EMD first mover in psychedelic care market

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 5,866,667 EMD shares and 2,933,334 EMD options at the time of publishing this article. The Company has been engaged by EMD to share our commentary on the progress of our Investment in EMD over time.

A few weeks ago, our Investment Emyria (ASX:EMD) treated its first patient using psychedelics for mental health issues in a private clinic.

This was a world first.

And the potential market is enormous.

The aim is for EMD to quickly bring this novel new treatment to the mass market through growing a private clinic model.

And they have just signed on a new chairman, Greg Hutchinson, who led the scale up of Sonic HealthPlus to over 7,000 active clients across 40 different clinic locations.

If successful, we think EMD’s care model could eventually be replicated across the world and EMD could be the first to crack the code, licensing its model to a range of care providers.

EMD’s new chairman Greg Hutchinson knows a thing or two about scaling up a clinical treatment model.

Greg is the CEO of Sonic HealthPlus, who has become the largest provider of occupational and community medical services in Australia

And now Greg will be applying this knowledge to help EMD grow from its current two clinics and the world’s first ever patient treated in a private clinic.

EMD's primary area of focus is on psychedelic assisted therapies using MDMA, ketamine and psilocybin to treat difficult mental health problems in innovative ways.

...a few weeks ago EMD treated the first ever patient in the world using psychedelics to treat mental health in a private clinic setting (legally).

EMD is the first mover in the space globally, taking advantage of Australia being the first country in the world to legalise the use of psychedelics (MDMA, psilocybin) for treatment of mental health disorders.

(We are still baffled at how or why Australia is the first country in the world to legalise this, but it is.)

EMD’s plan is to develop, trial and commercialise new psychedelics treatments - and then deliver them through the growing number of mental health treatment clinics the company had acquired in anticipation of these laws being passed.

EMD’s new non-executive chairman announced on Tuesday is uniquely capable of taking the company to the next level.

This is Mr. Greg Hutchinson:

Greg is a gun at scaling clinical services offering novel new treatments.

The perfect person to help EMD scale - we see this as a real recruitment coup for the company.

The clients Sonic HealthPlus services are “small entities to some of the world’s foremost corporations across all industry sectors, as well as large government contracts with major Commonwealth and State agencies.”

The type of connections that could help EMD secure a major payer for its services - which we see as a major catalyst.

Each year the Department of Veteran Affairs in Australia spends around $166M on mental health services.

Along with insurance companies, this would be the type of payer that EMD would target.

By getting widespread acceptance of the efficacy of EMD’s psychedelic treatments its goal is to secure large deals with big organisations who agree to pay for EMD’s services for its members.

And the efficacy evidence is growing.

In a recent Phase 3 study conducted by EMD’s peers, more than two thirds of those receiving the MDMA treatment and the associated therapy no longer had PTSD, and almost half of patients had successfully put their PTSD into remission.

It’s the kind of evidence EMD is seeking to build in its ongoing Phase 2b trial which is underway right now.

Last week while on a trip to Perth, we met with EMD Managing Director Mike Winlo and were lucky enough to get a tour of the world’s first private clinic for MDMA treatments for mental health.

If there’s one takeaway from our trip to EMD’s clinic - it was that this company is helping address a serious unmet need for treatment.

People are suffering - and for hard to treat problems like PTSD, options for treatment are currently limited.

EMD meets that need with wrap-around care, a full suite of services and professionals that can help put the disorder into remission.

EMD is working on genuinely exciting and ground-breaking treatments for mental health and is the first company in the world to be able to trial, develop and refine a “private commercial clinic” model to scale up delivery of these innovative new treatments for broader consumers.

Many of us will have a family member affected by mental health issues, so we are really supportive of the work that EMD is doing.

It was very cool to take a tour of this world first clinic, and we also got to spend some time with Dr Jon Luangharne, who is the psychiatrist heading up the program.

Here’s what EMD has done since we first Invested:

✅ First patient dosed - the first of 72 patients for a Phase 2b trial - the main aim of which is to prove out the efficacy of EMD’s MDMA assisted therapy for PTSD. A successful trial outcome here would further strengthen the case for a wider rollout of the treatments.

✅ Supply secured - this ensures the trial can proceed. EMD secured a locally available supply, and is awaiting a shipment from Canada. EMD has received importation approval from both Australian and Canadian regulatory bodies.

✅ NHMRC ethics endorsement - an NHMRC ethics committee endorsement allows EMD to advance their Authorised Prescriber (AP) applications with the Therapeutic Goods Administration (TGA). This is an important step that could open the doors to a wider scale up.

✅ New clinical services expert on board - Mr. Greg Hutchinson is well versed in scaling up clinical services, having been CEO of Sonic HealthPlus. Sonic HealthPlus is the largest provider of occupational and community medical services in Australia, with over 7,000 active clients across 40 different locations

EMD is currently capped at $25M, and has recently raised $3.2M in a placement and rights issue last quarter.

With clinical trials underway and the prospect of rapid growth in its clinical services, this is our Big Bet for EMD...

Our Big Bet for EMD:

EMD re-rates to a +$300M market cap by making a breakthrough with one or more of its clinical trial programs (MDMA, psilocybin, ketamine, CBD) while rapidly growing the footprint of its mental health treatment clinics.

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our EMD Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

More on EMD’s board changes

We’re particularly happy with the appointment of Mr Greg Hutchinson, as the new Non-Executive Chair of EMD.

We think the appointment of Mr Hutchinson could prove to be a shrewd piece of recruitment from EMD, as the company moves into a phase where operational nous will be increasingly important to the success of the business.

Mr. Hutchinson is no stranger to the Australian medical and therapeutics market with EMD describing his skillset as particularly suited to “rapidly scaling clinical services delivery”.

Mr. Hutchinson was instrumental to the growth of Sonic HealthPlus which is a subsidiary of ~$13.8B capped, Sonic Healthcare Ltd. (ASX: SHL).

During Greg’s tenure as the CEO of Sonic HealthPlus, the company became one of the largest providers of occupational and community medical services in Australia, with over 7,000 active clients across 40 different locations.

In addition to this experience, Greg has also been involved in developing and commercialising innovative clinical delivery models during his time as co-founder of 5D Clinics - a Perth-based oncology business.

We think having the experience and networks of Mr Hutchinson on EMD’s board will allow the company to more rapidly roll out its clinical services across Australia, following the recent changes to the regulatory environment around psychedelic therapies.

What’s next for EMD?

MDMA-AT Phase 2b patient recruitment updates 🔄

We want to see EMD recruit all 72 patients into the trial so that we will have a timeframe on results.

Animal study results for fast-acting MDMA analogue 🔄

EMD is developing its own analogues (modified versions of the drug that work better). These tests are currently being run on animals and we want to see if EMD publishes positive results here.

Approval for ketamine assisted therapy protocol 🔄

EMD has a pending application for a ketamine assisted therapy trial.

Secure key approvals for psilocybin use 🔄

EMD has a pending application for psilocybin use in an assisted therapy trial.

Secure a major payer partnership (we see this as a major catalyst) 🔲

If EMD is able to secure a payer for its treatments, we think this would be a major catalyst for the company.

EMD trial set up for success, here’s what a US peer accomplished...

EMD is progressing its own Phase 2b trial on MDMA for PTSD - the company dosed its first patient back in October.

The goal is to build on the success of other trials and prove out the efficacy of the treatment.

This will grow the weight of evidence for EMD to scale up the rollout of its services.

Just two months ago on September 14th, MAPS, a US-based not-for-profit organisation published Phase 3 trial results on MDMA Assisted Therapy for those suffering from Post Traumatic Stress Disorder (PTSD).

(Source)

We think this has big positive implications for EMD.

While the MAPS study is helping make the case for the US to allow MDMA to be used as a treatment for PTSD - Australia has already made this legal as of July 1st 2023.

We think that as a result, EMD has a massive head start here - and the trial should provide the foundations for something called “Authorised Prescriber” (AP) status.

This is a regulatory pathway which allows EMD to provide MDMA Assisted Therapy at a larger scale.

The AP status is the regulatory framework that emerged following the Therapeutic Goods Administration's (TGA) decision to legalise the use of MDMA for a very specific set of conditions - and EMD is one of only very few organisations in Australia that is equipped to secure AP status.

Today’s dosing news, which had no safety concerns and occurred in line with an ethics approved protocol, will help strengthen EMD’s bid to achieve this AP status.

If successful in the application, EMD would effectively be the only provider available for MDMA Assisted Therapy that could do treatments at scale.

EMD has already treated more than 10,000 patients at its Emerald Clinics and has the Pax Centre in Perth (which it recently acquired) to form the base of its initial operations.

As a result, we think EMD is extremely well positioned to capitalise on the TGA’s decision and has a powerful first mover advantage in the market which could see it re-rate on either expanded care delivery or clinical trial success, or both.

EMD will use the data from the clinical trial to develop a protocol for this kind of assisted therapy and position itself a leader in this growing field of medicine.

Our EMD coverage since we Invested...

Latest notes:

Our Newest Investment is

The 8 Reasons we Invested in EMD

EMD Doses First Patient in MDMA Clinical Trial

Quick Takes:

Emyria gets a new Non-Executive Chair...

Emryria receives endorsement from NHMRC ethics committee

EMD secures MDMA supply for trial

EMD’s peer announces breakthrough results for MDMA therapy

Risks

We see the safe administration of the first dose to a patient, the recently completed funding round and EMD’s bid to become an Authorised Prescriber as de-risking our EMD Investment across all the risks we outlined in our EMD Investment Memo.

With that said, EMD remains subject to all of these risks going forward and there is no guarantee that things will go as planned across EMD’s clinical trial program and services.

Small caps often need to raise funds to sustain their growth, and if EMD is not able to quickly scale its treatments and derive enough revenue from them, then funding risk may present itself again down the track.

Our EMD Investment Memo

In our EMD Investment Memo, you can find:

• EMD’s macro thematic
• Why we Invested in EMD
• Our EMD “Big Bet” - what we think the upside Investment case for EMD is
• The key objectives we want to see EMD achieve
• The key risks to our Investment thesis
• Our Investment Plan