Kerzner and Jordaan Get in on the Action as Cannabis and Psychedelics Poised to Make a Come Back on the JSE
The Financial Mail’s Mark Hasenfuss writes that if the JSE needs a potion to stimulate new listings then perhaps biotechnology companies with growth visions for the medical use of psilocybin and cannabis are just the fix?
Mark Hasenfuss, Financial Mail
11 April 2023 at 04:00:00
The Financial Mail has been alerted to developments at Psyence Group — a start-up with connections to former FNB CEO Michael Jordaan and Sol Kerzner’s son Brandon that is listed on the Canadian Securities Exchange (CSE). The business is attracting attention from global investors ahead of a proposed listing on Nasdaq. The move comes at a time when the initial craving for cannabis stocks in North America has diminished markedly, and purveyors of psychedelics are wallowing in the hangover from Toronto-based Field Trip Health flipping out financially.
Psyence focuses on natural psychedelics, or “magic mushrooms”. Psyence’s Biomed division works with natural psilocybin products to treat psychological trauma and mental health issues in palliative care.
Psyence’s Biomed division works with natural psilocybin products to treat psychological trauma and mental health issues in palliative care
Psyence co-founder and chair Jody Aufrichtig, originally from the Eastern Cape, says natural psilocybin products can help terminally ill patients cope with “adjustment disorder” — fear, anxiety and depression. “It helps cope with the existential crisis that terminally ill patients might be going through.” Alcoholics might also benefit.
It is a surprisingly big market to tap, with Aufrichtig estimating the global psilocybin market at about $21bn with a compound annual growth rate of 9.4%. He adds that the global palliative care market is projected to reach $28.6bn by 2030.
Plants traditionally associated with illegal recreational “tripping” are being increasingly accepted as effective substitutes for conventional pharmaceutical interventions — and South African inventiveness could come to the fore in commercial cultivation and production.
While the US market already hosts a good number of companies looking to exploit the healing and therapeutic benefits of cannabis and psilocybin mushrooms, the JSE has not been fertile ground — yet.
Labat Africa — which has seen many iterations over the past two decades — has been regularly raising capital for its cannabis ventures. Profits have been elusive, though. Nutritional Holdings flirted with a cannabis offering before collapsing under the weight of corporate ineptitude.
More recently Cilo Cybin Holdings looked for a JSE listing with an ambitious R500m capital raise.
The investor response was underwhelming, with only R20m raised, but it does seem Cilo Cybin could be back in a more refined form.
There is a discernible South African feel to the Psyence venture.
Two of the biggest ‘magic mushroom’ companies internationally are Compass Pathways and Atai Life Sciences
Aufrichtig, a chartered accountant with a BCom from the University of Cape Town, is better known as the determined developer of such properties as the Woodstock Exchange, the Old Biscuit Mill and River Club (being developed for retail giant Amazon).
He also founded the hotel and leisure group Daddy’s World. Aufrichtig has previously dabbled in the cannabis industry — initially selling a business to industry leader Canopy Growth, buying the business back and then merging it with locally based Goodleaf.
The CEO of Psyence is Neil Maresky, a South African-born doctor who previously served as a top executive at pharmaceutical giant AstraZeneca.
In January Psyence’s Biomed subsidiary announced a merger proposal with Nasdaq-listed special purpose acquisition company Newcourt. One of Newcourt’s largest shareholders is none other than Jordaan, while the CEO is Marc Balkin, a South African with deep roots in the venture capital sector.
Psyence will continue to be listed on the CSE and will own a significant portion of the combined company. Psyence will also have board control of the combined company — which will receive a minimum of $20m of cash held in trust and hold a market value of about $50m.
In the meantime, Psyence is not struggling for fresh capital. Just last week the group signed a subscription agreement with Cantheon Capital, a US-based fund “focused on listed biotech stocks with near-term catalysts” — for about $1.4m to fund clinical trials for the group’s natural psilocybin drug candidate PEX010 in Australia.
Then, further strengthening the local connection, Psyence raised capital in November and December last year when Kerzner invested about C$1.3m.
While the venture is still small by global pharmaceutical standards, Aufrichtig stresses that completing phase 2 clinical trials — where the efficacy of the products is tested — could have a huge impact on the valuation of Psyence. Two of the biggest magic mushroom companies internationally — Compass Pathways with a market value of $331m and Atai Life Sciences with a market value of $450m — have both reached advanced stages of phase 2 testing.
The latest round of funding means Psyence’s phase 2b clinical trials in Australia, which will be conducted with partner Ingenū, can go ahead as quickly as possible.
Aufrichtig says Psyence could look at a dual listing in South Africa - possibly on the Cape Town Stock Exchange (CTSE) - once the Nasdaq listing is settled down and once there is progress in the phase 2 trials.
Interestingly, Cilo Cybin might be making a second rush for the JSE. Founder and CEO Gabriel Theron tells the FM that Cilo Cybin is by no means capitulating and that plans are afoot to capitalise the company. He says details will be disclosed shortly.
Theron says Cilo Cybin’s first attempt at listing showed the risk-averse nature of local investors. “We raised R20m from 2,000 small shareholders. There was not much interest from big investors.”
Feedback from the investment roadshow confirmed the need for an underwriter, a more focused business model and the need to have specific timelines for break-even and profitability. “With this in mind, we hope to be back within the next six months.”
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