Otsuka signs on Jolly Good for $43M mental health VR deal

Virtual reality and artificial intelligence technology developer Jolly Good is likely feeling very jolly indeed after being tapped by Otsuka Pharmaceutical to develop a mental health treatment program combining pharmacological and psychotherapeutic techniques.

The duo will build out software—hosted on Jolly Good’s VR goggles and connected tablet devices, and backed by Otsuka’s expertise in developing neurological therapeutics—that takes a social skills training (SST) approach to treating mental illness. SST is a behavioral therapy in which patients with anxiety, mood and personality disorders, among other conditions, are taught on a step-by-step basis how to navigate specific social interactions.

The combination of SST and a pharmaceutical regimen has been proven in studies to reduce the recurrence of mental disorders, the companies said. Their first jointly developed program will be directed toward schizophrenia patients, and they’re predicting that the immersive nature of Jolly Good’s VR will make the SST therapy more engaging and effective than standard methods.

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Under the terms of the deal, Otsuka will offer 300 million Japanese yen, or about $2.6 million, in upfront payments to Jolly Good. As the VR program accelerates, the Tokyo-based pharma will reimburse the tech developer—which is also based in Tokyo—for the costs of development and marketing to healthcare facilities, while also doling out royalties based on sales of the resulting product.

Altogether, the total potential value of the deal is 5 billion yen, or about $43.6 million U.S. The mental health-focused, VR-based partnership is the first of its kind for Otsuka, which is aiming to build the largest mental health VR business in Japan with the help of Jolly Good.

Ayako Kanie, M.D., Ph.D., a psychiatrist who recently joined Jolly Good as a senior medical supervisor with the establishment of its digital therapeutics division, will serve as content production manager for the company’s VR business, including overseeing the development of the Otsuka-backed SST program.

“Currently there is a serious shortage of people who have the social skill training and other attributes necessary to provide ‘psychosocial therapy,’” Kanie said in a statement. “Our VR content development benefits from extensive involvement by psychiatrists in product design and aims to improve on and expand opportunities to provide psychosocial therapy according to medical theory. VR enables patients to practice in a nearly real environment and will prepare them for success in real-life situations.”

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This isn’t Jolly Good’s first pharma tie-up. In April 2021, it joined forces with Japan’s Teijin Pharma to develop digital therapeutics to treat major depressive disorder. In that case, the duo is planning to take a cognitive behavioral therapy approach to the VR program, designed to be offered alongside face-to-face therapy sessions.

Elsewhere, the software developer teamed up with Aichi Medical University Hospital’s Pain Center last December to begin researching whether VR could be used to treat complex regional pain syndrome, post-stroke pain and other forms of chronic pain.