Opioid Addiction Industry Outlook and Investment Opportunities 7 February 2021 1 Introduction Opioid addiction is a national epidemic with dangerous consequences, and without intervention, it will remain so for decades to come. The increase in opioid use, addiction and related deaths poses a critical challenge to society, as it affects all ages and demographic groups in the U.S. Private capital can play a significant role in combating the opioid crisis. Funding the development of new interventions, alternative drug therapies and innovative technologies can reduce widespread dependence and suffering. Within these distinct approaches lie many opportunities for investors to advance solutions capable of delivering affected individuals from despair and matching the desired risk-return profile. Highlights About 2 million people have been diagnosed with opioid use disorder (OUD) in the U.S. An additional 4 to 6 million people may also have the disease but have not been formally diagnosed. • According to the National Institute for Drug Abuse (NIDA), more than 130 Americans die every day from overdoses. • This translates into an annual cost of more than $78.5 billion in the U.S. across factors like systemic healthcare costs, lost productivity, treatment, and criminal justice activity. In one study, 35% of patients who were prescribed an opioid had a known risk factor for opioid use disorder (e.g. another substance abuse disorder). • Alerting healthcare providers about patients’ risk factors can allow doctors to make informed decisions when determining if patients should receive opioids or an alternative medication. • Significant progress can be achieved by improving how high-risk patients are handled and averting new opioid use disorder cases proactively. Medication-assisted treatment (MAT) can reduce opioid overdose death rates by 50%, but less than half of privately funded opioid treatment programs prescribe MAT-inclusive regimens. • Opioid addicted patients often require more comprehensive interventions, including support networks and psychological treatment when underlying conditions are present. • Several companies are developing in-person treatment programs that address the economic and social conditions that impact a person’s health, alongside MAT and therapy. Another promising area is the development of non-addictive therapeutics that can supplant opioids as the primary treatment option across common use cases. • While the risks associated with opioids are apparent, their efficacy in treating various types of pain is superior to many other available options. • The developers of non-addictive medications are attempting to match or exceed the efficacy of opioids in treating pain without entailing the same risks. 2 Risk Screening One method of addressing the opioid crisis is through preventative measures designed to reduce the number of new opioid use disorder cases. Advances in data analysis provide a better understanding of patient demographics — specifically of individuals with the highest risk of developing an addiction. This enables care providers to make increasingly informed decisions about the suitability of opioids for specific patients, and to offer alternatives when necessary. Since opioids are still a preferred treatment for many conditions, risk screening personalizes care by identifying the best option for each patient. Companies developing risk screening technologies are using several methods for quantifying risk factors: • Prescient Medicine developed a genetic test that uses an algorithm to determine with 87% specificity whether an individual is at increased risk for opioid dependency. Prescient’s test was fast-tracked by the FDA in February 2018. • SomaLogic studies protein signatures associated with addiction risk using their platform technology. They have raised $379.5 million over 13 separate rounds of funding. • AutoGenomics developed the INFINITI Neural Response Panel for assessing a patient’s risk of opioid use disorder. The platform is currently under FDA review. AutoGenomics has received $67.4 million in funding over 6 rounds. • Trestle Tree uses a proprietary algorithm to analyze 320 behavioral risk variables of addiction to predict a patient’s risk of developing an addiction. Trestle Tree has raised $5.6 million and is working with the Utilization Review Accreditation Commission (URAC), an independent healthcare quality certifier. • PainQX is expected to be the first FDA-cleared medical device to objectively measure chronic pain using electroencephalogram (EEG) scans and proprietary machine learning-powered algorithms. The company’s approach is supported by the National Institutes of Health and was designated as one of the top ten companies that can best address the opioid epidemic. Addiction Treatment Recovery programs are a crucial resource for the 6 to 8 million individuals who already have opioid use disorder — including those with currently undiagnosed cases. Expanding access to treatment is important, as the cost and requirements of in-patient programs can be prohibitive for many patients. While sobriety and long-term support are the ultimate goals for successful recovery, they are not the only measures of positive outcomes. People suffering from opioid use disorder span various levels of dependence and socioeconomic circumstances. The opioid crisis will continue to grow in severity if these patients descend further into the depths of addiction, creating a longer pathway to recovery that is laden with obstacles. Intermediate benchmarks are replacing opioid abstinence as a sole measure of success, however. These benchmarks include patient engagement and adherence to recovery programs even when relapses occur. Ultimately, recovery is only possible when an individual willingly decides to pursue it. 3 Emerging Technologies and Companies • Groups Recover Together developed an in-person treatment program that considers social factors alongside traditional health indicators. Its partnerships with state Medicaid programs and commercial insurers are a testament to its outcomes: 89% abstinence, 75% retention rates after 6 months while reducing payer spending by 30%. Groups has raised $40 million in growth equity and venture funding from several groups, including Kaiser Permanente and UnitedHealthGroup. • Boulder Care provides treatment and support through its app-based hub and video messaging platform, increasing the ease and accessibility of its program. Patients work with care providers to set goals and build a custom treatment plan. Boulder Care has raised $10.4 million in funding to further develop and scale its platform. • Eleanor Health is the first addiction treatment provider to operate using a value-based care payment model and drive positive outcomes using a community-based approach. This method focuses on supplying patients with the necessary infrastructure and resources to facilitate long-term recovery. Its early investors include Oxeon Ventures, Echo Health Ventures, Mosaic Health Solutions, and Town Hall Ventures. • Pear Therapeutics created reSET, a mobile app for online substance abuse therapy that uses clinically validated method for behavioral modification. When patients complete online lessons and pass mandatory drug tests, their behavior is positively reinforced and rewarded with gift cards. This new incentive structure realigns a patient’s reward system with the goal of driving long-term recovery. Since it was founded in 2013, the company has raised $134 million in funding from investors such as 5AM Ventures, JAZZ Venture Partners, and Arboretum Ventures. • Orexo (OTC: ORXOY) obtained exclusive rights to commercialize the digital therapeutic OXD01 in August 2019. The technology uses artificial intelligence to engage patients in simulated interactions and achieve goals that aid in their recovery. The Swedish company partnered with GAIA AG, to develop a proprietary platform for opioid use disorder. OXD01 is also designed to augment the effectiveness of psychosocial counseling and medication-assisted treatment. Orexo plans to file for FDA approval in 2021. • Sober Grid uses a telehealth platform to lower the cost of addiction treatment by providing an accessible, yet comprehensive, suite of tools for patients. It is an accessible resource that allows patients to track and share their progress, while receiving support from a network of members. Sober Grid is the largest mobile sober community and has raised $7.5 million in funding. • Workit Health is a telemedicine addiction treatment provider that offers care to thousands of individuals. Patients have access to physician, medication, private, and group counseling, and a curriculum of more than 1,000 engaging courses on their mobile device. This model has achieved strong outcomes, including 68% retention and 84% adherence after 6 months. Workit Health partnered with NIDA, the National Science Foundation, and addiction medicine experts to develop their evidence-based and affordable addiction treatment program. It has raised $20 million in funding across three rounds. 4 Alternative Therapies Considering the devastating consequences of opioids — often beginning with legitimate medical use — new therapies are being developed to replace opioids in the future. These efficacious alternatives greatly enhance the impact of risk screening on patients. • Astraea Therapeutics is developing a drug that is 100 times more potent than morphine in reducing pain in rhesus monkeys. It also decreased addiction to traditional opioids like oxycodone. The