Emyria (ASX:EMD)

Company: Emyria
Ticker: ASX EMD
Sector: Biotech

What Does EMD Do?

Emyria is a vertically integrated clinical drug development and care provider company. Emyria predominantly focus on psychedelic assisted therapies using MDMA, ketamine and psilocybin in order to treat difficult mental health conditions. It also has cannabidiol (CBD) treatments in its clinical pipeline for anxiety and complex pain. 

Sector Thematic

It is estimated ~43% of Australians aged 16–85 years will experience a mental health disorder at some point in their life. In 2020–21, an estimated $11.6 billion was spent on mental health-related services in Australia, an increase from $9.3 billion in 2016–17. In 2019, the US spending on mental health treatments surpassed $225 billion. These are clear markers demonstrating the significant scale and size of both Australia and the US market, which has seen authorities begin to look to new care methods, such as psychedelics, to curb the growing burden of mental health, which we believe have potential to be a market disrupter. 

This is evidenced by Australia who has become the first country in the world to recognise psychedelics as medicine, after the TGA approved psychedelic substances used in magic mushrooms and MDMA. Therefore, from 1 July 2024, medicines containing the psychedelic substances psilocybin and MDMA can be prescribed by authorised psychiatrists in Australia for treating certain mental health conditions. 

EMD Recent Performance

From the beginning of 2022, Emyria’s share price has seen a steady decline, from $0.42 per share to $0.052 per share. Despite achieving a number of company milestones and significant catalysts, it can be asserted the decline in share price can be largely related to the broader bearish market sentiment for small caps, which has been compounded in the bio-tech sector as demonstrated by the Global X S&P Biotech ETF which has declined almost 50% from its ~$150 US highs in early 2021, however could be poised for some reprieve having increased from ~$65 US to ~88 US since October 2023.

Strong Company Fundamentals

Experienced Board of Directors Who have Delivered Big in the Past 

Emyria currently have five board members, with significant experience in the bio-sector and track record of success in both small founder led ventures and large ASX 100 listed corporations. Three of these key members are highlighted below:

1. Mr Greg Hutchinson (Non-executive Chairman) – Mr. Hutchinson has held leadership roles in rapidly scaling clinical services delivery for over 30 years, spending the last 13 as the CEO of Sonic HealthPlus and Deputy CEO of Sonic Clinical Services, subsidiaries of Sonic Healthcare Limited (ASX: SHL) an S&P/ASX 100 company. Under his tenure, Sonic HealthPlus has become the largest provider of occupational and community medical services in Australia.
2. Dr Karen Smith (Non-Executive Director) – Dr Smith was Chief Medical Officer and Global Head of Research and Development at Jazz Pharmaceuticals which was acquired by GW Pharma for USD $7.2 billion in February 2021. Jazz Pharmaceuticals made Epidiolex which is the only US FDA approved cannabinoid-based medicine and has annual sales of ~$1 billion (Emyria are working on cannabinoid-based medicine).
3. Dr Michael Winlo (Managing Director) – Dr Winlo was CEO at Linear Clinical Research Ltd (Linear) until October 2019. Under Michael’s leadership, Linear’s revenues grew over 300% in just over three years (to over $23 million per year). Additionally, Dr Winlo spent more than 3 years at ~US $33 billion Palantir Technologies, eventually rising to the role of Health Lead.

Committed Key Shareholders & Australia’s Richest Man 

On initial listing in 2020, Emyria Top 20 held a total of ~128 million or 69.8% of shares on issue. Whilst capital raisings and dilution have seen the overall percentage of shares held by the Top 20 decrease to 48%, the key shareholders have steadily increased their holdings and the Top 20 now hold approximately ~176 million shares on issue, purchasing at multiples of today’s share price ($0.05). Noteworthy substantial shareholders include:

• Dr Stewart Washer – Previous Emyria Chairman, number 1 shareholder and between 2020 to 2023 at which point he retired from the board, had spent approximately ~$400,000 on-market and/or in placements at an average of $0.09 per share. 
• Tattarang Ventures Pty Ltd – Tattarang Ventures is Australia’s richest man, Andrew ‘Twiggy’ Forrest’s private family investment fund, which is spearheaded through his new $250 million fund called Tenmile, which solely focuses on the health tech industry. Tenmile aims to support early stage biotechs through the period when cash is burnt on R&D and no revenue is being made. Tenmile initially acquired a 7.3% stake in Emyria for $5 million at $0.25 per share, however recently has again participated in Emyria’s capital raising purchasing a further $500,000 of shares at $0.15 per share.
• Craig Lawrence, Matthew Callahan (previously Emyria non-executive director) and Sufian Ahmad (62 capital) – These key substantial shareholders have all increased their holdings since IPO and remain the top six  shareholders. 

What Do We See Driving Company Growth and Success?

Emyria is quite unique in the sense that it offers several avenues in which it can generate share price growth. 

Treatment Centres with Growing Revenue & Attaining Real-World Data 

Emyria has been actively acquiring companies with operating treatment centres, providing patients with a full suite of practitioners such as psychiatrists, where psychedelic treatments can be administered. This approach offers two significant benefits. Firstly, Emyria collects and owns valuable patient data to help improve its own drug treatments and therapy programs which are essential for their blue-sky drug development research, which very few companies in the world can do presently. Secondly, it provides a revenue stream which if executed successfully will reduce the need for capital raisings and shareholder dilution. For example, Emyria generated ~$1.6 million of sales receipts for FY2023 which is forecast to increase to ~$5.7 million in FY2024.

Licensing & Intellectual Property (IP) Converting to Scalable Revenue Streams 

In addition to strategic acquisitions and organic growth, Emyria can leverage their world’s largest library of novel, patentable, MDMA analogues, collection of data and patient care models derived from their treatment centres, in turn generating IP and licence care models which can be used at other clinics. This will allow Emyria to quickly scale its operations and revenue through licensing.

‘Traditional’ Blue Sky Drug Development – High Potential Catalysts 

MDMA Therapies 

Through their treatment centres, Emyria has been developing MDMA-Assisted Therapy (MDMA-AT) for Post-Traumatic Stress Disorder. Further, on 30th October 2023, Emyria announced its lead psychiatrists had received endorsement from an NHMRC ethics committee allowing them to advance their Authorised Prescriber (AP) applications with the Therapeutic Goods Administration (TGA). By operating their own treatment centres, this places Emyria in a unique position and at the forefront of psychedelic assisted treatment globally.

Additionally, Emyria has partnered with the University of Western Australia and have created the world’s largest library of novel, patentable, MDMA analogues in order to expand the use of MDMA for other mental and physical conditions. At present, Emyria are focusing on development of three specific MDMA molecules (EMD-MX1, EMD-MX2, EMD-MX3). These ‘Blue Sky’ drug developments offer significant upside, for example Emyria is engaged in preclinical work right now on EMD-MX2, aiming to re-engineer MDMA for Parkinson’s patients where the current standard of care is L-Dopa, a drug which makes up a substantial portion of the current US $5.4 billion market for treatment.

CBD Prescriptions

Emyria have three CBD products in the pipeline, with development primarily focused on EMD-RX5, which is in Phase 3 of clinical trials and if successful would result in over-the-counter availability for treatment of anxiety and stress. Emyria has already entered a binding Term Sheet with Aspen Pharmacare Australia (subsidiary of Aspen Pharmacare Group, US $8 billion market cap), and if the trial is successful would net an upfront payment $400,000 in addition to 10% royalty on any sales. 

Emyria are also undertaking Phase 1 clinical trials for prescription indications. For peer comparison, Epidilox is the only US FDA approved cannabinoid-based medicine used for child epilepsy which has annual sales of ~$1 billion. It is important to note that Emyria Board member, Dr Smith, was Chief Medical Officer and Global Head of Research and Development at Jazz Pharmaceuticals who developed Epidilox, which was acquired by GW Pharma for USD $7.2 billion in February 2021. 

Ketamine & Psilocybin

Emyria have stated they do intend to expand to Psilocybin & Ketamine therapies. 

Emyria have a First Movers Advantage (Globally)

The US FDA has made an early move, designating MDMA as a ‘breakthrough therapy’ as early as 2017, but has so far not legalised its use beyond scientific purposes. This means Emyria are one of a handful companies world-wide, gaining real world experience years ahead of competitors, operating in this niche market and will be set to benefit from the TGA’s latest announcement, which we believe will be monitored by a lot of interested operators in this space.  

What We Would Like Achieved & Upcoming Catalysts 

• Increase Revenue & Decrease Expenditures
  Throughout FY 2024, we would like to see an increase in Emyrias treatment centre revenues and decrease of staff expenditures in line with that has been forecast, which would demonstrate cost efficiency and a strategic focus on advancing the Company’s active MDMA-assisted therapy programs and novel drug development initiatives.

• Provide Full MDMA-AT treatments to 20 Patients
  Completion of these treatments will demonstrate the effectiveness of EMD’s protocol in treating Post Traumatic Stress Disorder and we believe garner attention both nationally and internationally.

• Engage Payers
  Securing a major payer partnership for any of Emyrias therapy programs would likely see a significant re-rate.

• Provide Positive Progress on EMD-RX5
  EMD-RX5 is currently in Phase 3 clinical trials, and we would like to see the commercialisation agreement with Aspen Australia achieved which would offer immediate value to shareholders

Attractive Market Capitalisation Against Peers with Growth Potential 

Emyria is one of only a handful of ASX listed companies operating in the psychedelic space. Whilst this offers a significant competitive advantage, conversely it also makes it difficult to ascertain an accurate fair and reasonable valuation. However, noting Emyrias relatively low market capitalisation, forecast reduction in staff & administration expenditure, in addition to increasing revenues, we view Emyria as an attractive risk to reward play, which at these levels offer significant room for share price growth if Emyria can execute its strategies. Further, as demonstrated by peers outside of Australia (listed below), we believe a significant re-rate would apply should a breakthrough be achieved in one or more of its clinical trial programs.

Outside of Australia, there are several companies which operate in the psychedelic treatment space, however have significantly higher market caps and are listed on the NASDAQ, despite not having the same regulatory environment to support their growth. These companies include:

• Mind Medicine (NASDAQ: MNMD) ~$226 million market cap – In Phase 2 clinical study for LSD therapy focused on anxiety. 
• Atai Life Sciences (NASDAQ: ATAI) ~$436 million market cap – Supported by Peter Thiel, the co-founder of PayPal, is working on variations of ketamine for depression.
• Compass Pathways (NASDAQ: CMPS) ~$1 billion market cap – Have conducted the largest clinical trial in history of a psilocybin therapy and in a Phase 2 trial for treatment resistant depression.

Despite depressed biotech valuations and lack of regulatory support, these biotech companies demonstrate that companies can experience significant share price growth through Clinical Phases 1 & 2, without having completed Clinical Phase 3 and reaching commercial sales. 

Highlights:

1. Experienced management team and board with a wealth of experience in clinical services, data and drug development
2. Emyria founders and majority shareholders have a vested interest in seeing the company succeed and have been increasing holdings 
3. Emyria already generating revenue which is forecast to significantly increase in the near future 
4. Emyria is one of only a handful of operators in the psychedelic assisted therapy space, and the only ASX-listed small cap with both infrastructure (clinics) and deep patient data to create these protocols.
5. Australia the first country in the world to recognise psychedelics as medicine, of which Emyria are one of a handful of companies operating in this niche, providing a first movers advantage
6. Low market cap relative to industry peers with significant room for growth 
7. Emyria have made a concerted effort to reduce cash burn which should be seen in the coming quarterly reports 

Risks:

1. The overall market sentiment towards small caps and the Biotech sector remains bearish. It may take a change in market sentiment or a significant company milestone achievement as a catalyst to move share price. It is worthy to note that the S & P Biotech ETF has shown signs of a reversal, having increased ~35% since October 2023
2. Capital & shareholder dilution remains a concern with Emyria having a high cash burn
3. The biotech drug development process which is several clinical phases, can take a significant amount of time and money with no assurance that results will be positive