Mydecine Innovations: Tiny Psychedelics Company at the Forefront of Curing PTSD & Addiction

Those of you who have read my previous piece on psychedelic medicine will be in little doubt that I am very excited about the game-changing potential of psychedelic compounds to properly treat mental health issues: Psychedelic medicine: a mental health game changer?.

Mental health is a medical problem more costly and more widespread than any other single area of medicine. According to the World Health Organization, more than 800 million people worldwide suffer from mental health disorders. Treatment costs, lost work, and social tolls amount to a $3trillion drag on the global economy. And modern medications aren’t doing nearly enough to address this gigantic mental health crisis. According to the Institute for Quality and Efficiency in Health Care, 40–60% of people who took traditional antidepressants didn’t see an improvement… and of those who did see results, one-third said the drugs completely stopped working overtime. Sadly, this huge global problem is growing too, fuelled even more by the pandemic. It’s really astounding that despite the billions of dollars Big Pharma has invested in research, they have had little success in coming up with really effective mental health treatments. The result is mental health problems remain undoubtedly one of the most serious and costly issues facing the World today.

So one hundred years after Big Pharma came into existence and 40 years after the more nimble and innovative biotech sector did, we have the wide-open chasm of unmet medical need that is effective mental health treatments. The sad thing is no conventional treatment offers a high likelihood of cure, and what’s worse is these not very effective medications come with a whole host of pretty unpalatable side effects. To put this gigantic area of human suffering in a number’s context, it would easily rank as one of the world’s largest trillion-dollar industries. To be fair, Big Pharma has tried time and again to come up with more effective treatments. A radical new approach seems appropriate given that Big Pharma’s billions spent on conventional research and 100-year head start haven’t yielded results.

Against this backdrop, there has been a raft of astoundingly positive results from psychedelic compounds drug trials around the World. The degree of effectiveness of these new compounds in treating a range of mental health issues versus conventional treatments means that even the FDA has called psychedelic treatment a ‘breakthrough’ while the New York Times calls it a ‘revolution’. In human impact terms, this new approach looks like it has the power to take away human suffering for millions of people around the world. It’s hard to overstate the size of the opportunity in numbers or human impact terms.

Thesis Portfolio_Blog Banner

Join us NOW!

Psychedelics have been illegal and the preserve of recreational drug use for the last 40 years. To be clear, the medicinal use of psychedelics as a mental health treatment has nothing to do with getting high. In fact, the micro doses used in the trials to date avoid that prospect altogether. We are talking about a new class of prescription medication which needs to go through conventional drug trials to assess its safety and efficacy. As usual with powerful drugs, these meds would be prescribed and monitored by a specialist doctor either through pharmacies or in clinics.

It’s important to note that the drug trials to date were conducted by some of the most renowned researchers at world-class institutions like Johns Hopkins/Yale/NYU/ Oxford/Imperial. These brilliant researchers have uncovered a whole different side to psychedelics and given their credentials, have given the approach much needed credibility. What has held back progress to date has really been the bad reputation of these drugs but looking at the evidence of the growing bank of trial results, deregulation and reclassification of these drugs by the authorities seems a logical response. Today, there are some very positive early signs that things are changing for the better in terms of the way regulators view these compounds. The FDA even recently approved psychedelics for treating depression and PTSD - which is tantamount to accepting that these drugs have medical uses - while the DEA has also significantly softened its stance.

So in my opinion, it’s only a matter of time before psychedelics are ‘scheduled down’ to grouping the drugs with common prescription medications like Tylenol with codeine, Vicodin, and anabolic steroids. When that happens, we’ll likely see a flood of capital and new entrants pour into the market to grab a share… but the biggest gains will be found in a handful of companies actively working to make these drugs a reality today.

We can see many parallels between the psychedelic sector and that of cannabis. Cannabis was illegal in most countries, came from a recreational drug use background and was perhaps for this reason initially vilified and distrusted as a viable solution to unmet medical needs. As trial results came in confirming the positive benefits of medicinal marijuana, deregulation and rapid growth of the cannabis market quickly ensued. The same pattern seems to be repeating itself in psychedelic medicine. Therefore, it is exciting that we are only at the very early stages of the sector’s growth. In fact, mental health issues - the problem that psychedelic compounds look capable of addressing far more effectively than existing treatments - happens to be possibly the biggest problem facing the world today. Therefore, I believe the growth potential of psychedelic medicine actually far outstrips that of cannabis.

Within this context, today I would like to tell you about one of the most exciting but very early-stage companies in the space. As you know, I seek out investment opportunities that I feel have a higher-than-average chance of success in any given sector. Today I would like to explain why I believe Mydecine Innovations is uniquely placed to become one of the leaders in psychedelic medicine.

Equity Research Report

Price data as of 20.01.2022.

Source: MSN Money (Price data as of 20.01.2022)
Past performance is not indicative of future performance.
Returns may increase or decrease as a result of currency fluctuations.
(Figures refer to price data between November 2016 and January 2022)

Business Description


Source: Mydecine Investor Presentation, 2021

Mydecine is an emerging biotech and life sciences company dedicated to developing and commercialising innovative solutions for treating mental health problems and enhancing vitality. It is developing molecules based on psilocybin (the active compound within magic mushrooms) to treat PTSD and addiction and also has an app for psychedelic after-care remote therapy. At the heart of Mydecine’s core philosophy is that psychedelic-assisted psychotherapy will continue to gain acceptance in the medical community with many of the world’s best accredited research organizations demonstrating its remarkable clinical effectiveness.

Mydecine has exclusive access to a full cGMP certified pharmaceutical manufacturing facility with the ability to import/export, cultivate, extract/isolate, and analyse active mushroom compounds with full government approval through Health Canada. Mydecine also operates out of a state-of-the-art mycology lab in Denver to focus on genetic research for scaling commercial cultivation of rare (non-psychedelic) medicinal mushrooms.
In December 2020, Mydecine completed a commercial harvest of 20 kilograms of psilocybin and in March 2021 it became the first company in the world to complete an international legal export of dried psilocybin.


Source: Investor Presentation, 2021

In terms of areas of focus, the company plans to use psilocybin to treat post traumatic stress disorder (PTSD) and addiction (specifically smoking cessation). Mydecine has seven molecule designs, and its clinical trials are at Phase 2A, with test sites approved at Leiden University, University of Alberta, Royal Ottawa Hospital, and Western Ontario University. Overall, it’s at a pretty early stage but it has developed important partnerships and secured licenses that provide it with several advantages over its peers.


Source: Investor Presentation, 2021

Huge Market Opportunity

We have discussed how mental health treatment represents one of the largest unmet needs we face in the world today. Therefore the opportunity for effective psychedelic-assisted therapeutic solutions is huge. For example, worldwide sales of antidepressant drugs are expected to reach almost $16 billion by 2023, according to a report of Allied Market Research. In aggregate, according to data from the National Institute of Mental Health, the direct and indirect economic costs of mental disorders in the USA alone are $467 billion.

Source: Cybin

Mydecine is initially focusing on PTSD and smoking cessation (part of treating addiction). The figures below show just how large these two sub sectors are. In terms of PTSD, the company has unique insights and a wealth of data regarding PTSD in veterans and even believes the statistic that 30% of veterans returning home experience PTSD is an underreported number. In terms of treating addiction, the CEO explained that 480k people in the US alone (and 8m globally) are dying from smoking related diseases. The size and growth of the smoking cessation market hides the fact that currently there are no good solutions (efficacy rates on current treatments is only in the single digits!) Smoking is by far the largest addiction market and kills far more people annually than all the others combined.


Source Investor Presentation, 2021

Industry Progress Held Back for Decades

It was as far back as the 1950s that researchers started to discover the medicinal properties of psychedelics like LSD, magic mushrooms, and mescaline – a psychedelic substance found in certain cacti. Early studies at St. George’s Hospital in London showed that psychedelics cured alcoholism in about 50% of study subjects. Over the next decade, there were hundreds of studies which showed the benefits of using psychedelics to treat conditions like depression, anxiety, and addiction.

But then things went wrong! In 1960, a Harvard psychologist named Timothy Leary began taking LSD and psilocybin with his research subjects and his students, and he went as far as publicly advocating for the mass use of LSD! He became one of the most prominent figures in the debate surrounding these drugs and the result was that his actions tainted the reputation of psychedelics-based research for decades. Following this period, President Richard Nixon declared ‘the War on Drugs’ in 1971, and so nearly every psychedelic was labeled a Schedule I compound. A schedule I classification makes it illegal to use the drugs for even medical research without an exemption from the federal government. This strictest possible classification together with the bad reputation created by this one prominent researcher effectively killed the prospect of any further research into psychedelics for a half-century. In fact, the DEA, tasked with enforcing the ‘war on drugs, was very influential in making sure it stayed that way. But today there are very positive early signs that the stance by the regulators is changing ….

Deregulation is Critical to Commercialisation

Given the size of the market opportunity as well as the effectiveness of these psychedelic treatments, the future for psychedelic-assisted therapeutic solutions looks bright. However, it very much depends on deregulation. The valuations of companies in the sector assume that deregulation will take place and totally depend on the eventuality that governments around the world approve the therapeutic use of psychedelics.

All signs are that legalisation in the USA is just a matter of time and the first steps have now begun. The tide is definitely turning, with the recent news that Seattle is the latest U.S. city to decriminalise the personal use of psychedelics, following in the footsteps of Denver, Colorado, Washington, D.C., and the State of Oregon. Clearly, psychologists who advocate the use of psilocybin mushrooms and other psychedelics to treat mental health conditions welcome this news as a sign that full deregulation is only a matter of time.


Source: Numinus

Did the DEA Just Signal an End to the War Against These Drugs?

Since 1971, the U.S. Drug Enforcement Agency (DEA) has been at the forefront of the fight against illegal drug use and trafficking in the U.S. And while many states have passed legislation legalising cannabis for medical and recreational use, the agency has stood firm on psychedelics. It rejected multiple petitions calling for federal reclassification of cannabis and psychedelics from highly addictive with no medical use, (what’s known as Schedule I classification), to the more lenient Schedule III classification – these are therapeutic drugs available only via prescription. But in a memo released this week, the agency seems to have changed its stance from total prohibition and strict enforcement. It actually conceded that there is a need for more of these drugs! Specifically, the memo calls for legal producers to ramp up the production of cannabis and psychedelics like psilocybin (found in so-called “magic mushrooms”), LSD, and MDMA (aka “ecstasy”) for medical use in 2022.

Here’s an excerpt from the memo:

There has been a significant increase in the use of schedule I hallucinogenic controlled substances for research and clinical trial purposes…

[The] DEA supports regulated research with schedule I controlled substances, as evidenced by increases proposed for 2022 as compared with aggregate production quotas for these substances in 2021. (Emphasis added.)

In short, the agency wants to increase production of certain drugs to meet growing research demands in 2022. For instance, it proposes doubling the production of psilocybin… increasing LSD production by 12x… and MDMA production by 64x.

The DEA’s softening on psychedelic research is a critical milestone for the industry and for all the small companies at the forefront of these life-changing medical breakthroughs. It now seems reasonable to expect the DEA to continue down this path and reclassify psychedelics to Schedule III status within the next 18 months.

Other important regulatory developments also support the view that deregulation is only a matter of time:

  • In 2018, COMPASS’ synthetic psilocybin (COMP360) was granted breakthrough therapy status by the U.S. Food and Drug Administration (FDA).

  • In June 2021, the Drug Policy Reform Act was introduced in Congress. It has the potential to become the first bill to federally decriminalise possession of all currently illicit drugs and this would likely lead to a loosening of restrictions on research into psychedelic therapies.

Drug Pipeline


Source Investor Presentation, 2021

Mydecine has announced their 4 leading drug candidates - called MYCO001-004. As the slide above shows, Mydecine’s two leading drug candidates are progressing through trials and we can expect newsflow on these in early 2022. The company is conducting trials in 7 countries focused on FDA standards to initially establish safety.

MYCO 001 is made from organic /fungal psilocybin rather than a synthetic form that sector leader Compass is targetting. MYCO002 is MDMA-based and the company feels they have overcome the known heart problem complications typically associated with this therapy. MYCO001 is also being trialed in partnership with Johns Hopkins Hospital and is building on the work of Johns Hopkins in smoking cessation. It’s important to note the ease of this study: a binary result of either they quit smoking or they don’t and the fact that it compares to single digit success rates in existing treatments. To add to the positive picture: the pilot study by Matt Johnson at John Hopkins looked at a small population of 15 smokers who had smoked on average for 31 years and had had at least 5 attempts at cessation. After 6 months, MYCO001 showed that 80% were completely abstinent, at one year 67% remained abstinent and at 2 years 60% remained abstinent. These are remarkable success rates and several times higher than any addiction treatment that is available in the market today!

What is Truly Unique about Mydecine’s Position

Although the sector as a whole is very promising, Mydecine is among the companies that I am most excited about. What truly sets it apart from its competitors is its wealth of unique real-life experience of treating veterans with psychedelics, its vast partnership network, its licenses, and its telehealth app. I think the latter derisks the business somewhat and is already gaining traction and showing impressive early success.

Perhaps for me, the curious situation in Mydecine’s work in PTSD is the most important. Mydecine has been collaborating with military personnel in treating veterans with PTSD. This means Mydecine is in a truly unique position with significant amounts of real-life data and insights which give it important advantages over its competitors. Specifically, Mydecine works closely with the VA hospital network which is in fact the largest hospital system in the US, if not the world! Psychedelics are currently classed as a ‘Schedule I’ drug by the FDA which in layman’s terms means they are seen as harmful and as having no clinical benefit at all and therefore completely illegal and should never be used. Despite this extreme stance from the FDA, Mydecine have been actively using psychedelics in their psychiatric treatment of veterans at the VA!

So it’s fascinating that we have one of the largest government agencies basically telling another large and powerful government agency – ie the FDA - that these treatments work and they aren’t willing to wait for the right authorisations! From my standpoint as an investor, it means Mydecine has access to an unparalleled volume of real-life treatment outcomes in PTSD treatment. Without their connections to a hospital system as powerful as the VA, it would be impossible and unthinkable for a company like Mydecine to be already using these drugs in clinic! The fact is that 17 veterans a day are committing suicide and it’s a very emotive and politically charged issue so it’s difficult to see any politician in the world risking their political capital by opposing this treatment. Equally, the pressure on the FDA to play catch up and authorise treatments must be there for these very reasons. I am inclined to think it is now a question of when not if these treatments are granted a lower scheduling by the FDA. The institutional pool of capital will feel far more comfortable getting involved in the sector once it is reclassified to schedule III and it is likely that they too will be pressuring the government for this rescheduling. The truth is that the actions of the VA and the comments from the FDA acknowledging the clinical benefit of these treatments show that they are actually on the same side of the table.

In my mind, this inconsistent behaviour between branches of the government cannot continue to coexist for long – one branch is recommending this treatment while the other is saying it’s harmful with no benefit! I suppose the question then becomes which side will fall into line. Is it going to be the VA who stops using a treatment that is not only miles more effective but saves them millions of dollars or is it going to be the FDA who gives these drugs breakthrough therapy dispensation? In my opinion, it’s far more likely to be the federal government and the FDA that falls into line. When these drugs are reclassified as schedule III, the boost to the sector will be monumental both in terms of institutional investor involvement but also in terms of accelerated commercialisation.

Overall, Mydecine is in an incredibly strong market position despite its size as detailed in the slide below. It has 14 patents pending covering thousands of inventions that can be layered and standardised to FDA guidelines. Other advantages include Mydecine’s global drug trial infrastructure, its large distribution network and a carte blanche all encompassing health canada dealer’s licence.


Source Investor Presentation, 2021

Telemedicine Opportunity

In August 2020, Mydecine bought a company named MindLeap Health for C$2.5 million ($2 million) in shares, and in September 2020 it launched a digital telehealth mobile application for mental coaching to support the conscious and trustworthy adoption of psychedelics into the broader categories of mental health and inner wellness.


Source Investor Presentation July 2021

The app is free but Mydecine will make money through in-app purchases of mental health and wellbeing programs by charging a 9% fee for each session. At the moment, the app downloads are at a low level but the reviews are pretty good, with most of them at five stars and the average rating standing at 4.8 stars as of the time of writing.


Source: appgrooves

The plans for the app are ambitious for next year as Mydecine plans to significantly expand the specialist and partner network as well as the social media presence.


Source Investor Presentation, 2021

Mindleap helps address the known scaling issues around psychedelic therapy in first generation treatments. Basically given that the number of physical locations will initially be limited, to scale the availability of psychedelic treatment quickly, Mydecine have aggregated the world’s largest grouping of professionals trained in providing psychedelic therapy. They currently have 135 trained professionals actively using the app to provide the therapy integration and the psychedelic assisted psychotherapy virtually to patients globally.

Experienced Management Team

Mydecine’s management brings significant experience in the cannabis sector and also in psychiatry in veterans. Specifically the company’s CMO retired after a 30-year career as chief of Psychiatry for the Canadian armed Forces. Through his vast NATO connections, Mydecine has been able to bring in the World’s most renowned experts on PTSD.


Source Investor Presentation, 2021

Valuation Upside

Recent Spin off of Cannabis Assets to Gain Nasdaq Listing

The company’s shares are very difficult to buy at the moment. In order to widen its shareholder base and the liquidity and availability of the shares, the company is in the advanced stages of gaining a Nasdaq listing. The CEO explained that they had complementary cannabis assets within the company but during the Nasdaq listing review process, it came to light that the NASDAQ does not see US cannabis assets as ‘legitimate assets’ and will not allow companies with cannabis assets in them to list on NASDAQ! So Mydecine put those assets into an SPV and spun them out of Mydecine (NB they are not currently separately listed but they do plan to eventually list that, most probably as a separate company listed on a Canadian exchange). The proposed NASDAQ listing in the next few months should mean the shares are far more accessible to investors and therefore that should have a positive impact on the share price.

Another valuation upside catalyst could be from the fact that the regulatory tide seems to be turning as discussed in detail above. There seems to be little coverage of the companies from this field, and I think the reason for this is that many of them are small and based in Canada and very dependent on the pace of deregulation. We therefore have the opportunity to invest before the anticipated newsflow on deregulation and therefore before the majority of investors get involved.

In terms of newsflow on MYCO001, we can see that IND submission is scheduled for this quarter and trials are slated to start next quarter. Given the depth of practical experience and therefore data captured already in Mydecine’s working with veterans, this is likely to be granted, with obvious implications for the share price.


Source Investor Presentation, 2021

As you can see from my figures below, Mydecine shares trade at a fraction of the valuation of more famous market competitors like Compass and Mindmed. This significant valuation gap is in my opinion very likely to close as we see further newsflow on new potential partnerships and progress in drug trials.

Pynk Community Mydecine Shares Value
Source: Stockopedia, 2021
Price data as of 21st October 2021.

Key Risks

Mydecine and its novel treatments are extremely early stage and therefore the shares represent a high risk early stage investment. The sources of risk are summarised below:

  • The company has just C$7m of Cash and cash equivalents so there is a real prospect of additional fundraising which may be dilutive

  • These treatments may show unexpected adverse side effects in further trials

  • The delivery mechanism and accurate dosing process is still in its infancy

  • The pace of deregulation may be slow or it may stall, delaying the route to market for these treatments (NB there are no approved psychedelic drugs yet apart from Ketamine)

  • Management may not execute the growth plan effectively

  • The fundraising markets may be less buoyant so capital may be less freely available

  • Mydecine is focused on the use of natural occurring psilocybin which as a naturally occurring substance is difficult to patent (however, they have a raft of patents surrounding its purification and delivery and are likely to get 3-5 year exclusivity from the FDA if approved).

  • Half-life optimisation is a challenge that is important for rollout of the treatment

  • Distribution networks in their infancy

Conclusion


Source Investor Presentation, 2021

Mydecine is one of the most exciting companies I have come across. The markets they are addressing are truly enormous. Thanks to their work with veterans in one of the largest hospital systems in the world, Mydecine benefits from an unparalleled wealth of data and experience in using psychedelics to treat PTSD. They possibly have more real life data treatment experience than any competitor given this unique affiliation with this powerful government agency! Despite this, the shares are valued at a fraction of their more famous competitors. Other important investment attractions are the company’s global research and collaboration network, their licence to export psilocybin as well as their telehealth app. In the long run, Mydecine needs to successfully advance its molecules through the long and arduous clinical trial process and hope that deregulation happens so it can sell these new treatments. But meanwhile, the company is bringing its app to the mainstream and starting to monetise it successfully. Although the company is loss making and at a very early stage, I believe the shares are an attractive high risk/high return long term investment proposition.

This material is not investment research in accordance with the legal requirements designed to promote investment research independence and is also not subject to any prohibition on dealing ahead of the dissemination of investment research; and as such is considered to be a marketing communication.

Thesis Portfolio_Blog Banner

Join us NOW!

All investments have the potential for profit and loss and your capital may be at risk.

Past performance is not indicative of future performance.

The price may increase or decrease as a result of currency fluctuations.

3 Likes