Cybin became the first psychedelic healthcare company to list on the New York Stock Exchange, with its psilocybin formulation to treat Major Depressive Disorder in Phase II clinical trials.
The company’s CEO, Doug Drysdale, has 30 year’s experience in the healthcare sector and has raised US$4 billion in public and private capital. PSYCH spoke to Drysdale on raising finance for psychedelic medicines, industry trends and the emerging investment opportunities.
‘Capital raising is a bit of a process’, said Drysdale. We’ve had five five financing rounds – all over subscribed – and they were largely subscribed to by institutional investors.
‘We’ve raised about US$120m so far and listing on the New York Stock Exchange was an opportunity to provide access for retail investors and diversify from our institutional base. Since we’ve gone on the NYSE we’ve seen liquidity increase four times, so it certainly makes us a lot more accessible and tradable at that level.’
PSYCH asked Drysdale to expand on Cybin’s investor base and whether support from institutional investors validates its drug development programme.
‘When you start any venture, the capital you take in is quite important. We were very very selective targeting blue chip healthcare investors that had a long-term view; after all drug development is a lengthy process.
‘We focused on professional healthcare funds and 90% to 95% of the capital we raised in those early rounds came from blue chip healthcare funds. Moving to the NYSE was an opportunity to diversify those investors.’
As opposed to conventional treatments, raising capital for psychedelic healthcare poses a number of unique challenges. PSYCH was interested to learn if these pose a roadblock to the growth of the industry.
‘Investment bankers, commercial bankers and stock exchanges, they all have to do their due diligence on their clients. The fact that we’re doing work on psychedelic therapeutics definitely opens up an additional area of questions during these processes.
‘Really it’s just so that these institutions can get educated as this is so new. I think that some institutions we’ve worked with came into the space thinking it’s like cannabis, and we have to re-educate them that it’s really not cannabis – it’s pharmaceuticals. So there are an additional few steps, but nothing that we haven’t been able to overcome.’
We’re starting to see a rise in M&A activity in the psychedelic sector, with big pharma waiting patiently on the sidelines. PSYCH put this to Drysdale and asked when he believes big pharma will claim a larger stake in the industry.
‘We have started to see M&As begin to happen, which is not really a surprise, and I think we’ll continue to see M&A activity over the next 12 to 24 months.
‘I think there are a couple of factors driving this. Firstly, there are perhaps 50 publicly listed psychedelic companies, which is obviously a very large number. It’s inevitable that not all of those companies will get access to the capital that they need. So there’s bound to be consolidation or licensing.
‘Over the next 12 or 24 months, the intellectual property landscape will really emerge. We’re just starting to see patents begin to be published, but much of it is still below the waterline and it’s not very visible, but as that continues it is inevitable that some licensing or consolidation will occur.
‘12 to 24 months is a pretty short period of time and I think big pharma can afford to wait and see which companies prevail with both viable therapeutics and valuable IP. After all, if you take those 50 psychedelics companies and combine their market caps, it is still only about US$10b. So even if it bought the whole sector it would not be a large check for big pharma.
‘Big pharma can afford to wait, rather than trying to weed through the 50 companies to see which ones they might be interested in. I imagine they’ll wait and see the results of initial studies, and see what IP issues occur before jumping in.’
With heightened competition in the capital markets, PSYCH probed whether this was of increased concern to Cybin.
‘No, we don’t really think about that too much,’ commented Drysdale. ‘Our goal was to get out of the blocks quickly and be amongst the leading pack, and I think we’ve successfully done that.
‘If you look at market caps and balance sheets, it is all four or five psychedelics companies. There’s quite a large gap between them and the other 45. So, I think we’ve managed to successfully pull ahead and be in a group that has access to capital and will continue to have access to capital.’
Despite being one of the heavier financed companies, there are obstacles to the widespread accessibility and adoption of psychedelic medicines. Drydale spoke to Cybin’s development pipeline and drug delivery technologies.
‘The focus with all of our programmes has been to try to overcome some of the challenges we see with psilocybin and other psychedelics. While there is tremendous therapeutic potential, there are also real challenges to scale and practical adoption when treatments are six, eight or 10 hours in duration.
‘It’s hard to see how addiction and depression clinics can be adapted to those models, and still be profitable and practical. They’re concerned they may be in a situation where a patient is in one of their rooms for an entire day, which is not how they typically run their businesses.
‘They’re looking to see multiple patients a day, so we’ve been really focused on trying to create fast onset short duration treatments that can have the same therapeutic benefit. The psilocybin sublingual film was designed to deliver a fast onset and a shorter duration, by bypassing the liver. Psilocybin is a pro drug and is gradually converted from psilocybin to psilocin by the liver, over a period of time, and that’s what creates this long duration.
‘As psilocybin is continuously converted by the liver and dependent on metabolism, this creates quite a lot of variability. We’ve seen this and know patients can have quite a varied experience on the same dose. One might have a moderate psychedelic experience, while another has a very profound psychedelic experience. That variability is also a challenge in itself.’
Cybin has a market cap just under US$300m million, which places high expectations on the company. On the subject, Drysdale said he remained unfazed by the metric.
‘We don’t spend too much time thinking about market caps and expectations. Instead, we are very much focused on executing and progressing the science programmes. Successful progression of these programmes and successful outcomes will ultimately drive market cap rather than the other way around. So we remained focused on execution and doing a good job, which in itself will take care of those financial metrics.
‘Obviously we’ve been humbled by the level of interest and support that we’ve had from our institutional investors. Now we are starting to see more retail investors come in and the confidence they have in Cybin is also very humbling. This morning we announced that we will be providing an R&D briefing next Monday on November 8th, which will provide the opportunity, for the first time, to share more detail on our programmes and the data we’ve generated.’