Otsuka Pharmaceutical pulls in Proteus Digital Health

Deal size: $15 million

Announced: Aug. 20

Closed: Aug. 25

Why it matters: The American unit of Otsuka Pharmaceutical Co. acquired the technology assets of Proteus Digital Health in August for $15 million through bankruptcy proceedings.

While the price would seem impressive for a digital health deal, it’s but a small fraction of the dethroned unicorn’s previous valuation of $1.5 billion.

The high-flying digital therapeutics startup founded in 2001 had secured big pharmaceutical partnerships and raised close to $500 million. Proteus developed ingestible sensors and a wearable sensor patch to track medication-taking behavior.

The startup, which spent almost two decades working on ingestible sensors, made headlines in 2017 when it gained regulatory approval for the first “smart pill” in the U.S.

But the company struggled to find a market for its product, reportedly failed to close a $100 million funding round in 2019, and then lost a development deal with Otsuka Pharmaceuticals.

Proteus attempted to raise capital and get more financing this year but potential buyers were turned off because Proteus was burning through too much cash—to the tune of $2 million a month—and it wasn't clear when the company would be profitable, according to an investment bank the company hired.

The company ultimately filed for Chapter 11 bankruptcy in June.

Otsuka acquired the company through a “stalking horse” bid through its bankruptcy proceedings. 

As part of the asset purchase agreement, Otsuka will buy Proteus' information technology assets, intellectual property, and equipment, including equipment used to design and manufacture wearable sensors. The pharmaceutical giant plans to fold Proteus' technology into its digital medicine program, according to executives in a statement when the acquisition was announced.