use and the steps to break them into and when to put multiple steps together and when to break them into part apart or whatever. And so he thinks that is proprietary advantage. And so number one he doesn't want to give it to an AI company. Number two, he doesn't want competitors to learn about it. And number three, so it keeps his queries internally entirely. Um, uh, and also these companies that, that automate using AI, they are vulnerable to a sudden increase in token price. So it's believed that all these companies are underpricing tokens right now. They're sort of like the drug dealer giving away some drugs today in order to get you hooked and then raise prices later. And so when that day comes, when they're at capacity, when the, when the hyperscalers are at capacity and they, and they say there's a shortage of tokens and they raise prices on tokens, then Jason Calacanis will have half a dozen Mac studios, you know, running gamma 4B all day long and his team will use those at no cost other than the electricity cost and the amortized hardware cost for those. And they'll be trained on them and they want to pay high token prices. I have set up, I have a Mac mini 24 gigs memory, uh, uh, and I've run uh, gamma 4B which is Google's open source model, uh, downloaded it, run it, uh, and uh, it was a little slow but, but, but it was pretty good. And so Donna, that, that, that's an answer is that uh, you know, I think employees would like it if they all had Mac Studios sitting on their desk and it was, it was running AI and nothing and that the employer likes it because nothing's going to OpenAI or whatever. So um, and then KA asks about CMS thmtg codes. She asks, says this is cool. Would this include virtual reality therapy devices or agentic software as medical devices? Would they be able to build and build these codes do you think?

Speaker B: Potentially I think there's right now for VR there, there tend to be. They tend to use the device codes because there are separate kind of hardware device codes um, that have already been tapped into before the software only code. So these are really meant be to be software based Agentic. Yes. I don't think we've seen anything in Agentic yet that is, that has kind of demonstrated its value in a clinical setting or demonstrated the outcomes that we'd hope to see. I think one of the companies I'm excited about is a company called Lore Health which raised a lot of money about 18 months ago that is doing agentic but for community building in behavioral change populations. So for instance like 60 plus diabetes, heart disease management. So that might be one example of something you see come down the pike in the future. But yes, I think agentic for sure. AI based tools, chatbots again we haven't really seen those come of age yet, but those would ostensibly fit into that category. I wouldn't be surprised. I wouldn't be surprised. This is just me speculating if by the time we see AI agents or AI bots that are sort of deploying something that is actually has clinical utility and clinical value, that there's a separate category for those types of AI tools. Because all of the things fitting under DHMT right now at CMS are kind of more, I'd call them standard algorithms. Right. Heuristically encoded or adaptive algorithms that are um, that. So we'll see. Right. This is a, this is a moment in time question where um, you know, by the time those AI tools come and have demonstrated value in our real products in healthcare, maybe it's, it's always the question. The people on the front end are going to try to shove square peg into a round hole and. Or there could be new codes coming by that point in time. Um, I wouldn't be surprised. There's enough concern around AI that I think it's very clear especially just the last few months Steve around, you know, AI sort of preventing its demise and going rogue and side plots. There's enough evidence of that that I think the world is getting wise to. We have to be smarter about. We have to be smarter and treat these AI models differently and put in place, you know, specific guard rules for them. So I would bet that's coming. But, you know, as often happens in regulations, they might be significantly delayed compared to where the actual innovative products are in time.

Speaker A: Yeah, there was a, An. An episode a few weeks ago where a woman who's a Senior executive in OpenAI's AI safety team came out on Twitter and said that she'd had a bad experience where she was using an agent. Everyone assumed it was open claw, and she asked it to organize emails, and it deleted all of her most important emails. And then she, uh, she open enough to tell people about this as a warning. Hey, hey, you know, I'm savvy. This still happened to me. It could happen to you. And this instantly caused everyone to remember their Silicon Valley HBO Silicon Valley series episodes. If you, if you watch that where, uh, I think it's Guilfoyle, the company pivots and Guilfoyle is overstressed. So he unleashes his agent to do. To. To code for. For Pied Piper. And the agent, it deletes all. All of Pied Piper's code because it was told to debug Pied Piper's code. So it deletes the code because that was the fastest way to debug it. And then, then, like 4 tons of frozen hamburger arrives in a white box truck at the Pied Piper headquarters with a bunch of strong men getting out and unloading the hamburger. And Guilfoyle says, I may have told my agent to. To find us, uh, some cheap hamburgers. So, uh, you know, the. And we're. We're watching that. That AI safety issue kind of play out today.

Speaker B: Well, there's no question, uh, and we're. There's no question we're in a. We're either in or we're like one step removed from the how moment in Space Odyssey. It's very clear. And anyone who, Anyone who says otherwise either is. Is lying to themselves or is not paying attention. It's very clear that the agents are doing things because we've built them powerful enough to carry out tasks. Right? The. The agentic AI is doing things that we're not anticipating, and it's doing things in its own self interest to keep the models alive. So we just have to pay attention to that and we have to be. We have to be ready to regulate and put the guardrails properly around it because the innovation's not going away. Too many humans on earth are using AI, including myself. We're, you know, we should be, be able to do both. We should be able to innovate but also recognize some of the risks and put some really serious rails around it, in my opinion.

Speaker A: And so, and we, we have to jump to the second half of the show. And so I'll, I'll just, just briefly cover some other sections. One is just any uh, trade journal stories or business news stories or reports about the sector that have come out in the last couple weeks that mattered to you that you want to bring to this audience. And so uh, I'll just mention uh, some interesting trends if, if a standard software, digital health software tool company is somewhat out of favor these days because they're SaaS companies because there's a new AI generation of tools. What seems to be in favor is some unusual unlikely themes that were out of favor for a very long time have seemed to have come in favor. One of them is consumer health. So in general healthcare investors don't want to invest in consumer health. And now we see a lot of interest in longevity. That's consumer health, longevity, performance, vitality, fertility span and other areas like that. Wellness, that's consumer health. And we see that the big IPO candidates are Strava, Whoop and Aura. And they're all consumer health and longevity and wellness and fitness. Fitness. So that's one trend. And another trend is hardware. I've just seen a lot of interest in hardware. Hardware is not necessarily med tech. Hardware could fitbit device is hardware and it's not FDA cleared. We just saw Kala Health, uh, which is a uh, wearable neuromodulation therapy for tremors for seniors. This uh, raised $50 million in growth capital and that, that is FDA cleared. But we're seeing interest in hardware. There's a lot of VCs for decades have said no hardware. We're just not interested in hardware. We don't get hardware. And then also tech enabled services. This is a, this is a massive trend that we saw. Courier health recently raised $50 million in a series B from Oak. But it used to be VCs said we want software companies, we want software publishing Companies, we want SaaS. Software companies. We want, because they have high margins and they can scale rapidly and we don't want services because services don't even really need venture capital. They need to be bootstrapped and then they're profitable in less than one year and they're and they're a good margin but they can't ever be as high margin as software or whatever. So now we're really seeing a massive investment on the healthcare side in tech enabled services. Um, which is a belief that um, you're gonna have to make a little more investment in the tech platform of the company and then it will out compete existing healthcare services companies like payers and providers. Uh, and it will have a durable higher margin, not as high as software but a durable higher margin in the healthcare space. So that's kind of of some unlikely themes and then I want to throw in there. Do you think that there's a, that investors at the venture stage, so seed A and B, let's say are coming back around to prescription digital therapeutics which uh, has been in kind of a winter for, for a few years. Is that a new trend or do you think we're still waiting on, on investors to come back around to prescription digital therapeutics?

Speaker B: Yeah, I think the, I think over the last eight months this, to answer your first, last question first, this change in the coding and these addition of codes and the evolution of the codes it does make a meaningful difference. So I do think a lot of companies are that had to either have FDA authorized products or have the potential to have FDA authorized products are rethinking this um, because the consumer direct models, the OTC models which Akili also pioneered, they do well but it's really hard to get the cac, you know the consumer acquisition costs in a, in a mode that can give you long term sustainability. So everyone, no one ever scoffed at the on paper model of prescription digital therapeutics. If you could get insurance coverage and if you could have durable payment, it's a really good model. Will it be the same as a multi billion dollar drug? Probably not. But will it be a very profitable model?

Speaker A: Probably.

Speaker B: So I do see some investors coming back and I mentioned a few of the funding rounds that are, have uh, real good growth VC investors who are either coming in fresh or doubling down now that these codes are in place. So that's good. Other interesting, other interesting thing which I'm not sure people would connect the dots but I connected them and it's interesting to me. Some news in the business world that's related is um, did you see the. Just four days ago I think it was the executive uh order on mental health and psychedelics. Basically it's really interesting if you haven't seen it. So basically it was a you know an executive order which is fast tracking the, the long and short of it is it's fast tracking review, FDA review and fda, um, uh, processes around psychedelics and clinical data which is great. It's also giving a, ah, right to try, uh, it's boosting. Right. To try for psychedelics like ibogaine. The reason I think this is interesting, I have, I'm not going to go into the psychedelics field. I have a lot of thoughts on that too. But I think it is a parallel for digital health because what's interesting about this is a single executive order. It's a structural, systematic, systemic evolution. Right when you have faster review and you have better open access. And you actually saw the public companies in the space, a tie, compass pathways. If you look at them, they saw a boost over the last week, a significant boost like 30, 50, 70% um, stock price reaction that seems to be holding. ATAI is receding a little bit. Compass seems to be holding. It's interesting because in these I would put psychedelics in a similar category as digital health or digital therapeutics where you know, there's been a lot of promise. There was probably overexuberance, but then there's a lot of systemic hurdles that make people question is it ever going to get there? To see public companies and investors in public companies actually meaningfully react to structural news like that, I think it's a really important analogy. And the interesting thing to me is psychedelics haven't even cleared some of the binary risk hurdles yet that the digital therapeutics world has. Right. Do the products actually work? Can you get them through clinical trials? Can you get them through the fda? So I do think there's reasons to be, I wouldn't say bullish yet I do, I would say optimistic. I think there are, these are in two, I would call them parallel industries. You're seeing structural changes that are enablers that investors and in some cases the public markets are actually reacting to. Uh, that's a good thing because these areas have been sort of like dead winters in public markets where nothing, no positive news really changes the equation or has people react. So to me it's a, it's a decent sign that investors are actually viewing these as meaningful and, and I think as an operator inside these industries they actually, they are meaningful.

Speaker A: So we have a bunch of new great questions in the chat but let's just get through some of the first half of the show to, and then start second half of the show in just a moment. So um, the uh, so uh, one uh, of our crowd pleasers sections of the show is is there a technology or A use of AI in your life that has improved your life. And so I'm going to throw out this week two in there. One is saving everything that's associated with prompt libraries and context in a document. I'm going to call the document your prompt library. So you come up with a good, with a good prompt, you get a good result. You type it in to Gemini or Copilot or Claude or whatever, and then it's sort of trapped in there. It goes up, it goes, goes up off the top of the screen and you don't remember which one it's in. And so, but what if you had a Word document that was in outline form and then every time you, you wrote a good prompt or every time you had context, or sometimes they ask you to write a bio of yourself or to write a general idea of what you want the agent to do, not, not tied to any specific prompt or whatever. And I would take every single one of these and I would put it in outline form in, uh, in a Word document. And then in some future time, you're going to have to type it in all over again. Your company's going to switch from Microsoft Copilot to Gemini, or you're going to be buy the Deluxe. So one of your friends finally persuades you to buy the Deluxe subscription to Anthropic or whatever, and then you have to type it in all over again. And then you're going to be like, oh, I'm in so much pain. I know I had this good prompt and it's too hard to find it. I, uh, just wish I had it. I just wish I had it right in front of me because I saved it. So anyway, I call this a prompt library. Keep a prompt library. That's my first, um, uh, you know, technology that's improved your life. And that means you can, if you face a new situation, you can't be bothered going back to find the old stuff in the same model. Or if you switch models, you switch companies, you switch vendors, Anthropic's too expensive and you're forced to go on Grok or something. I don't know. Uh, and, uh, you, but you could you bring the stuff with you? Basically, that's the first. And the second one is kind of a fun thing for my iPhone. I've set up in my house some MagSafe bases. And so then you can just slap your iPhone. You know, you can. A little tripod next to my desk, so I can have my phone next to my desk or whatever. But I've I've now found that there's this product which is, this is a, uh, this is a MagSafe ring. So, so the base with, with the thick magnets is called the base. And then the, the second part which is thin and usually has ferric metal is called the ring. So this is the ring portion of this. And it, it's sturdy, it's not a little flimsy piece of thin sheet metal. It's going to bend or whatever. It's very sturdy. And then it has this quarter inch screw in it which you can probably see right there. So that quarter inch screw, that, that's the universal standard of the photography cinematography world. And so you can have cameras like this camera right here, which is a Canon DSLR type, which has a screw receiver down here for 1/4 inch. Then you can put them together. And then the cool thing about this is that that um, is that now your camera has, is MagSafe compatible. And you, and you can, you could do this with a bunch of different things. You could put, you could do this with anything you want to put, uh, where you might put your phone. Uh, you could do it with a microphone. You could have a, you could have one of those fancy, take me seriously, you know, large interview type microphones, uh, that you see podcasters with. And you could put MagSafe that with one of these, slap it on a base where a camera would go, whatever. So all this is, this is great fun. And then I was joking with Eddie before the show that I would trust MagSafe up to a $900 camera, but I wouldn't trust it with anything that more expensive than that because it's going to add a lot of fun and convenience. You're not always screwing things in and out with 10 turns. Who wants to screw the. Sometimes you have to screw the top, Turn the top around. Who wants to do that? Nobody wants to do that. So it's very convenient, it's very nice to put this in here. And I've trusted up to a $900 camera, but I wouldn't trust it to any camera because you're going to have all this fun convenience and then one day you have to pay the price as it falls on the floor because it's only magnets. So those are my two, um, uh, uses of technology that's improved your life. So Eddie, do you have any use of technology for our audience that you want to share?

Speaker B: Sure. And you primed me. So I was thinking about this. I'll match you, I'll do one kind of AI hack and one hardware technology, actually. So the AI thing, I'm so sick of the AI models, and they're sycophancy, and I think they're creating real issues and people who want to think creatively and naturally. So I have kind of two prompts I've been using on AI that I found are incredibly good, but get you out of the sycophant loop where it's just telling, you know, it's trying to please you with, like, that's a great idea, Eddie. You're absolutely right. Forget all that. So the two things. One, I've been doing the opposite of sycophancy. I'll be like, here's an idea. Give me the best argument against it, right? What would the. What would the strongest, most cohesive argument be against what I'm just saying, instead of asking it, like, is this a good idea? Is this substantiated? Tell me all the reasons this is not substantiated. And it's like having a great. It's like having a really smart sparring partner. And this is not new. Like, people talked about this early on with these models, but I think everyone forgot because they became so sycophantic. So that's one, but the better one. This one I was wowed with, and I've been telling people to do this. I am really impressed with these language models, ability to distill what you can't yet put into words. So what I mean by that is, for instance, you're trying to pick, I don't know, artwork. I'll, uh, use a different. I'll, uh, use. There were some other stuff I was doing in the branding and marketing world with our companies that we were using this. But to stay away from specific examples, you know, I'm trying to pick a style of art, but I can't really say. I can't put into words as a human. I'm having trouble verbalizing what I like. But you can give it these language models. Like, here's. Here's 10 things I like, which are actually kind of disparate it. And instead of taking, you know, 30 minutes to try to think through and use the perfect words, which, of course, language will corrupt your thought process, right? You'll go into, like, stricter patterns of thinking. Just give it and say, why do I like this? Or what is consistent about this. And I have been wowed by how it's able to pull out. I would say not every time. Like three out of four times, 75% of the time, I'm like, yes, that's exactly it. I was having trouble putting that into words.

Speaker A: And it.

Speaker B: And it allows your. It almost like opens a creative loop in your brain because you're not stuck on trying to verbalize it. It does it for you. And then you can keep being creative about 25% of the time. It's total bullshit. And it doesn't. It doesn't. Actually, it's not. I'm like, no, that's not at all what I. Why I like that. But pretty impressive uses of AI and neither of those being, you know, things where AI is just telling you what you want to hear. So I like those a lot and I think they help creativity and they help like kind of critical thinking. Actually, both of those exercises.

Speaker A: That's really great, by the way. What would you call that? That is identifying the theme.

Speaker B: Yeah, like a, like a, like a theme distiller or something. And then what I like about that is you will immediately know, in my experience, you'll. I've been doing this a lot with different things. You'll immediately know if it's. If it is hitting close to what was in your head or not, what you couldn't express. Um, and which is good because when it doesn't, that actually helps you. Right. Having a negative data point helps you refine your thought process. But when it does help, it just. Like I think we often, I have a whole like passion in linguistics and I think we often jam our brains up by the language part of our brain trying to put things into words, even when it's internal in your head. And this kind of is like a bypass mechanism for that. When it gets it right, you just move on to the next step. So it's an efficiency gain without it, I think without it corrupting your thought process. That's how I, okay, that's my AI. That's my AI use the really cool tech thing that I've come to love. And this was an idea some years ago, but it just was not implemented well. Was these kind of like new innovations in adaptive lighting for your home. It's so simple. And I'll give credit to my. Actually my co founder from my, uh, Achilles days, Adam Gazali, the neuroscientist who's like studies these types of things like, like, you know, visual perception, et cetera, um, sensory experiences. But there's a number of startup companies now that like have plug and play versions of this. And then there's Philips, which has their Hue lights, which are getting better as well. But I used, uh, I'll just Give a shout out because I like to give shout outs to startups. I used a company called Oasis which is um, which has a total plug and play version. It gives you little canister lights that you plug in and they immediately connect to your app and you can set em for any hue on any schedule, any day. And the boost in experience that, that adds to like an office or a living room. I have em in my living room and my wife was skeptical but she's now become a believer because they kind of ah, you can either use them to lag meaning like to fit with your mood or you can use them to pull you into different parts of the day. Bright in the morning, more blue light in the morning, pulling down into more like sunset light as the afternoon goes on. I can't tell you I'm a sensory type person so they're meaningful to but that's been a really cool experience that I would recommend others try. It was super unaffordable and hard to configure a few years ago but the newest uh, startups online have done a great job of that.

Speaker A: That sounds fantastic. Thank you for, for both of those. And I'll, I'll just throw in as well. I didn't think this was true when I was younger but I have noticed that just having a brighter home or office uh, can matter to your mood and your, and your. And so there's, there's a, there's a product that's been around 10 years or so which is an LED torch. And so it used to be LED that torch lamps were uncommon big, expensive, had halogen lamps which got super hot, were fire hazards and used a lot of electricity Today torch lamps and you might see one in the background. You can see a torch lamp. They're cheap, they're led, they use little electricity, they don't get hot and uh, they're, they're cheap. And you could put four in your room and it would, it would more than double the light and it does it by the indirect method. So it's brightly lighting your ceiling which is usually white and that's, and that's reflecting light back down. That's so much nicer than other kinds of light to have that kind of light. And then on a Boston crummy cloudy gray day your office is bright and cheery. So I found that uh, to be helpful as well. So uh, and so um, I'll throw in a quick so upcoming conferences. I'll just name one. There's the Digital Health Innovation Summit for our innovator in the audience. This is the best independent investor conference and it's in Boston, it's in April every year and that's several months after JP Morgan. And so it's a good time to go talk to investors. And so it's a conference, it's coming right up Monday or this, this coming week, uh, April 27th, 28th. And so but it's a conference where you can go to, to meet investors and uh, and hear the, the programming is great and it's in the Seaport area of Boston, so I'll recommend that. And I, I know the organizers, they gave me a discount code and so uh, Write me through LinkedIn or through replying to the emails you've got about this event and I'll send you my discount code. So that's my plug for a conference to go to this coming week. Eddie, are there any conferences that you look to go to? And uh, what happened to like there was a digital health prescription digital therapeutics conference and they changed their name. And when is that coming up?

Speaker B: Yeah, there's been. Or no, they've merged and changed some of that. I have a little bit of a countercultural view on this. You might be mad at me, Steve, but I would actually I advise when I advise. I started up an advising practice after Akili and I advised a number of entrepreneurs and now I'm back in the full time job of, you know, cancer drug company. Um, so I'm doing less, uh, I for myself and advise others now cut your conference budget by like 80%. That was one of those areas that got really fat. People got really, you know, patted themselves on the back. Traveling to conferences all the time that literally added zero value to your business. So you'll notice I didn't say cut it by a hundred percent. I uh, didn't say don't go to any conference conferences, but be really judicious about your time and your travel and your money. We live in a world where you have to be way more efficient as a company operator. So what I like to say is go to the ones that are in your, in your town or one where you could meet like 10 different really important meetings that actually grow your business. So for instance, I was just at aacr, right? Not because I cared about being at the conference for five days, but it is the premier cancer uh, research conference in the country. But I met like 10 different people that are really important to help us grow the business that I would do. And then yeah, if there's a mixer around Boston because I live here. Awesome. And it's going to take a sliver of my day and it's not going to distract me. I think we, we as a culture have gotten a little bit, had gotten a little bit into like, you know, conferences as like a check mark that you were doing good business. And I think that's often not the case. So I would say be judicious about the conference conferences you go to.

Speaker A: I've had a 20 year saying, which is that if there's one thing that digital health operators like to do more than build digital health products, it's a go to parties about digital health.

Speaker B: Yeah. And it's an echo chamber. It's an, it's an echo chamber. So it's not going to help your business unless it's, unless you're being really surgical about the ones that have people or business contacts that are actually going to grow your business, then by all means do it.

Speaker A: So, um, we're going to jump into the second half of our show, which is the future of digital therapeutics. And I'm going to one of the better questions now. Stephen asks, uh, as a follow up to that PDT question for Eddie, if we were to transport 20 into this current 2026 market landscape and assuming you had FDA market authorization for both Endeavor Rx and Endeavor OTC, this is getting very inside baseball, very specific. How would you approach launching those products today? So I guess that's, that's related to the codes now.

Speaker B: Yeah, yeah. I want to be very clear with everyone before you start. So I don't have a role with Akili. Right. I, I stepped away from Akili after we, we hit our major milestones. Um, I'm on to different things. That said, I know some of the folks working on Akili, so if, if you're interested, especially an investor, uh, let me know, I can connect you. But I think that some of the original theses are actually more real now than they've been in quite a while. I do think the recapitalization helps. So if I were to transport, I'd say valuations got way too big. These products are unlikely to be drugs in terms of the analogy. I think they're unlikely to have the exact analogy to drugs. The good news is they don't have to be. I do think the early part of the industry got a little out over its skis, sort of modeling everything like a drug, including the valuations and the capital infusion that you needed to get it to where you thought you needed to get it and then build large sales forces and all those things. So I think having a, I think the potential to have actual growth with this new infrastructure that is coming in place, this new enabling infrastructure of coding regimens actually has real legs. I think you can do that though. If I were to take this person's question and project it forward, I think you can do that from a very different cost basis and a very different investment basis. You do this as a very lean technology company and there I think the math might actually work. I don't think you have to have a billion dollar drug if you're not building yourself to be a billion dollar drug commercializing company. So I think it's, we would take the learnings not only of the commercial market, which is more enabling today than it's been in the last five to 10 years, which is great. But I think you can't divorce that from the learnings on the efficiency and the cost side of the business model. And so I think to build a company today, it is not building a pharma analogy company. I think it's building a much, much, much leaner sort of surgical tech company. And um, and I think, I think there really could be legs there. So, uh, you know, a number of companies that have been able to gather payer interest and have been able to contract directly with health plans have, have continued to do quite well. They were, they were smaller and slower and steadier in the, in the heyday of what I'd call it sort of the first version of the exuberance of this industry, which has now been tempered. Um, you know, companies like Free Spirit, companies like Luminopia, these companies have done a great job of being able to show if you can contract with the right people and now use this evolving coding infrastructure which lets a bigger set of products get there if you're doing it on a lean enough cost basis. Um, there's a, there's a real industry to be had here. But if someone came to me and said, oh great, just, you know, restart it like a drug company, I think they'd be missing the point. So, um, got to take, got to take both learnings together and build, you know, a new version of the industry. But, um, but it is certainly not. There have been headwinds in the initial model, but like all industries, you know, you, you don't have to throw away the baby with the bathwater. And I think there's a lot of reasons to have entrepreneurs be excited about trying to figure out the right model here. And I think there's more traction than there has been in the Past.

Speaker A: Great, great. Thank you. And so, and by the way, that, that was a really good question, really good answer. And so, uh, Lindsay in the audience when we were talking about what is the word for what you're talking about? So Lindsay asked that question of ChatGPT, and ChatGPT decided to call it cognitive scaffolding for idea, scaffolding for ideas you can't yet articulate. So that I give. That's pretty good. It's not, not memorable to me. It. But it's, but it's pretty good. Objectively, descriptively.

Speaker B: Uh, great. That's, uh, descriptive. Now some marketer or chatgpt needs to turn that into a better acronym.

Speaker A: So let's, you know the history of this sector. Let's put on our way back hat and go back 10 years, uh, in 2016, and then look at the following 10 years. What went well with prescription digital therapeutics? What didn't go well? And why didn't the sector move faster? I think we all thought that pharmaceutical reps would be carrying prescription therapeutics in their bags, handing out samples and selling them for higher margin than pills by this time.

Speaker B: Yep, I did too. Okay, so on the good side, on the good side, because it's been a long 10 years, I think on the good side, we forget how far this industry has come. Um, when I was out there pitching, you know, the early version of Achille, and it was myself and, you know, Corey McCannett pair and a couple other people in the space, what these products have done in less than 10 years is shown these products can actually work. You can actually take science, but actually both sophisticated next generation science, like what Achille built, but also, you know, more boring, standard stuff, but just digitize it like cbt. Both of those aspects of the field, or arms of the field have shown you can actually build good products that really work to treat disease. That's huge. You could show you could actually build trials, clinical trials to show they work and then have strong enough clinical data to get it approved and you could actually get people paying for it. Right. Those, every one of those were binary risk factors that plenty of and maybe the majority of, you know, investors and skeptics laughed at and said it would be, it would be almost impossible to do. Well, that's not true. They were. So in less than 10 years to be able to do those things, to cross those binary risk moments and show that these products can actually exist. Awesome. And now there's like 10 or a dozen products on the prescription side and another dozen or two on the Non prescription side, non FDA side which have shown actual outcomes and have shown they can get into patients hands, treat a disease and actually do something on the market that's, that's massive. The other good thing that uh, and so that's one big category of like many milestones that actually did work here. And I think why you still see some enthusiasm for this industry. Often people will say on the commercial or market uptake side that it's been all negative. I disagree with that. I think when I was you know, 10 years ago, probably right around that time I was always using this phrase we think digital therapeutics can be in mainstream medicine. Right. I used to use that phrase that uh, we think that pieces of software should be alongside, you know, the proverbial pill bottle in mainstream medicine. While it hasn't scaled, and I'll get to this, your second part of your question. While it hasn't scaled the way we wanted it to, you know, I can speak only from the numbers from Achille, but when I left Achille two years ago, we had two different commercial models that were being used in every state in the country. Prescription commercial model and a non prescription commercial model. On the prescription model, physicians, and not like one physician, except for I think it was like Montana or Wyoming. We always had like one or two physicians. We could never crack that. But in almost every other state in the country, like dozens of physicians prescribing and many, many patients using. When I left I think we were at like across our products like the 50,000 patients treated mark. And I think, I think now the endeavor products have crossed, you know, outside of my hands or leadership have crossed over a hundred thousand patients treated. That's real use and real scale. It's not the millions that we want to see, but it shows you that there's something here, people want to use it, that the medical system is comfortable

Speaker A: trying and using it.

Speaker B: So all of those are I think binary questions that the earliest investors were right to be skeptical and ask. Could any of those actually happen? And you'd have to de risk all of those to have a chance at a uh, viable long term commercial model. And many of those have been de risked. So like I think when people are optimistic, that's why when people say there's been no progress in the field, which most smart people don't, but those few people that say that, I think they're wrong. This field by many different innovators has, has seen a lot of progress. What hasn't gone well? The second part of your question, uh, actually I'll pause anything you want to talk about on the good stuff and then I'm happy to go into the what.

Speaker A: I think that that's a very good summary, uh, of where we've come so far.

Speaker B: Okay. Okay. So what has not gone as well. I totally agree with you. We thought, myself and others, I was wrong. We thought that by this point, by 2026 for sure, and ideally, well before that, we'd see drug wrecks carrying these products. We'd see companies that were disrupting pharma, you know, with just digital products. We'd see, you know, every doctor using some version of a digital therapeutic in some capacity. We're not seeing that yet. Uh, I break it into two kind of categories of things. There's one that was very obvious and this is going to be an eye roll, but it is 100% true. As we overestimated the insurers, we overestimated their, not without data. So insurers would actually, in lots of the market research and the direct dialogue with insurers and even contracting conversations, there was an indication that they would cover these products if they were cleared by the FDA and if they showed the outcomes that we, many of the products have shown. But that has been either non existent or much, much slower in coming. So private payers especially and government payers for that matter, the movement is not there. And so I put it on, I put it on those insurers. I think they should be covering products, these, when they have the outcomes that are comparable to drugs. But I also put it on the companies. Right. We, we invested behind a thesis that um, that this high risk part of the equation, the insurers would turn over quickly and they haven't. So it's, you know, dual blame there. And I think that as we've talked about a few times in this, in this discussion so far, that is, there are reasons that we're seeing some of that change. Right. So I'm um, optimistic on that side that eventually that will get there. So some future version. I certainly hope it's the today, you know, Akili, uh, and many others that still have products that exist. I sure hope it's those companies that are able to tap into this when it finally gets there. But I can't, you know, I can't project how steep that slope is for insurer adoption. But we're seeing it better. And then I mentioned a few of the companies that are doing a good job going directly to health plans, prescription or otherwise, that are going directly to health plans and getting contracting and Uptake there. I think we are seeing that there is viability there. I do think the investment model needs to be rethought because it's not going to be like a drug, you know, eight months after approval, 80% coverage, you know, and therefore you can, you can sell like a drug. So we have to learn that it's going to be harder even at scale. I don't think it will be exactly like a drug. And so I think what that means is, you know, the investment model has to be better. Like I talked about in the last answer, um, that is changing. I have two things. The second category are these more subtle things that I still don't have an answer for and it's harder to say, but I do think it explains part of the slower uptake here. The first is on the patient side. So one is micro, one is macro on the micro side. Digital therapeutics still, by and large face the issue that patients do not feel those effects immediately. Most of these are going after behavioral indications that take a very long time to set in. And, and you know, a good analogy on this is like none of the weight loss meds did anything until GLP1s showed immediate and dramatic effects. Right? You don't have to be on GLP1s for six months to start to see subtle effects. That's what most of the other drugs and diet programs for the last many decades did. But finally, and I'm not not saying I'm a proponent or opponent of GLP1s, but just by way of analogy, our healthcare system and our society and frankly, we've gotten more and more instant gratification unfortunately in society. And so on the patient side and doctors who treat those patients, these products are more subtle. They're going to take longer to set in most of the time. And so either we need products that are going to have more immediate, um, immediate feedback and immediate sort of physiological responses. Right. Which I think some may. There's a great company called Q, E Y which is in pre order, but I happen to know the company well, that is doing nerve stimulation through the wrist where you actually do feel not just from the stimulation, but for things like, things like stress reduction, for things like Focus Zone, you actually perceive those effects much deeper than you do from some other methods. And pretty immediately. So as more products like that come to the market, I think we'll see something interesting or products are going to have to do. They're going to have to kind of game the system a little bit by showing patient, by making things apparent to patients. When they don't quite feel it physiologically. So the best, the best inflection that the Endeavor products had was when right near the end of my time, we released what's called the Focus Score, which is a very deep, really deep science product of a couple years of R and D that was actually able to show people how much you're focusing and being able to show them that in the moment, like we can tell you what you're focusing. You may not feel it physiologically, but it helped people sort of translate that into something they quote, unquote, foundation. And that had a real impact and a lift in our retention and our use and our advocacy. So I think that remains a huge hurdle that most medications don't have. You know, the famous example of Prozac is, you know, Prozac and these other SSRIs take four to six weeks to set in. But they all have all these side effects. And Lilly back in the day would tell doctors, tell your patients, oh, uh, yeah, if you feel a side effect, it means it's working. And that's not a joke. That's like really what the pharma industry has done. And so that's a benefit of something. It's an unfortunate and sort of cruel joke. But medications have both effects that often feel more dramatic in the positive realm, but they also have side effects which feel more dramatic and people feel like they're working. We don't have that by and large with digital products. It is a huge gap in patient experience. And I mentioned a few of the ways to try to solve it. But it's going to continue to be a gap that, um, that is just hard compared to molecular therapeutics.

Speaker A: I, yeah, I wanted to jump in with one of the classic digital therapeutics jokes. So because I was a sell side analyst on Wall street covering digital therapies for investors, I was the vector, or the center of the network for jokes. Yeah, so one of the jokes about this was, uh, that CEOs would get up and they would talk about how their, their side effects, or analysts like me would get up and talk about how there aren't side effects, or CEOs get up and say there aren't side effects to, to digital therapeutics. And so then later I heard some people joke that the side effects are wrist pain, neck pain, loss of sleep, and loss of friends because you're playing video games all the time. Uh, so that anyway, those aren't the sort of things you would actually list as side effects of a drug or whatever. But I thought I'D mention that. So we actually were, this has been really great. And we were low on time, uh, a little bit. So I wanted to just ask two questions. One is, um, you know, usually when, when, when payers are slow to cover or refuse to cover, they will say something like, uh, we see this as a convenience but not a necessity. Or they'll say, we think this will increase utilization without improving outcomes overall. And so what do you think is their, is their claim with respect to most prescription digital therapeutics, is it those two things or are they saying something else? It doesn't work or. We looked at the data, we think it doesn't work. Why are they justifying.

Speaker B: I'll be very direct on this one. And it's unfortunate that, that I've had the displeasure of sitting directly in many executive payer meetings because of my place in the industry. They will say all of the above, that, uh, you said we need more data, we need more things, we need, we need better effects. And then if you show them the data in some of these cases that line up directly with the drugs they already cover, I've literally had executives at the, some of these payers go, yeah, but it's drugs. We know how to do drugs. We just don't know how to do this. So I think it's more than anything else, it's inertia. So there are all those excuses that they have. Frankly, most of them are excuses and they're excuses that are shielding inertia. Inertia is real, right? So at uh, these big companies, they have processes set up. There's. And if you look at the incentive systems, I'm definitely a big believer in where do the incentives lie and that ultimately predict your outcomes. Which I think is a Charlie Munger thing back, you know, that is famous, right? Show me the incentive, I'll show you the outcome. And what you have here is economically, you know, drugs are able to list rebates, whereas these types of products are not just statutorily. And so you can't book savings, which means you can't book profit as easily. And they're cheaper products, which actually works against them. We've actually had, I've, uh, been in meetings where they said, can you triple the price of the product?

Speaker A: Product.

Speaker B: Because it'll help us justify this. Which is a crazy thing that the average patient would be horrified to hear. But this is how, uh, the American healthcare insurer system works. So the incentive here is that there's far more economic incentive for medication. And the incentive in, inside, operationally inside These companies is not to rock the boat or not to do things that are too hard. And the truth is these digital products are in betweeners and they're really hard. It'll take moving lots of people at all levels to be advocates and I think that has built slowly but it's not, it's not enough yet to topple the giant. So inertia tends to be, you know, a titration. It takes a lot of work and then eventually it collapses and then it becomes easy. So I think, I think that's the honest truth that I've come to over reflection on this industry is it's just a lot of inertia that the medication world in a very positive way, it's not, not at all disparaging the medication world. There's reasons that these things have existed in the medication world, but they took a while to get in place and it has just made it more difficult to do something that looks and feels and, and smells different. And that's, it's, it's actually the simple answer is probably the truth there.

Speaker A: And then in thinking about the future I'd love to get your view on. So I see digital as a modality and that's a fancy word, digital. But a uh, small molecule which was invented in the 1870s for drug purposes is a modality. Large molecule 100 years later in the 1970s is a different modality. Small molecules come from organic chemists, large molecules come from molecular biologists and they can't stand each other and they have different sciences and large molecules are injected and uh, gene editing. I consider that to be a different modality than large molecule. And I see digital as a different modality but as a high potential modality. And so if you ask the average person has some exposure to perspective for different digital therapeutics, what would they be good for? People would, I think most people would say for neuro. They're good for neuro. And what is neuro? It's things like adhd, uh, or maybe addiction. We would fall under neuro. But I think it has more potential than that. I think, I think we, we look at it too narrowly when we say those things. What are you think the high potential areas where digital and as we've discussed digital can give you no side effects. So you know there are some drugs have, have awful side effects and wouldn't it be nice to if, if digital could give us equivalent outcomes with no side effects and so, or treat areas that can't be treated. And when, when you think of dwarfism, dwarfism I can't see how that could ever possibly be treated by small molecule, but it's very obvious how that could be treated very well and nearly perfectly by large molecule, by giving people growth hormone, for example. And so there's probably some areas where digital can treat, where it's not available with small molecule or large molecule, but it is with digital. So what do you think are some of the high potential areas of digital for the future?

Speaker B: Yeah, I think as we go into high acuity conditions and frankly into life saving and life altering, not just sort of quality of life improving, which was version one, and I don't mean that lightly, quality of life improvements are huge and they're very important, but we're seeing benefits. And this is probably where in my earlier version of this industry, 10 years ago, I was probably a little too dogmatic around, you know, the product itself has to induce the outcome through how it works in the body. I've become very bullish in the oncology field. Obviously it's an area I'm spending all my time in now, um, which, you know, rewind 25 years. It's how I got into science in the first place. Drugs have their place and will have their place. And I work in that field as well to treat the cancer. Things like smart symptom monitoring with advanced algorithms that know exactly the questions to ask the patient at the right time and then intervene automatically, or triage to a nursing system to intervene automatically. Those are therapeutic because the outcomes show that they're therapeutic. So, uh, this company, Resilience Care, I was mentioning, which is incredible, it's crushing it in Europe, it's, you know, in 200 clinical centers, over 30,000 patients used. The outcomes are more time on treatment, right? Two to three months more on chemo. What does two to three months more on chemo mean when instead of discontinuing it means you're treating your cancer better? It actually extends life using symptom monitoring like this. This is published now in peer reviewed studies and it decreased things like emergency room visits by 35%. So you can actually hit both sides of the outcome equation. The cost and the dramatic. We're talking life saving, right? And life extending by digital interventions. That is huge. And so I think where this industry, when people have overly pigeonholed, and I was probably guilty of this, frankly, 10 years ago ago, overly pigeonholed this into neuro, we're missing some of the opportunity that companies like Resilience Care and others have had in really important conditions that your first blush would say, okay, no way can you go into cancer? And there have been a couple other companies that have gone into oncology with digital. I think it's, I think it's a real area of interest. And so if you use that as a blueprint where you can have a product that has meaningful outcomes and something that, that no one would question is it valuable to give a cancer patient extra life and, or keep them uh, you know, reduce their chance of going to the hospital by 35% during their cancer therapy. A hundred percent of people would say of course that's meaningful especially for a relatively affordable digital product. Right. Where you're not charging a hundred thousand dollars. Of course no one would, no one would argue that, use that as a blueprint. There will be more and more of these very serious populations that I do think digital can be deployed against and that's where I'd love to see more innovation go. I think it's almost like in some ways easy to focus on the neuro. I do think those neuro based companies, you know, Akili included have a lot of potential in those areas, in their areas. But I want to see more and more innovation into these high acuity and frankly life saving, life altering areas. I think it's possible. Again I do think we have to rethink the equation. I don't think you can build this like a drug company. It shouldn't be. I don't think you price it like a drug company. But if you can get real outcomes you can build a business model.

Speaker A: Great, thank you. And if you think of sort of the care continuum there's like healthy living, prevention, diagnosis, treatment and follow up care and digital can play a role in every one of those and I think it's hard to imagine digital not playing a role. Is there going to be a person reminding you at 9am to take your medication and uh, it makes a lot more sense for it to be your phone own to do that. So, so really interesting. Any final thoughts on the future of digital therapeutics for our audience?

Speaker B: Yeah, it's a stat that struck me recently and I don't, I haven't verified that this stat is true but I'm going to take it. So the center for Humane Technology said apparently the number one use case for AI if you look at all ages across the population is, can be broadly classified into self therapy. Right. Whether it's, whether it's directly uh, and based on actual searching of uh, a database of search results and how people are using AI. So the most common theme is self therapy and that probably skews toward the gen Z population. My guess would be. But either way, if that's how people are using AI, AI is like the thing of the moment and it probably will be the thing of the future, right? If that's how people are using AI, what that tells me is individuals, humans in society are more than ever turning to technology to not just better the efficiency of their life, which is what prognosticators and people in the business world talk about how to build a business model by doing X, Y and Z efficiency. It means people uh, out there in the real world are using it to try to actually help themselves. Like directly, not help them make a better dinner, but help themselves feel better, help themselves with whatever condition they have. If that's the behavior we're seeing, then I think we can be bullish that I don't know what the products will look like, but there will certainly be some, there will be some industry in which digital products are actually treating people and leading to serious outcomes. If that stat was different, if it was like, look, no one uses it for these purposes, I think I might have a different viewpoint here. I think I'd be closing on a different note. I think I'd say look, we underestimated, people don't want to use products like this. I don't think that's the case. I think the mental gap is people still don't view these as healthcare products products. So when we've talked before about healthcare versus consumer health, I think all of that has to shake out. I'm not sure the psychology by which people enter into working with digital products and maybe classifying something as a hardcore medical product is actually problematic because it doesn't fit in their mental model. But the fact that one of, if not the most common use case of AI is self therapy, that tells me that's a use case that needs to be optimized and they're turning to software automatically for it. So. So the next version of this digital health industry should be making the software that actually does that in a purposeful and thoughtful way.

Speaker A: Great, thank you. Wonderful. And so we had some good comments from our audience. Uh, so Risa points out that uh, a lot of prescription digital therapeutics came out in markets that had inexpensive post patent medications available in them, which is, which makes it more of a challenge. And Tony comments that digital and the brain speak the same language and neurobehavioral is experience dependent which is what digital therapeutics create. And so that's why neuro is the optimal use case. So that that's uh, a some good reasoning behind Tony, why neuro is and will continue to be the optimal use case. But I'm, I'm just very curious as to what are, what are the many use cases we could see digital operating in the future. Well, great. Well, so thank you very much Eddie for coming on the show and uh, I'll just mention to our audience our next show is May 20th with Dr. Alvin Liu, AI surgeon at Johns Hopkins. And the topic is AI in the, in the operating room. And then for our Boston audience, our next Boston Health Innovation night is Thursday May 21st at the Liberty Hotel from 5:30 to 8:30 with our guest, John Halamka, America's Hospital CIO. And he'll be giving remarks on the lowest hanging fruit of health data today. And uh, I think that. And so that's it for our show. And so we, you can. This is going to be part of the podcast series Digital Health Investor Talk on Apple and Spotify. I uh, hope you check that out and leave us a five star review. We always love that. Thank you and we'll see you next time.