Analysis: Mydecine Looks Set to Cease Operations

It looks like time, and money, has run out for Denver-based Mydecine Innovations Group. The company’s latest filings show that it’s down to around $300k in cash, which won’t even cover its management’s compensation.

Below, we recap some of our coverage of the company. Before we dig in, let’s briefly discuss our motivations for doing so, lest we be accused of gloating or schadenfreude.

Just like the psychedelic experience, while every psychedelics company and its management are unique, there are commonalities among them. As such, a look at Mydecine’s ongoing demise might help us in our observations of other psychedelic companies. Themes like iIl-informed trial design and drug development pipeline strategy, high levels of management compensation versus cash on hand, and rapidly-diminishing cash runways are examples of these more generalisable trends that we observe across a number of psychedelics companies.

It’s also worth pointing out that Mydecine hasn’t shuttered; no time of death has been pronounced. The company could have a successful and substantial financing up its sleeve, in which case they could continue operations and leave this author with an egg on his face.

With that said, let’s take a brief look at some of our reporting on Mydecine’s progress over the past year…

In September 2021 we took a look at the company’s MYCO-001 (“99.9% pure” naturally-derived psilocybin) for smoking cessation program, which was announced as a partnership with Dr. Matthew Johnson at Johns Hopkins. We were interested in the trial design that the company announced: a seamless Phase 2 / 3 study. As we reported, these adaptive clinical trials allow for changes to the protocol after initiation, which makes them more flexible and (ideally) efficient. Mydecine, in explaining its decision, went on to claim that the study “could be completed as early as Q4 2022”. 

However, we reported that seamless trial design is generally accepted to only be appropriate for certain drug development programs. It has primarily been employed in the development of oncology drugs, and despite former FDA commissioner Scott Gottlieb’s intention to expand their use to other areas of medicine, the scope of such trials is still largely limited to immunology and targeting specific molecular deficits.

We went on to discuss some of the limitations and issues associated with such trial designs, but were limited in assessing Mydecine’s trial design due to it being unpublished. 

Half a year later, in March 2022, we shared an overview of our analysis of public psychedelic companies’ cash runways. We referenced Mydecine by name, explaining that our data suggested the company’s runway was almost over as of September 30, 2021. Since then, the company has scraped through with a number of financings.

A month later we reported on the company’s decision to pursue a 50:1 reverse stock split. “Despite the fact that such splits leave a company’s value unchanged,” we noted, “they’re often viewed as a bearish signal.” By the time the split took place, the stock had continued its steep downward slide.

A few weeks later it became apparent that the company’s CEO, David Joshua Bartch (who generally goes by ‘Josh Bartch’), had filed more than ten insider trading notices, some of which were filed over two years after the fact. One filing showed a May 2021 private transfer of 10 million shares from Bartch to an unknown counterparty. Another detailed a November 2021 transaction in which Bartch received over 5 million shares as compensation.

It was radio silence from Mydecine, so we reached out to Bartch for comment. After confirming that the private transfers did not represent sales of stock, the CEO told us that he would “be doing a few interviews in the near future addressing this,” as well as clarifying “the reasoning for the reverse split, several very positive company updates and the numerous false statements circulated in chat rooms.” The follow-up was never received by Psychedelic Alpha.

We also commented, again, on the company’s financials:

“The company is running on fumes, with a monthly burn of $1.6m according to accounts for the quarter ended March 31. During that quarter, the company spent $2m on salaries and consulting fees.”

In June (Issue 106) we reported that the FDA snubbed Mydecine’s seamless trial design. The company announced that it had abandoned its seamless Phase 2 / 3 trial, which we discussed in September 2021, in a move described as a “pivot” that would lengthen the company’s trial timeline.

Two weeks later, in Issue 108, we clarified that Mydecine’s smoking cessation trial had not commenced. Rather, the Johns Hopkins University trial, which would use Mydecine’s MYC-001, had been initiated. Even Bloomberg’s reporting misrepresented the facts, as we noted on Twitter (and had confirmed by Mydecine).

Two weeks ago, in Issue 113 of the Bulletin, we presented new analysis showing that smaller public psychedelics companies were cutting back on spend, while larger ones tended to double down and increase their burn as drug development progresses. We identified Mydecine as “perhaps the most dramatic example” of the trend among smaller companies.

But, earlier this week we pointed out that the company’s cash burn wasn’t slimmed down uniformly. Rather, one area of the company’s spend remained quite consistent: director and management compensation.

The company’s financials showed just $300k in the bank at the end of June 2022, which isn’t even a third of the amount needed to cover 6 months of management’s cash compensation. What’s more, the headline director and management fees presented in the company’s financials don’t show the whole picture, as compensation was largely delivered via related party transactions. The company also changed the way in which it recorded such compensation, “converting key management employees and recording their compensation as payroll.”

Amidst this turmoil, four company Directors resigned last Friday. Among them were Dr. Victoria Hale and the company’s Co-Founder, Director and COO, Damon Michaels.

That brings us up to today, where the company’s future remains uncertain. In lieu of a quick financing or partnership, it’s difficult to see where Mydecine can go from here.

UPDATE: Shortly after we finished writing this segment, Mydecine announced that it has raised $240k via a private placement. The company has also replaced its Audit Committee with insiders including the CEO and CSO after the independent directors that formerly constituted the committee resigned last week. The company’s CFO, Larry Dean Ditto, resigned effective today.