Shaky but Still Standing
It’s been a tumultuous two years for the psychedelics market with extreme volatility in stocks and unfulfilled expectations of psychedelic drug programs. For example, the performance of the Horizons ETF can be used as a bellwether – the ETF is down 20% this month, down 77% since its IPO in February 2021.
As psychedelic firms and investors struggle to navigate this market, we view this as a time of opportunity where mergers and acquisitions will occur, the smart capital will invest and firms with questionable management and weak intellectual property (IP) will fall by the wayside.
We believe that the winning path forward for a successful psychedelic company will be a multi-prong approach:
1) a strong drug development and/or clinical therapy program
2) strategic partnerships and/or
3) mergers and acquisitions.
A recent bright spot in line with this theme, is the licensing agreement between CYBIN (NEO: CYBN) (NYSE AMERICAN: CYBN) and Mindset Pharma (CSE: MSET) (OTCQB: MSSTF). A strategic arrangement which places both companies in good positions along a potential pathway towards commercialization. Let’s take a brief look at these companies, and what makes this deal important.
Mindset sees itself as the quintessential biotech company within the psychedelics space. They focus on only one thing: drug discovery. In the last 2 years the company has amassed the largest IP portfolio in the space, with over 100 synthesized, novel psychedelic drugs. The company has filed eight provisional patent applications to date, which cover next generation drugs inspired by psilocybin, DMT & 5-MeO-DMT.
Mindset has also selected its first lead clinical candidate, MSP-1014, a differentiated psilocybin-based analog, to move forward into investigational new drug (IND)-enabling studies.
Cybin motto is “Psychedelics to Therapeutics™” and aims to eventually provide a full-scale psychedelics offer Cybin aims to grow their portfolio with a mixed strategy of supporting clinical trials, M & A, and IP strategies. To date, Cybin has developed 50 novel compounds, with 19 patents pending, with one US patented issued. Cybin is a leader in research and development partnerships, engaging in about 50 collaborations with world-class scientists and CRO support programs.
For example, the company acquired a Phase 1 study from Entheon Biomedical for their drug candidate CYB004. This is the largest DMT study to date and is expected to accelerate the clinical development timeline for CYB004 by about nine months.
Cybin’s drug program is nothing to sneeze at as well. They have 50+ synthesized novel psychedelic-based compounds. Their strategy more runs the gambit of clinical trials, Mergers and Acquisitions with a strong focus on partnerships – like the licensing agreement with Mindset. The have over 50 strategic partnerships to support their drug program.
Cybin has the financial backing, but no clear runway to commercialization.
Mindset is guaranteed support for 2 of their families of drugs. They are the only company with the support of big pharma (Otsuka Pharmaceuticals) – they’re being taken very seriously.
ATAI Life Sciences
Surprise. Why are we briefly mentioning ATAI here? Because ATAI, within itself is good example of a diversified drug program with partnerships/ownership stake. ATAI is like a small holding company for psychedelics. Let’s look at their drug program, assets and their financial stake in the respective ventures.
|Company Name||ATAI’s Stake|
|Viridia Life Sciences||100%|
|Recognify Life Sciences||51.9%|
ATAI has at least one drug candidate from each company they hold a stake in. However, if you add up their IP from their assets, and it doesn’t add up to Mindset’s library of synthesized novel molecules. ATAI’s strength, is being involved in multiple clinical trials for various indicators – from Treatment Resistant Depression (TRD) to Anorexia Nervosa.
At the time of publishing, Mindset has over 100 synthesized compounds. This gives them the most, as the CEO James Lanthier would put it: “shots on goal” to win approvals and bring a psychedelic drug to market.
The Mindset and Cybin Agreement
Cybin has acquired an exclusive license to a class of tryptamine-based molecules from Mindset Pharma. This license excludes MSP-1014, Mindset’s psilocybin-like lead drug candidates. This agreement includes an initial fee payment by Cybin to Mindset of US $500,000 as well as clinical development payments once certain milestones are completed.
The milestone payments could total up to US $9,500,000, with the first payment in the amount of US$500,000 which would be paid out upon completion of a Phase 1 clinical trial. These payments may be payable in cash or in common shares in Cybin, or a combination of both if the Neo Exchange approves. Milestones will also have to be reached, including the approval and commercialization of the first drug candidate.
This deal also considers a royalty of about 2% for all commercialized licensed products, which is the usual arrangements for drug licensing agreements like this.
Doug Drysdale, CEO of Cybin shared some comments:
“This exclusive license bolsters the breadth of Cybin’s IP holdings while adding a significant number of compounds to our growing library of psychedelic derivative drug development candidates… We are pleased to work with Mindset who, like Cybin, has a deep-rooted understanding of psychedelic science.”
James Lanthier, CEO of Mindset Pharma, also had some comments:
“This licensing agreement – Mindset’s second such agreement to advance its innovations to clinical study – is another example of Mindset successfully executing on its scientific and business strategies. Coupled with our existing collaboration, Mindset now has multiple “shots on goal” for commercializing its innovations, with additional potential from its recently announced new families.”
This deal is beneficial for both parties, as it expands their portfolios. Hear us out. It gives Cybin access to novel compounds previously unavailable to them. Mindset is incentivized to develop and potentially profit off a class of drugs that were a part of their library that they weren’t working on. This is the advantage of having a strong base of IP. If you’re focused on the science – the drug development side of psychedelic investing the IP catalogue of the utmost importance to the company’s potential revenue potential.
Agreements of this nature will dramatically increase over the next year, as psychedelic companies expand their drug programs and shore up their assets as they navigate the volatility of the market.
Yes, we are moving into a recession if we look at the significant decline in economic activity over the past few months. As the Fed continues to raise rates, this may be accompanied by increasing layoffs – which we are seeing occur now. At the time of this publishing, job losses have slowed down – but continued financial tightening will put pressure on companies to cut. It is a key to the Feds plan for a soft landing to somehow lower inflation without significant job loss, which will prolong a recession.
According to Crunchbase, as of mid-September more than 42,000 workers in the U.S. tech sector have been laid off in mass job cuts this year. Keep your eye on the tech sector, which in the near term will most likely suffer the most job losses.
Mindset Pharma is a market awareness client of Capital 10X.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.