And we are really pleased to be joined by Nick Kadysh, founding CEO and President of PharmAla. Welcome, Nick, and thank you for being here.
Thank you very much. It is great to be here.
Before we begin, please know that PharmAla's safe harbor statements can be found in its latest corporate presentation on the company's website. We will aim to address investor questions submitted during today's conversation in a follow-up email or in the management series report that will follow. Please enter your questions in the chat. Investors interested in scheduling a meeting with PharmAla can indicate that interest within the conference portal. With the housekeeping items covered, let us jump right in. Nick, perhaps you can start by telling us a little about your own background and what brought you to establish PharmAla. Then for listeners who may be new to the story, give us the 30,000-foot view of the company. Before we get into any detail, let us lay the cards on the table and what do you think are the most important things investors need to know to understand about PharmAla?
Sure. Of course. I will take them in order, I guess. My background is, I got my start straight out of university. I got a job as a political staffer working in the Canadian Parliament under the administration of Prime Minister Stephen Harper. After a couple of politics jobs, I left and I began working as a lobbyist. I worked as a lobbyist for a number of large blue-chip companies, always in healthcare and always at the leading edge of what was permissible by healthcare regulators. During the middle of the pandemic, I guess, as many of us did, caused me to reevaluate some of the things that were going on in my life.
I am a little bit strange, I suppose. I love scientific literature. I love sort of following what's going on, especially in clinical research because I spent so long working in healthcare, in associated industries. Never in pharma, but in associated industries like medical device. I saw all of this literature coming out about this emerging sort of psychedelics field. This was the time when sort of that big tranche of phase II trials was getting published. The MDMA one looked the most interesting to me for a number of reasons. This was sort of the formation of the company in a nutshell. The indication today that we treat, which is an amazing thing to say five years later, the indication that we treat is post-traumatic stress disorder. It's a very difficult indication to treat, as anyone who has experience with PTSD knows.
Of course, MDMA has applicability in a whole bunch of different sectors, or I should say a whole bunch of different indications. Of course, MDMA is synthetic, so unlike psilocybin, there is no natural source for it, right? You have to make it in a lab. That's the only way to make it. Not easy to make a pharmaceutical drug product in a lab to GMP standards, to meet all the qualifications that you have to meet. Of course, it's a controlled substance, so a lot of regulatory issues. When I left my last company, JUUL Labs, I left there after we'd been very successful in many ways. In many ways, we were not successful. I sort of made some decisions about what I wanted to do with my life.
I wanted to do something that was going to do some good in the world. I also didn't want to be a lobbyist anymore. I didn't want to just do regulatory work. I'd sort of run a team and a department, and been a senior exec. I wanted to run my own sort of company. We've started PharmAla, and we started it really with two goals. That has not changed. We have not had to pivot once. We started off with the goal of being the best developer of novel MDMA-like drugs, like novel entactogens, in the world. Today, we have numerous patents for composition of matter. We have some great science on the drugs that we develop, and we're well on our way on that front.
The other major thing that we said we were going to do was we said we're going to be the best supplier of MDMA in the world. So the best manufacturer, supplier. Today we are, I think, fair to say, the world's largest supplier of clinical-grade MDMA on the planet. We supply about 35 different clinical trials all over the world, including at some fairly august institutions. Harvard and Yale are customers. Johns Hopkins is a customer. Two trials at Johns Hopkins. The VA in the U.S., and other VAs across the world. Now as of this month, the U.S. military is a client, so we're officially dual-use, I guess. That's the company in a nutshell. It's good MDMA today, better MDMA tomorrow. Yeah, that's how we got here.
Right. What do you think the most important thing investors should know about and understand about PharmAla?
Oh, yeah. Look, focus. We haven't. I sort of alluded to the fact that we haven't pivoted in five years. We've also managed to do it with very little capital. We haven't raised a lot of money. There's a reason for that, because we have focus, one, and two, we started off with this idea that we were going to. It's hard to bootstrap completely in the pharma industry. But as much as possible, we were going to do this on sort of our own merits and under our own power. I think sort of more than anybody else in the sector, we've done that.
Right. So would it be fair to say that PharmAla has established, as you mentioned, you're the largest global supplier of MDMA. It's established a legal MDMA supply moat, we'll emphasize legal. You have also said that-
Yes, please.
[crosstalk] supply will face increasing competition as more manufacturers secure the necessary licenses. Strip out the regulatory headstart for a moment. What keeps a customer like Johns Hopkins or Mount Sinai or Yale or Harvard buying from PharmAla three years from now rather than switching suppliers? How much of your customer base is now placing repeat orders, and how significant is the qualification and validation burden for an investigator who wants to change suppliers mid-program?
Well, look, I think I'll slice up the segments a little bit because we have two sort of segments. The first, which you've alluded to, is the clinical trial marketplace. As we can all imagine, there's not an endless supply of clinical trials. There are some today, but that doesn't mean there will always be clinical trial customers. What keeps them coming back to us today, and we do have I would say about 30% of our clinical trial customers are repeat customers, which is actually insane. Most of the time, clinical trials are one-offs, right? Like, "I'll test this MDMA, and we'll see what the results are, then I'll publish, and then I'll move on to something else," like something completely different. A peptide or whatever. I think it speaks to the potential of MDMA as a drug that we have so many repeat customers.
What keeps them coming back to us as a supplier is the fact that we're reliable, and we pass regulatory muster. I don't just mean that we make a good product. I mean that we have all of the data ready to go on stability and manufacturing quality, and the fact that all the regulators that we've dealt with have accepted our dossier as substantive for the purposes of allowing for a clinical trial. So manufacturing quality. Reliability is critical anytime you have a customer. This is especially important when you exit the clinical trial world, and you zoom out and you look at the other supply that we do, which is to doctors and patients. If manufacturing quality and reliability is important for clinical trials, you can only imagine, of course, that when it comes to actual commercial drug treatment, it's far more critical.
Customers are looking for the same thing. I think we are the largest supplier in Australia. This is through our joint venture, Cortexa. Australia is, I think fair to say, today, the world's largest commercial marketplace. They're looking for reliability. They're looking for quality. The same thing every other customer is looking for. Australia's seen some pretty great expansion over the last year. They've gotten reimbursement for MDMA-assisted therapy for PTSD. I see these two paths as sort of going down the same track in many ways. There's now been an expansion to New Zealand, meaning that there's now two Western countries that have approved MDMA for use in their medical system. I think we're going to see the U.S. move very soon. I was just speaking at FDA a little bit earlier this month, and it certainly seems like they're moving.
But part of that is because we've supplied so many researchers and developed such a body of scientific evidence, it's become very difficult to deny.
Several of your agreements involve supplying MDMA at low or zero cost in exchange for rights to the resulting clinical data, and you are now involved, I think, in around 33 trials across--
Yeah.
--about a dozen publicly announced relationships. The argument against that model is that API is a relatively small component of total clinical trial costs, so giving it away may attract customers who see the manufacturer as a commodity supplier rather than a long-term partner. How do you respond to that, and what evidence do you have that these arrangements are actually creating durable customer relationships, which you seem to be alluding to, rather than simply subsidizing trials that could ultimately be supplied by someone else?
I'll separate out those two questions. First, let's address the question of is it useful to get data or not? To which I would say yes. From our perspective, the answer is a clear yes. I'll use one example. There's a trial, it's an expansion trial in Europe, where I'll give enough data that if somebody really digs in, I'm not breaching an NDA, but if somebody really digs in, they could probably figure out who it is. There was a trial in Europe where they did a small pilot looking at MDMA in a completely new indication, and they got some very nice signals. They approached us and said, we want to expand this out. We want to do a large phase IIb, and we want to talk to you as a potential supplier.
But we're cost-constrained. I said, sure. We ran them off a quote for the material, and they said, well, we need a discount. It was like a 10% discount on our drug product supply. We said, okay, we'll give you the discount that you're asking for. However, we want a license to your data. They said, yes. Is that a worthwhile transaction? Yeah, man. Yeah, absolutely. That's going to be data on MDMA in a novel indication in a large phase II trial at a very well-respected institution. For the price of a 10% discount on the drug supply, we got a full license of the data. That's a great transaction anytime. Is the data worthwhile? Depends, right?
The part of your question that you actually didn't really address is, do we look at the quality of the data before we offer people a discount or offer them whatever, free drugs sometimes a discount? The answer is yes, right? We're slightly more thoughtful than just like, here you go, take some drug, right? We actually examine the protocol, we examine the indication. We see if they're actually adding anything to the scientific literature. Look, I have to be honest, if somebody is out there saying, we intend to just do the 20th clinical trial looking at MDMA in PTSD, no, we're almost certainly not going to be offering you any free drug product. But if you're doing something truly novel and interesting and we think that there's commercial value in it, then yeah, then we will.
As to the sort of the durability-- Ffrst of all, we're not just an API supplier, we're a drug product supplier. Actually, the vast majority of the clinical trials that we supply, we supply with finished drug product in a range of SKUs. But the proof is in the pudding. The fact that we have Johns Hopkins has now come back for two and probably going to do a third, that's an indication that we've built some durable relationships with these researchers. Of course, we are doing our own research as well, so we have more to talk about with these folks than just when we're going to ship them their next batch of MDMA.
Right. I think that's an important point you made about checking the quality of the data. You're not just willy-nilly just saying, oh, yeah, we'll take the data and here's your discount, or, we'll give you the drug for free. As a follow-up to that, in a typical drugs for data arrangement, what does PharmAla actually own or have the contractual right to use from the resulting clinical data? Once you have those rights, what is the path to monetizing them? Do you use the data to support your own regulatory strategy, provide it to partners, or license the data itself?
Look, we are quite enterprising at PharmAla, so I do not see the need to put it into a box. We will use the data for whatever we want to use it for, and that could be all of the above. However, in terms of what kind of data we gather, on that, we are very clear and transparent. The only time we offer even a discount is in exchange for both safety and efficacy data. There are other people in this space who think that just safety data by itself is valuable enough. We do not. We think the efficacy data is very important as well.
So we ask for a full license to all outcomes data coming out of the trial, and down to the granular sort of level, so the full dataset. We ask for a perpetual license. It does not have to be exclusive, because this is scientific research. Actually, we never ask for publication rights. This is part of the reason why I think researchers like working with us, is because they understand that they are getting something in exchange for their data, but we are not trying to get a, like, publish before them. We are not trying to steal their thunder. We are not trying to claim credit for their data that they developed. We want to use it for commercial purposes after they have sort of released it, and that is fair.
Okay. PharmAla is obviously a global company, but one cannot get away from the fact that the U.S. is the largest market probably for you, potentially. The three things that could move the U.S. volume at once, the U.S. Department of Veterans Affairs and Defense Health Agency trials you already supply, the expanded access pathway contemplated by the April 2026 executive order, and Resilient Pharmaceuticals resubmitting the MDMA NDA without a new phase III. How do you see those three opportunities playing out? If Resilient gets its filing accepted, does that change the role PharmAla can play in the U.S.? If it is rejected again, what would it mean for your U.S. order book?
Well, look, we do not have any commercial orders outside of clinical trials for the U.S., so I think if they get rejected again, I think nothing changes. I do not think that is what is going to happen. The Resilient application is important. It is important not just for us as a company, although obviously it is, but it is important for the industry as well. If you recall, two years ago when Resilient got sent back for a phase III, there was a lot of commentary, but I commented widely on this, and I think that there was fair and legitimate criticism of the Resilient data package. But ultimately, the idea that we needed yet another phase III clinical trial, I never thought that that was correct.
Because we treat patients, not we as a company, but we supply clinics that treat patients commercially every single day, and we have for two years now, basically since the Resilient complete response letter from FDA two years ago. I anticipate that Resilient actually will get their approval. I think that that will change the focus of PharmAla. We will start to look more seriously at the U.S. although we will continue to look more closely at other markets in the world. There are numerous markets out there where the regulator is what we call a reference regulator. I was in Saudi Arabia last year, where I thought that the reception for a controlled substance like MDMA would be decidedly frosty.
It turns out, no, because the Crown Prince, Mohammed bin Salman, has been actually very focused on mental health, believe it or not, and where the country has been and continues to be in the middle of a pretty brutal war in Yemen, and where the security apparatus is actually quite focused on PTSD. The Kingdom of Saudi Arabia's FDA, its KSA FDA, is a reference regulator. They do not do drug approvals on their own. They look at other regulators like European Medicines Agency and FDA, and they say, well, if you've approved, then we approve. But somebody still has to go to them with a dossier, and somebody still has to submit it and all that stuff. PharmAla will definitely be more focused on the U.S. market post-Resilient approval.
We'll also be really focused on other markets where we can go in very quickly and submit a dossier and get working.
Great. Now let's turn to the drug development side of the business, which is really, you mentioned earlier, the first reason you founded PharmAla in the first place. You've claimed that the Jupiter transaction through which you have licensed U.S. rights for your lead pre-phase II development asset, ALA-002, a non-racemic MDMA composition, is a proof point for how PharmAla can monetize an asset directly on attractive terms while retaining meaningful downstream re-economics.
Now, investors will argue that virtually all of the CAD 100 million value that you've tagged to ALA-002 sits almost entirely in milestones which may or may not be achieved. So what visibility do you have into Jupiter's IND-enabling work and its funding for a U.S. phase II? What triggers the first CAD 3.33 million development milestone? What protection do you have if Jupiter simply moves slowly, or is there a contractual diligence obligation, milestone deadline, or reversion right if development stalls?
Yeah, of course. I'll maybe take those backwards, but the initial payment has already come through. That's how the deal started, right? The initial payment has already been completed. I don't have direct visibility into Jupiter's development work. They do their thing. We do speak relatively often. In answer to your question, the contract is posted online I believe on both SEDAR and EDGAR. Yeah, there's explicit and very concrete diligence milestones built into the contract. If for any reason Jupiter's unable to hit those milestones, the license reverts back to us. Of course, there's other elements. There's financial payment milestones that also, if they're not achieved, AKA we're not paid, the license reverts back to us. I think we've done everything we need to protect ourselves as a business. I do view ALA-002 as a very valuable asset.
But I'm not opposed to selling the rights to it, as you can see, if we think the economics are right. In this case, we did think that they were right.
Okay. You retain the ex-U.S. rights to ALA-002. The compound is phase II ready with GMP drug substance complete.
Yeah.
You've named Professor Adam Guastella, if that's how to pronounce the name--
[inaudible]
-at Sydney as the principal investigator for a trial in social anxiety disorder. When does that trial actually start, and how are you funding it? In the context of PharmAla's IP monetization strategy, are you already having concrete discussions with potential partners to out-license development or commercialization in territories beyond the U.S.?
The answer to your final question on commercialization is yes. You mentioned that the drug substance is already ready. For those who are not as familiar with the lingo of the pharma industry, drug substance is like the powder. It's the active pharmaceutical ingredient. Next step is we got to make the drug product. I think in the next couple of months, what you will see from us is we've actually, several months ago, we picked a drug product manufacturer. We're positioning the drug substance at the drug product manufacturer. We're going to kick off and hopefully complete drug product manufacturing before the end of this year. It's taking us longer than I would have liked, but we're there now. That'll be a big milestone because we have already begun commercialization discussions in other markets with other partners.
It is helpful to have the product complete and ready for use to conclude those discussions, and to really move commercialization along in other markets. As for our own research and our own development, it continues at pace. Can't really start any clinical research before you actually have the physical drug product, unfortunately. You can figure out on your own the timelines. We've got a lot of announcements on ALA-002, despite the fact that we've out-licensed the U.S. rights. I anticipate quite a bit of interesting news around that asset. At the end of the day, that is part of the reason why we did the Jupiter transaction, is because we didn't want to just give up the asset completely. It was too good an asset. We were perfectly happy to talk about releasing territorial rights.
Good. Turning to your second development, your APA-01, your preclinical neuroplasticity asset targeting post-stroke neurorehabilitation and traumatic brain injury. Both are large and underserved markets. Its spin-out arrangement sort of fell away because the special purpose vehicle Restora Neurosciences could not raise the CAD 2.5 million funding threshold, and you elected to terminate rather than exercise the option to extend the timeline for additional three months. Were you surprised that Restora could not raise the money, particularly given that APA-01 offers a neurorehabilitation opportunity outside the psychedelic and MDMA space? Also given that the rationale for the spin-out was because you considered APA-01 a non-core asset, although you would not abandon it, what does an acceptable structure look like now for this development?
I will say one thing. It wasn't because the vehicle couldn't raise the money. That is the contractual lever that we pulled to get the asset back. It wasn't because there was no money to be had. In point of fact, what we found out through the process was there's a lot of very interested funders looking to fund the asset. That said, there was a number of other factors that sort of caused us to pull the lever. Over the course of that same time period, when we did the Jupiter transaction, I think it brought a lot more attention to the company. We also signed up Canaccord as our investment banking partner, and they brought a lot of interesting things to the table.
We do continue to view the APA asset as maybe not non-core. That's not really the way that I would describe it. It's still an entactogen. It's well within our wheelhouse. The indications that we're talking about are neurological indications, not neuropsychiatric indications, and it's an earlier stage asset. I think we are still quite interested in partnering. We would like to do more of that development work ourselves and keep that asset in-house for a little while longer because we think we have some good ideas on how to do it quickly and efficiently and everything else. As with anything else, we're open to discussion. We basically decided as well that maybe giving up half the asset at the very beginning was not good business anymore because of the sort of the response that we got on it.
Okay. You have a joint venture, existing joint venture, Cortexa.
Yeah.
That is a proof point that PharmAla model could extend into the Australian market. But there have been no product sales into the venture since your 2024, I believe. Its carrying value is now nil, and the AUD 250,000 annual license fee concludes this fiscal year, which ends in October 2026. From FY 2027 onward, what does Cortexa actually contribute to PharmAla? Is the Australian prescriber market generating enough underlying growth and commercial opportunity to justify maintaining the JV structure? If not, would you consider changing the economics or structure of the relationship?
I will disagree with you completely. Cortexa-
[inaudible]
Yeah. No, look, what I didn't understand when I started a joint venture, because I'd never started a joint venture before, was that the accounting treatment of joint ventures is actually very annoying for a public company because you can't consolidate anything on your books. When they have sales, it doesn't really matter for you because you can't show them, right? Us and our partners at Vitura are two public companies that end up having this baby between us that is a private baby that nobody really sees the books on it. All you see is the deferred revenue from what we sold into the joint venture three years ago when we started the damn thing. Cortexa has achieved much. Earlier in, I guess, 2025, we made our first batch of drug product in Australia. Almost a year ago now.
We made the first batch of drug product in Australia for the Australian domestic market. Cortexa is the number one supplier of drug product into the, it's called the Authorised Prescriber Scheme. This is the mechanism through which MDMA is allowed to be sold. We've developed exceptional relationships with the largest clinic networks in Australia, including in the case of Cortexa, our largest customer is a company called Emyria. It's a great company, and it's growing very aggressively. We function as the exclusive supplier of both MDMA and psilocybin to those guys, and a great customer relationship. I was with them at this FDA panel. A lot of commercial expansion underway in other markets. Cortexa has achieved a lot. I know that on our books it looks like nil for all the reasons that I listed earlier.
The entity is incredibly working very well, and our partnership with Vitura has actually never been stronger. They have a new CEO, Justin James, really enjoy working with him, talk to him all the time. Vitura, as well. You don't think that it's just me who feels this way, but Vitura, all the way from their board chair on down, sees Cortexa, an expansion into psychedelic drug therapies as one of the biggest growth areas of their business. No, Cortexa is doing great. Our partnership has never been stronger, and we want to keep pushing forward.
The final state is AI. AI is central to your IP monetization strategy, and you said it's already generated numerous ad candidate molecules. None has been filed on as yet, which you've attributed to capital allocation rather than scientific outcome. You also said filings would resume once the Jupiter and Restora transactions were resolved, and they seem to have been resolved. You set the bar yourself. The platform justifies itself economically if it produces even one additional patentable molecule a year. Is that still the test, and when does the clock start? How many filings do you expect over the next 12 months, and what will they cost to prosecute? You've said that the risk of deferring filings is acceptable because the MDXX space is narrow. How do you assess that risk, and absent a second licensing deal, what should investors use to evaluate the platform?
Yeah, for sure. I will just say, we have a third patent family that we do not really talk about very often, because we deprioritize its development to focus on ALA and APA because we thought that they were just better assets. But, the ABA family of molecular entities is also available to us because we have actually received the patents for those. Just to say. Nothing has changed from my previous commentary. I think now that the Jupiter transaction, regardless of what happened with Restora Neurosciences and APA, now that the Jupiter transaction is sort of complete, we have a full bore focus on novel molecule development and patent prosecution. There is a lag time here. As you know, it takes a year between the filing of a prospective patent and the actual initial prosecution and publication of that patent.
So, if you believe that the starting point is, as I have said, the starting gun, so to speak, was sort of the conclusion of the Jupiter transaction. I think you can anticipate that we will either file soon or have filed recently, as that transaction concluded recently. Takes a year for us to disclose. But yes, if we are unable to generate, I think, at least a couple of candidate leads out of that platform, then it is not worthwhile and we will obviously, since we have spoken about it publicly, we will have to sort of acknowledge that and abandon it. But I do not think that is the case. I think the platform will actually continue to generate great candidates well into the future.
Okay. Well, we will wrap it up there. And, thank you, Nick Kadysh, for a great conversation about PharmAla, about MDMA, and we really appreciate you joining us for this session of the Water Tower Research Virtual Insights Conference.
Thank you, [Robert]. It is always good to see you.