Virtual therapy provider Talkspace Inc. (Nasdaq: TALK) could see a little more daylight in the virtual mental health market as Cerebral pivots away from prescribing controlled substances. 

While Talkspace itself has never prescribed controlled substances — it refers patients to in-person psychiatric services as needed — Talkspace Chief Financial Officer Jennifer Fulk said Cerebral’s decision might be good for her company.

“As we continue to focus on our full-stack behavioral health care platform, psychiatry is an important aspect of that,” Fulk said. “To the extent that a competitor that has been fulfilling psychiatry needs has issues, I think [it] could definitely be an opportunity.

“We are very well positioned to deliver on this growing demand and growing area of unmet need.”

Fulk made these remarks Tuesday during a Q&A session at the William Blair & Company’s 42nd Annual Growth Stock Conference.

Talkspace, founded in 2012, employs psychiatrists and nurse practitioners with prescribing privileges but limits medications to non-controlled substances, citing concerns over the federal Controlled Substances Act, which makes it illegal to prescribe controlled substances via telehealth without an in-person exam.  

“We do not and we have never prescribed controlled substances,” Fulks said. “So, we’re very clearly not in that business.”

Cerebral has faced repeated backlash over media reports of how it marketed and managed treatment with controlled substances. This includes an investigation by the U.S. Department of Justice and a whistleblower retaliation lawsuit in the civil courts from a former executive including claims over medication prescribing. 

On May 17, Cerebral announced that it would stop prescribing most controlled substances by Oct. 15. The next day, it announced that founder and CEO Kyle Robertson was replaced by Chief Medical Officer David Mou, effective immediately.

Also in May, CVS Health (NYSE: CVS) and Walmart (NYSE: WMT) announced that they would no longer fill controlled substances prescriptions from Cerebral.

Despite these developments, Cerebral has moved forward with its new virtual medication-assisted treatment program, which will include the controlled substance buprenorphine. 

Fulk did not comment on Talkspace’s future as an independent company during her presentation, nor was the topic breached during the Q&A session. She focused her prepared remarks on the company’s four-point turnaround plan that was laid out during the 2021 third-quarter earnings call, which revealed the company was in worse financial condition than initially anticipated.

Since then, leading voices in the public equities analyst space have speculated that Talkspace could be a prime acquisition target.

Jefferies Research Services released a March analyst note that the massive demand for behavioral health services has, in turn, amped up investor interest in the space and upped the interest of health care entities in technology.

“With [Talkspace] valued just above cash, we believe ample potential buyers could emerge on the M&A front, particularly PE buyers or a large diversified player looking to get into the behavioral health space,” the Jeffries report states. “Despite the operational challenges, the company operates in an attractive and growing market for behavioral health services.”

Similarly, Citi analyst Daniel Grosslight wrote: “Our recent conversations [with major shareholders] lead us to believe that an acquisition at these levels is more likely than we initially contemplated.”

Grosslight’s note also notes that shareholders have received no update on the search to name a permanent CEO. 

Interim CEO Doug Braunstein has led the company since it ousted its founders and CEO the same day as the 2021 third-quarter earnings call. Before then, Braunstein was the Talkspace board chair, a role he retains.

Braunstein is the founder and a managing partner of the investment firm Hudson Executive Capital.

Hudson Executive Capital is the sponsor of Hudson Executive Investment Corp., the blank-check corporation that acquired Talkspace and made it a public company. 

As of March 30, Hudson Executive Capital was Talkspace’s second-largest shareholder, with a 7.31% stake worth $19,732,644, based on the $1.72 share price at the time, according to Yahoo Finance.

In February, Braunstein said that he and the management team are focused on improving shareholder value and how the company operates.

“Right now, the things under our control are to run the business better, to grow our B2B franchise, to optimize our B2C business, to improve our [therapist] network, to increase and improve our controls and financial rigor and discipline and cash flow generation,” Braunstein said during the company’s annual 2021 earnings call.