Exclusive Interview With PharmAla CEO Nick Kadysh On MDMA's Imminent Global Rollout

Highlights

• PharmAla is filling the need for GMP-grade MDMA to conduct clinical trials across the globe while simultaneously developing their own proprietary, MDMA-based therapies for mental health disorders.
• The company took a calculated risk in entering the MDMA manufacturing business before MDMA has been fully legalized or approved by regulators, but it has paid off handsomely due to Health Canada's Special Access Program and Australia's Authorized Prescriber Scheme.
• The company's sales are expected to reach $2 million this year, and the market for MDMA is expected to grow exponentially due to two sources of demand: GMP-grade MDMA for use in clinical trials and in the clinic under special regulatory exemptions (i.e., until full regulatory approval is granted).
• PharmAla has already received purchase orders from clinicians in Australia who are planning to prescribe generic MDMA.
• To satisfy the growing demand, PharmAla has formed a joint venture with Vitura Health to distribute MDMA in Australia. This partnership will help the company to scale its operations and reach a wider audience.
• PharmAla is also developing novel chemical entities (MDXX compounds, ALA family of drugs) based on MDMA that have the potential to be more effective, and less toxic, than generic MDMA for the treatment of mental disorders.
• PharmAla is planning to launch a Phase 2 clinical trial of ALA-002 as a treatment for social anxiety in autism patients in Australia by the end of the year.

Transcript

MedicalGold

PharmAla is leading the sector with MDMA, not only research, but also fulfilling the manufacturing and supply chain demand. Our understanding is that you're kind of unique in that way - you're both a class biotech research and development company, developing new therapeutic assets, but also a manufacturer of GMP-grade drug product for other clinical trial initiatives the inevitable need for commercial supply (which will be enormous). So how do you see these two initiatives evolving side-by-side?

Nick Kadysh

I think it's helpful to look back on the history of the company. We started off just as a regular drug development company, like early-stage drug discovery, your standard biotech, right? But as we developed our novel chemical entities we started talking to researchers all over the place, trying to get partnerships in place. And we kept heading, “it's fantastic that you have something new, but do you have any MDMA”? Many researchers already had clinical trials funded and ready to go, but lacked the GMP-grade MDMA to start dosing patients. One researcher had been waiting for two and a half years to do an MDMA tinnitus study. He had the money, he had everything, except for the MDMA.

Clearly, there was an opportunity here. And so I had a meeting with Rick Doblin, founder of MAPS. We were doing a panel together and were sitting in the green room and I said, “Rick, listen, , all of these researchers are saying the same thing: there's no GMP drug supply out there... MAPS has pioneered medical psychedelics for the last 30 years, and we all owe you a debt of gratitude. If you tell me to, pardon my language, go fuck myself, I will. But it sounds like there's an unmet need here that MAPS cannot fulfill. Do you mind if we do it? "

And Rick, being Rick, he said like, "yeah, go forward."

MedicalGold

That’s amazing. Clearly, you are both seeing eye-to-eye, and commercial interests aside, you both are primarily concerned with getting MDMA into mentally ill patients.

Nick Kadysh

Exactly. More drug supply equals more research, which equals more data, which equals faster approval. We are all working towards the common good. Rick said, “Go forth ”. And so we did. We are somewhat lucky. The psychedelics industry is unique in that there are both new molecules being developed for clinical trials, but there are also the generic psychedelics that are being explored for clinical potential. Watch our news over the next couple of weeks because we'll have a lot of interesting announcements on this novel molecule side. But somebody needs to make the sort of the generation-one molecules and MDMA is also incredibly unique in that it's only synthetic.

It's hard. GMP synthesis is challenging. I often make the joke that I don't actually sell drug product, I sell 600 pages of regulatory documentation because that's what you actually need, right? There's lots of biotechs that take their initial investment and put it into some small cash flow generating business just to keep the pump primed with cash. We are lucky in that we work in this industry where you can basically do both in one chemical class: We can make generic MDMA because there is a market for it, especially after the recent Australia legalization. Still we are improving the molecule with novel chemical entities in the same drug class. I do see the business as synergistic. And while it is uncommon in biotech, is always helpful to have a cash flow generating business. We do see MDMA manufacturing as a relatively significant money maker.

We are only two years old and this year we're anticipating sales of 2 million. It's not bad, certainly nothing to sneer at. And of course, it's only going to grow and it's going to grow exponentially. I think in the long run for our shareholders, the IP and the novel chemical entities will actually end up generating more shareholder value. But that's a longer time horizon. Whereas the generic business is growing by leaps and bounds right now.

MedicalGold

That makes complete sense. Near-term risk mitigation via cash flow generation combined with the upside potential of drug development. A winning combination if there ever was one.

So why hasn't there been a generic GMP-grade MDMA already created?

Nick Kadysh

A couple of reasons,. Number one is you had to sort of take a bit of a leap of faith, right? You had to bet that there's enough of a market to make it worth your while. Generic drug development still takes a couple of million bucks and it’s a year’ worth of time. There's a whole bunch of things in the drug manufacturing process that you can't rush. Stability, data just being one example, scaling the batch, etc. It takes time. And so we made an educated decision based on our regulatory expertise that there was enough of a market to make it worth it. And there was; our bet  panned out. But many people would not have made that bet.

Number two, MDMA is a controlled substance. There are many CDMOs and drug developers who look at the regulatory requirements for controlled substance manufacturing and just say, “fuck this”, it's not worth my time. I can be spitting up penicillin and making more money or aspirin or whatever else, right? Like, if you're going to go into generic, why would you go into this generic? There was a risk involved. It was calculated risk, but there was risk. But I think it's more than borne itself out because less than a year after we made our first batch, we've got enough sales that we've more than paid for all of our development costs for our new chemical entities, or will by the end of this year.

MedicalGold

That’s absolutely unbelievable. Can you give me a flavor of some of the economics? How do you see the demand for commercial MDMA scaling, and what are the margins?

Nick Kadysh

Sure. We have functionally two customer bases. This is why we felt comfortable making the leap into generic manufacturing. We saw that there was enough of a market in the clinical trial space to support the development costs.

Clinical trials, of course, are low volume but we can command a very high price. The synthesis itself isn’t that challenging. Investigators are really paying for the regulatory expertise to create GMP-grade product. You have to have a full investigator's brochure and CMC documentations. This was our initial customer base, but the real bet was that there was going to be a commercial market that would form once MDMA was legalized within the first couple of years.

And then you get this exponential growth because then you have consumers. So clinical trials are great, but it's not really repeat business or high volume. And that's what happened  - Australia essentially legalized MDMA for treatment in the clinic, and that's why you saw this takeoff this year. We made a bet and it hit.

MedicalGold

You are referring to Australia’s recent approval of MDMA under their Authorized Prescriber Program, correct?

Nick Kadysh

Yes, exactly. This monumental regulatory catalyst allows individual prescribers (doctors) to give their patients MDMA, unlike Canada’s Special Access Program, which requires doctors and patients to advocate for individual treatment on a one-off basis. The APS scheme will allow MDMA prescription to scale exponentially. In anticipation of this milestone, we formed a joint venture with Vitura Health, called Cortexa, that is a distribution and manufacturing partnership.

Look, I used to work at Red Bull Energy Drink long time ago… it was the best job I ever had. I was their lobbyist in Canada, which is a great gig if you can get it. So one of the things I learned at Red Bull is, and it's important, is that you pay for distribution always. Either you pay it for it on the front end or the back end, but you always pay for it. And if you do it through contractual arrangement, there's always risk. Maybe your distributor finds a better supplier, maybe you decide you don't like your distributor anymore and there's business risk involved. And especially for a young company developing the first market anywhere in the world, you don't want to take that kind of risk. So what we decided was we’re going to pay for it on the front end, with equity.

We're going to give up half of the Australian market because it's going to be in the form of a joint venture, but it locks us in with this distributor forever. Identifying the best distributor was a critical decision, because if we failed in this, it would reverberate for the entire company forever. You can't fuck up your first market. And so we're really pleased with Vitura because they are, by far and away, the best partner we could possibly ask for. They have incredible expertise in Australia. They represent 60% of the medical cannabis business in Australia, They're a 400 or 500 million dollar market cap company. But more than that, they are incredibly diligent. They are super professional. They make no bones about the fact that they are an integrated healthcare company.

What I mean by that is Vitura has clinics, they have doctors, but they're also a distributor. And they have an exceptionally good relationship with the regulator, which for us is our stock and trade. Cortexa does have a license to all of our manufacturing IP, but we said, listen, for the initial batch [of MDMA], do you mind buying it from our [PharmAla’s] existing inventory because it'll allow us to defray our costs? And they agreed with the acknowledgment that we're not going to charge them too high a margin. There’s plenty of margin in this game. Over time, we will see that margin start to erode as other players run through this space and you're going to get price compression. But for today, Cortexa has fantastic margins on MDMA manufacturing.

MedicalGold

That was going to be one of my other questions - is Cortexa going to be a standalone manufacturer of MDMA, independent of PharmAla?

Nick Kadysh

Yes, we've been in business planning now with these guys for three months and we’ve established a stepwise plan. So initially, Cortexa will be importing full drug product [from PharmAla], but they're also importing active pharmaceutical ingredient [the generic MDMA, called “LaNeo”] so that we can encapsulate it in Australia for sale. PharmAla already has ready-made drug product capsules (40 milligrams), ready to go, so we will sell that supply to Cortexa for distribution until Cortexa has GMP manufacturing capability for API synthesis and encapsulation of the final drug product. Manufacturing in Australia will be cheaper, closer to market, and we won’t have to deal with the import/export bullshit. Also, if the demand is there, we [Cortexa] will be manufacturing both synthetic MDMA and synthetic Psilocybin because we do have a license to that as well.

MedicalGold

When you talk about “API” [active pharmaceutical ingredient] are you referring to generic MDMA or your proprietary, MDMA drug?

Nick Kadysh

Everything we've just spoken about is related to the generic business.

MedicalGold

Great, let’s jump into discussing your proprietary drug development program. Your lead drug candidate is an MDMA analog, “ALA-002”, right?

Nick Kadysh

For ALA-002, we are planning on going straight into a Phase 2 clinical trial in Australia, working with the University of Sydney, by the end of the year (1Q24 at the latest)

We are going to be studying the effects of ALA-002 on social anxiety in autistic patients. The patent [for ALA-002] has been published, so I can talk about it now! ALA-002 is an enantiomeric mix of MDMA, comprising a mixture of non-racemic enantiomers. Why is that important? MDMA is relatively unique in the drug world in that it's racemic [containing equal amounts of both enantiomers, (r)- and (s)-MDMA], and both forms are active, but they are active in different ways and have dramatically different receptor binding affinities. However, in the brain they work synergistically. There has been lots of interest in (r)-MDMA but not the other enantiomer, (s)-MDMA, which by itself is not a great therapeutic candidate. Taken together, the mixture of (r)- and (s)-MDMA is synergistic and potent.

MedicalGold

So to reiterate, MDMA exists in two enantiomeric forms. So far, all of the attention has been on one specific form that is active by itself, and the other on-active form has been ignored. But your ingenuity is realizing that both forms, when taken together, produce a synergistic effect in the brain that is more potent than either form individually.

Nick Kadysh

Exactly. To prove this, we spent the last year and a half conducting preclinical experiments to figure out which ratios of each form work best for specific indications. ALA-002 is the result of this exploration, and we found an exceptionally good response in a mouse model of autism disorder. We found this very dramatic pro-social effect in mice and a much improved toxicology profile compared to the generic, racemic mixture of MDMA. Importantly, ALA-002 was less cardio- and neurotoxic, which is a major drawback of MDMA therapies since the drug affects the central nervous system and can dysregulate body temperature, heart rhythm, blood pressure, etc. And on top of that, we found that the rodents were generally less hyper, demonstrating aa “purer” pro-social response without the hyper-stimulant effect characteristic of amphetamines. The other cool thing about our ALA-family drugs is  that they can possibly be utilized for other purposes because we found the toxicology improvements in normal mice in addition to the autism mouse models.

MedicalGold

Do you know why the ALA-002 mixture is so much better than the generic, racemic MDMA that everyone else is using?

Nick Kadysh

We don't know exactly why. I think there's still a lot of questions about brain structure in autistic patients and the interaction between molecules in the MDMA class of drugs and the brain, but can't argue with the positive results. The data does not lie.

MedicalGold

ALA-002’s similarity to generic MDMA must simplify the clinical trial process, right?

Nick Kadysh

Yes - We are going directly to Phase 2 because it's [ALA-002] is a novel mixture of a known molecule. It is still technically a new chemical entity, and has been patented as such, but it is based on something that has been extremely well studied. You can think of ALA-002 as a “reverse generic”, meaning that it is a proprietary drug derived from a well-known generic molecule. We've already gotten opinions from regulators like the MHRA saying, yeah, you can skip Phase 1 and go straight into Phase 2 trials.

We are planning on running the trial in Australia to take advantage of the 43% rebate on research and development expenses, and The University of Sydney, who we have partnered with, is a world class research institution. The researcher we're working there with there is a key opinion leader in autism. He has a captive clinic population, so recruitment for the study will be much easier. With a written opinion from MHRA, I don't foresee any issues with launching this trial in Australia.

MedicalGold

I'm assuming you've already designed the Phase 2 protocol if you sent it to the MHRA for their opinion?

Nick Kadysh

Yes, it is not completely done, but the vast majority of the work is complete.

We are going to be studying social anxiety in an autism patient population by treating it as a fear disorder.  Social anxiety in autism patients is really just a fear of socialization. Autistic people are not good at socializing, and so they are averse to socializing because they’re not good at it. What we know about MDMA, and drugs in the class, is that they are excellent at provoking a pro-social response, making socialization easier, and also making it more pleasurable.

So it’s a self-reinforcing sort of problem. If you can remove the fear of socialization, you can improve their [the patients’] socialization performance and then you create a positive feedback loop where they’re going to socialize more, they’re going to see that it’s not that bad and derive pleasure from it. We plan on measuring this reduction in fear of socialization over a three month window. We’re going to start with a randomized ascending dose of ALA-002 to establish our therapeutic window, and then look at the therapeutic effects in a relatively small patient population of autistic young adults who experience problems socializing.. I will note that there has been an investigator-sponsored trial published under Danforth et al (2018) in the laboratory of Charles Grob of UCLA, which looked at this and found incredible results.

We actually spoke to Charles, and he said that the effects of MDMA on pro-socialization were super durable and there were patients who benefited years after the trial concluded.  

MedicalGold

This 2018 trial was using a generic MDMA, correct?

Nick Kadysh

Yes, and we believe based on preclinical data that ALA-002 will actually be significantly better

MedicalGold

So we briefly mentioned that Australia has expanded their policy on compassionate use, and clinicians are going to start prescribing generic MDMA to their patients. Does PharmAla or Cortexa already have purchase orders from these clinicians?

Nick Kadysh

Yes, we do. We're working on a couple of partnerships with larger operators who are looking to set up clinics. We're going to be supplying these guys into the long term. It is in many ways a full scalable commercial launch. Keep in mind this is how Medical Cannabis was launched in Australia [under the Authorized Prescriber scheme]. Based on this precedent, we expect exponential scale up relatively quickly.

MedicalGold

Okay, can you touch on the differences between Australia’s Authorized Prescriber scheme and compassionate use protocols, such as Health Canada’s Special Access Program?

Nick Kadysh

The main difference is in most compassionate use schemes, like Special Access, you are authorizing individual treatments. We were actually the first company to be authorized to treat patients under the Special Access Program in Canada with MDMA, but because you are required to seek authorization from Health Canada for each individual patient, on a per-treatment basis, the enterprise is simply not scalable. In Australia, Contrastingly, Australia’s Authorized Prescriber Scheme authorizes medical practitioners to prescribe psychedelics to any or all of their patients. There is no limit to how many prescriptions an authorized prescriber  can write to deserving patients

MedicalGold

Clearly you have a grasp on the legislation of this highly regulated class of drugs. This quickly evolving regulatory landscape has created massive waves throughout the entire sector, and it seems like you are positioned at the helm of the ship What are some of the other imminent industry catalysts?.

Nick Kadysh

We are all going to benefit from the publication of MAPS’ second Phase 3 study of MDMA. We should see the publication of that data by the fourth quarter of this year. Their submission of MDMA for regulatory approval in the United States will be a massive catalyst next year. And while I don’t think that MDMA will gain full FDA approval until 2025, we are going to be collecting real-world data outside the auspices of a clinical trial by providing direct access of MDMA for patients through compassionate use and the APS scheme. This data is extremely valuable and will enable our future drug development efforts. Every major regulator has a pathway to drug approval via real world data, which will serve a dual purpose for PharmAla because it allows us to become commercially relevant [by supplying MDMA to clinics] while collecting data that will be acknowledged by the regulatory bodies to support future clinical trials.

MedicalGold

That’s a fantastic strategy, and one that is not possible for most drug development companies developing new chemical entities. PharmAla is very uniquely positioned in the sector as both a R&D company and drug manufacturer. Who are your competitors in regards to MDMA manufacturing?

Nick Kadysh

MAPS is the only other confirmed GMP manufacturer of MDMA. I don't really view them as a competitor because I want and need MAPS to be successful. Anything I can do to help MAPS, I will absolutely do. If they need supply, I will give them the GMP-grade molecule. There are some other companies that are saying they make GMP MDMA, but I haven't seen a certificate of analysis yet.

MedicalGold

What is something that your shareholders don't know or appreciate about your company?

Nick Kadysh

I think most of our shareholders right now are really focused on the generic MDMA manufacturing, which is important because we are doing something that very few companies in this space have been able to do, which become cash flow positive and fund our R&D without diluting the shareholders. But in the long run, the real victory is establishing really powerful IP around our research and development - the novel chemical entities. The entire pharmaceutical industry is built around IP. The generic business is a stepping stone into the world of patented novel molecules, with ALA-002 being the first one. We are also working on a molecule called PharmAla-1, which we'll be able to speak much more broadly very soon, and which could be a total blockbuster drug also in the MDXX class. This drug candidate has a couple of very unique features that we think will be incredibly appealing to a pharma. So, we need to get more into the world of sort of biotech outlicensing. And I hope our shareholders are supportive of that because that is certainly where I intend to take the company.

MedicalGold

Exactly. And I think seasoned biotech investors understand that having a source of non-dilutive funding is fantastic and rare for a biotech, but the value of that cash flow is not worth anything near the value of a licensing deal or the patent to a commercialized new chemical entity. Nick, this was really informative. We really appreciate your time.

Nick Kadysh

My pleasure, it was really nice to meet you. Thanks for taking the time to speak to me. Thanks for all the sort of work you're covering our company and the entire medical psychedelics industry.

About Nicholas Kadysh

With over a decade of experience as a Public Affairs and Regulatory expert, Nick Kadysh is the founder and CEO of PharmAla Biotech, a Toronto-based Life Sciences company focused on the manufacturing and development of MDMA and MDXX-class molecules. Prior to launching PharmAla in 2020, Nick led government relations and regulatory departments for a number of large corporations, including acting as Head of Corporate Affairs for JUUL Labs, as Government Affairs & Public Policy Leader for General Electric Canada, and as Director of Public Affairs for Red Bull Canada. Nick gained a deep understanding of government as a campaign and legislative staff member in multiple levels of government prior to joining the corporate sector, most recently directing the Outreach department of the Office of the Leader of the Opposition at Queen’s Park in Toronto. He has also worked as a policy advisor at the Parliament of Canada. Nick is trilingual (English, French & Russian) and is a graduate of Queen’s University. He lives in East Toronto with his wife, Olga, and two daughters, Milena and Sasha. He is active in non-profit and community initiatives in Toronto, including fundraising for Toronto East General Hospital and as a member of the board for Yonge-Dundas Square.

About PharmAla

PharmAla Biotech (CSE:MDMA), formed by a team of biomanufacturing and regulatory experts, is the first public manufacturer of GMP-grade MDMA and a leading drug developer of novel, proprietary MDMA analogs. Driven by the evidence that MDMA presents excellent clinical promise as a treatment for numerous mental disorders, their core mission is to advance the scientific research directly related to the medicinal use of MDMA by providing researchers and clinicians with a steady and accessible supply of clinical grade drug. While the base MDMA compound has shown positive results in clinical trials for PTSD, PharmAla also believes that the therapy can be improved upon by augmenting the molecules’ safety and pharmacological properties to treat a diverse range of disorders. With this in mind, the company is dedicated to developing MDMA analogs (called “MDXX” compounds) and has already filed patent applications for six of these new chemical entities

Disclosure

MedicalGold has no relationship with PharmAla Biotech and the author has no position in MDMA shares at the time of publishing. The article is presented for informational and entertainment purposes only and is not a recommendation to buy or sell any security