Doug Drysdale - Cybin - Part 4

Intro - 00:00:01: Welcome to the Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, serial entrepreneurs, and experienced investors about the challenges and triumphs of running a biotech startup from pre-seed to IPO with your host, Jon Chee. In our last episode, we spoke with Doug Drysdale about his transition from BD to leading M&A at Actavis, his insights on leveraging debt for acquisitions, and the importance of cultural fit in successful deals. We also touched on his strategic acquisitions at Actavis, the turnaround at Norwich Pharmaceuticals and Alvogen, and his challenges and successes at Pernix Therapeutics. If you missed it, be sure to go back and give part three a listen. In part four, we talk with Doug about his first-time experience running a public company, the challenges of hitting quarterly numbers, and the constant pressure of share price. We'll also hear about his move to Cybin, a startup transforming psychiatric treatments through psychedelic compounds, and discuss their rapid progress, including two key acquisitions, taking the company public, and their breakthrough therapies in depression and anxiety.

Jon - 00:01:22: So this seems again, like you keep putting yourself in baptism of fire moments where you're like, turn around and a public company for the first time. Let's do it. Like, let's just do it. Can you talk a little bit about, well, I guess the first question is, what was your experience running a public company for the first time?

Doug - 00:01:38: It was not fun. 

Jon - 00:01:42: Just like your early sales, you're just like, this is not fun, but I'm going to keep doing this.

Doug - 00:01:47: You know what? I mean, it was fun in the beginning. It's easier being a public company if things are going well. So I think the stock jumped 90% overnight when we announced that this new investment was coming in, that it was going to take over. And then we took the stock from $2 to $13 in 10 months, something like that. So everyone was very happy. But then I learned as a public company, we had to hit our numbers every quarter. Every quarter is a conference call. Every quarter you're getting grilled by analysts. Every Friday, IQVIA publishes prescription data on major drugs, gets fed into Bloomberg. And so all of the analysts have it. And every Friday, you can guarantee you're getting phone calls if your numbers aren't where they're expected to be. And we're talking week to week. It's just micro managing.

Jon - 00:02:40: Oh, my God.

Doug - 00:02:40: So that's all good until things don't hit the numbers. And we ended up in, I think it was 2016. Yeah, 2016. So pre-election, lots of pressure on drug pricing. Hillary, in particular, was putting pressure on drug pricing. There was the whole Pharma Bro experience, if you remember.

Jon - 00:03:03: Oh, yeah. I do remember. Yep.

Doug - 00:03:04: The 3,000% price increase. And so there was this all this pressure on pricing for spec pharma companies like ours. We had acquired a couple of assets that were already marketed. So, of course, we had increased prices, not egregiously, but a little. But all those pricing came under pressure. And that affected our net income. That affected our ability to service the debt that we had on the balance sheet. And it was clear to me that we needed to restructure the debt. It's not that unusual. Companies find themselves in these situations. It happens. It was kind of out of our control, the macro hitting the pricing. We just got hammered by the PBMs, honestly, on rebates and discounts. So we needed to spread the debt out over a long period of time or something like that, you know, to manage it. But that was an area that the board and I disagreed on. And let's just say there was a board member that was also a shareholder who, you know, wasn't interested in taking any dilution. So we didn't have the same. Objective. My objective was make sure the company doesn't go off rails and then we'll focus on the share price. They weren't necessarily the same thing. We would have had to have taken a short term hit on the share price, but it would have come back. So I just couldn't see a pathway to growing up selves organically out of that situation. And obviously, with that debt pressure, we couldn't raise equity or debt either. So you had to you had to unblock the situation. And my view was it was restructuring the debt. So, one of the directors took over as CEO and they went on their way. And unfortunately, three years later, they had to file Chapter 11 and restructure. But we could have dealt with this in a very different way, it was my view. And, you know, I said earlier, I'm about fast failing. You know, I knew what the path was. I'd been in plenty of debt situations before in my past, and I knew how to handle and restructure and deal with those things, an activist. And so it was just pointless to sort of sit in that CEO chair and just watch the share price get hammered and the scripts not come in and just watch it kind of fade away, which was basically what happened over the next three years. There was a way to fix it. And so we parted ways, unfortunately. But there you go.

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Jon - 00:05:29: And that's something, you know, I mean, I'm kind of seeing a through line with these experiences. It's like... You're kind of running towards the uncomfortable, like a debt restructuring. It's not comfortable. Like your creditors don't want to hear that.

Doug - 00:05:45: It's not comfortable, but you've got to be a mature and adult in those situations, except it is the reality. And you just have to go and find a solution. It may not be the solution you like, but you've got to do something.

Jon - 00:05:58: Exactly. And I love that because sometimes I think, you know, it's easy to kind of like, I don't want to say like sweep it under the rug or just like it's a problem for tomorrow. But sometimes you just have to jump on it and get ahead of it, even though it is like you've got to rip the bandaid off. Like we've got to do this if it means that.

Doug - 00:06:15: The situation wasn't going to get any better organically. That was my point.

Jon - 00:06:20: Exactly. Exactly. So what was next after Pernix?

Doug - 00:06:24: Yeah. So I was pretty burned out, actually, after that. It was quite draining. The whole chairmency of a public company, commercial company, you know, the scrutiny all the time. It's tough. And we were, you know, we needed really to be stable. We needed more revenues. We probably needed more products and a bit more runway, you know. But, so I needed a break and decided to invest in and join a private company. So no public scrutiny.

Jon - 00:06:54: Yeah.

Doug - 00:06:55: A little bit of a breather and some slower speed. And so I took over and ran the small contract manufacturing business. In New England. And a small team, a small little facility, you know, it just needed to do basically all the things we did at Norwich, which was, you know, improve efficiencies, improve capabilities, more than anything, bring in customers and build sales. And so that was pretty low stress in a way in that I'd seen it and done it before. So we grew, I think we grew sales 60% first year, something like that, from a low base. We were on the Inc. 5000 fastest growing companies list that year, I think, something like that. So it was fun. It was a project more than anything else, but it was a much needed break from the public markets. 

Jon - 00:07:42: Absolutely. I guess like my question is, I know you're now, you know, had a moment to kind of decompress and you're, you know, this is getting to kind of current day Cybin. When did you notice you're ready to go back into the ring of like a publicly traded company?

Doug - 00:07:58: Well, Cybin wasn't public at the time.

Jon - 00:08:01: Got it. Okay. 

Doug - 00:08:02: Cybin was a startup, handful of folks, three founders, all from Canada, and they recruited me. And I have to say, like, day one, first meeting, I knew I wanted to do it. Just right away. You know, we had, I had great chemistry with the founders. We definitely had a shared vision. We're all very ambitious about what we wanted to achieve. And we knew we had to go and build the best team. So that was a good remit to go in with. These guys, all excellent serial entrepreneurs, but not a lot of farmer experience amongst them. So they were smart enough and humble enough to say, well, let's go and hire, you know, a farmer, a CEO, that person. And we've just done so much in the last sort of three, four years. I joined right around the time that COVID hit. And so we built the entire business and operations, everything entirely remotely, never had an office and never worked together, like in an office environment. And so that means we have people, in Canada, all over the US, in the UK, France, Germany, Ireland, we were able to hire the talent wherever the talent was. And also build in other geographies without the expense of infrastructure and offices, and that kind of thing. I mean, along the way, we have acquired two companies. We acquired Adelia Therapeutics in Boston. So we still have a lab in Boston from that acquisition. They brought some early technology and IP with them. And we acquired late last year, a small farmer. It's a company based in the UK that was doing some work that was quite adjacent to us with DMT. So we put all of that IP and science together. And of course, we took the company public. So the first job out of the gate was go raise some money. And so... We went out in 2020 with really just an idea. We didn't really have a lot more than that, actually. A couple of contracts with some developers and manufacturers. Really an idea and a vision. And we raised by November 2020, we went public and raised $45 million. And today we've raised about $300 million. And we have about 55, 60 people across all those countries. And we've now got an asset about to go into phase three this summer. So inception to phase three in four years is really quite amazing. That asset that we're developing for depression has breakthrough therapy designation for FDA, which is a career first for me and for pretty much everyone in the team, as well as a rare thing. It's a once in a career opportunity. And then we have a second asset that's in phase two right now for anxiety disorders that we'll read out around year end. A huge IP portfolio, I think 50 patents or plus granted, still 170, 180 pending around the world as well. And adding to it all the time. And frankly, just amazing, outstanding phase two results in depression that are, you know, the biggest breakthrough in psychiatry in 40 years or something like that.

Jon - 00:11:03: That's amazing. And for those who are not as familiar with Cybin, can you zoom out for us and tell us Cybin's mission and focus and talk a little bit about the co-founders you ended up meeting and the team behind the technology?

Doug - 00:11:18:  Yeah, so I mean, as I said, the co-founders come from, really entrepreneurial backgrounds. They're all serial entrepreneurs that, like me, were just blown away by the opportunity here. When I first met them, I started reading about these psychedelic molecules that we're working on, the natural forms, Psilocybin from mushrooms and DMT in ayahuasca and others, and reading some of the academic studies that have been done around the world, quite a few of them. And honestly, at first, I couldn't believe it. I thought it was too good to be true. But the more I read, the more convinced, I was that these were incredibly powerful molecules. And as I said, I just had to be a part of it. I knew right away I had to be a part of it. And then they feel the same way.

Jon - 00:12:02: Yeah, just like at the highest level, Cybin's mission and focus and what got you bought in at the very beginning.

Doug - 00:12:08: Yeah. So, look, I mean, these psychedelic compounds have been around for millennia. Indigenous folks have been using them for thousands of years. We then started synthesizing them in the lab in the 30s, 40s. And we all know what happened in the 60s and 70s with them. Right. So they've been around for quite a while. So we knew we had to be innovative. We knew we had to find a way to improve on the natural molecule. We wanted to not mess with the pharmacology, though. Otherwise, you're looking at the potential for unwanted side effects or lack of efficacy. So the underlying pharmacology is the same. We've optimized the pharmacokinetics, so the way that the drug gets into the side of action, in this case, the brain. So we've taken both psilocybin and DMT. And we've modified them primarily through diuretion, which is changing hydrogen atoms on the molecule for deuterium, which is heavy hydrogen. But our goal, our mission, our vision was to create these novel compounds that could radically change the landscape in psychiatry. And the way we've been treating depression for the last 40 years is with SSRIs, so drugs like Prozac and Lexapro. And what they've been doing is working on the assumption that depression is caused by a deficiency in neurotransmitters. We now know that that's not the case and that these neurotransmitter levels are likely to be a symptom. And that depression is really an issue of brain circuitry, brain connectivity. And so these SSRIs have just been treating the symptoms not very effectively for quite some time. What we're seeing with our first molecule, instead of having to wait six, eight weeks for an SSRI to work, It appears to work the next day or within a day. So after one dose and after two doses that we gave in our phase two study, two doses, three weeks apart. So not daily dosing. 75% of patients in remission after just two doses. And so far they're still in remission four and a half months later. So it's a real paradigm shift. Rapid, large effects that are very durable, which is like nothing we've seen. The ability to be able to switch off someone's depressions really quickly and just change the way that they think about themselves and their situation is going to be a very powerful tool.

Jon - 00:14:32: That's incredible. And I guess my first question is why? I mean, I realized that, with psychedelics, you have to work with the DEA on it. But why for like, I believe you said it's like for 40 years, SSRIs were just kind of the status quo. Was it just like we were complacent and they're like, this is the best it's going to get? Or kind of like, why was it that way? Or why has it been that way?

Doug - 00:14:58: Yeah. Well, first of all, work on psychedelics was kind of shut down by the DEA, the War on Drugs, the Nixon administration in the 70s. And it's taken a while for it to come back and reemerge. So that's the story with psychedelics. Short story. With drug development and depression, we haven't really understood the underlying cause of mechanisms behind depression. And so we've been working on these different neurotransmitter pathways. And there have been a number of other drugs that have been approved for depression since SSRIs were first introduced. But all of them have quite small effects. And those effects are often difficult to demonstrate in clinical trials. When you have an effect size that's really small, and especially with a psychiatric condition, where the placebo group is receiving a sugar pill every day, they think they're getting medication. So there's often quite a high placebo effect in these treatments, with these treatments. And when you have a high placebo effect and a small effect size with the active, very often in depression studies, they fail because the active doesn't separate from the placebo. And that's what we've seen largely in depression. And it's primarily because we haven't had a target mechanism to go after. And I'm not saying that we know the four mechanisms of psychedelics either. We don't. But we do know that they create very large amounts of neuroplasticity, new connections and new networks being formed in the brain. And given we now think that depression is an issue of brain connectivity, then there's some logic there. Ultimately, the downstream mechanisms will all be elucidated, at some point, we're getting there. I mean, every week and month, we start to see new papers come out. But just the safety profile of these things is very benign. You know, infrequent dosing, rapid results that are very durable. So quite exciting.

Jon - 00:16:40: Yeah. It seems like a perfect timing, too, is kind of where... Where the regulatory is becoming a little bit more amenable to it, and also our just fundamental understanding of these kind of psychiatric kind of ailments is also perfectly timed for something like Cybin. Can you talk about what your experience has been working with the FDA? Particularly around psychedelics. I mean, that's a little bit, it's probably a unique experience as a public company CEO.

Doug - 00:17:07: Yeah, I would say that the FDA is currently a breakthrough therapy destination to our asset and to a few others as well. So they clearly see the potential here for psychedelic molecules. When we speak to them, for example, at our last end of phase two meeting, you know, they seem really quite excited about it. And they don't generally get excited about a lot of things. And normally it's quite dry. But, you know, I think there's quite a lot of energy and enthusiasm about the potential here because it is very different to anything else we've seen. Now, these trials come with their own challenges, as they all do. I mean, it's hard to hide the fact that someone's taking a psychedelic is difficult to blind it. But FDA is fully aware of that. There are many other drugs that are easily unblinded as well. Actually, only about 10% of clinical trials are really effectively blinded because most drugs have some kind of effect that the patient can feel. So blinding is a bit of a challenge, but it's not insurmountable. They've given pretty clear guidance on how to deal with that with their trial design. We did have a setback, I think, this last week when there was an advisory committee for MDMA. And that application just wasn't up to the standard that was necessary. Frankly, I think that's, the politest way to put it is that it wasn't the best job. It doesn't mean, though, that MDMA isn't a great opportunity for people with PTSD. And so hopefully they can fix that. And we'll see that come to market at some point. But no, FDA has been really quite encouraging. The breakthrough therapy designation gives us this ability to consult with them. So we're not just plonking data in front of them. We're asking them up front, hey, what do you think about this trial design, these endpoints, the sample size, you know, and getting all those things agreed and aligned beforehand, which de-risks a lot of the Phase 3 program.

Jon - 00:18:52: Amazing. That's what an amazing opportunity. And you're right. It seems like once in a career, for sure, especially for something such an unmet need. It's, you know, hearing that SSRIs, which are like lackluster at best, has been just like the only option. Sounds pretty bad, to be quite honest. And so moving to kind of like Cybin and Cybin strategy, can you talk a little bit about your guys intellectual property strategy? And also, I know you guys partner with a lot of organizations as well. Can you talk a little bit about those two efforts?

Doug - 00:19:23: Yeah, so we outsource pretty much everything. So the brain trust is in the house. And then I'd say the operations are already outsourced. So everything from manufacturing, testing, clinical site recruitment, management, data analytics, regulatory consultants. We have a core team, but that team is managing external capabilities. And the reason for doing it that way is, one, we can access whole teams of regulatory staff rather than just one or two people in the house. So you get more for your money that way. But also our needs have changed. Our needs from when we were preclinical to phase three have completely changed. So that would have meant reshaping the entire company if we did it all internally. So the outsourcing part of it is the way to go.

Jon - 00:20:09: Makes a lot of sense. And as you are building out this kind of like core team that is like managing kind of these external parties and you're obviously a clinical stage company. Can you talk a little bit about the kind of company culture Cybin is seeking to build and kind of how you're thinking about recruiting and kind of retaining talent?

Doug - 00:20:27: Yeah, I think I said that we have grown up entirely remotely. So culture has really been everything. And we've had to be really intentional about... Connectivity and bringing people together. And we do that through having a number of lighthearted gatherings that are remote, but keeping people, you know, engaged and lighthearted because it can get a little bit remote working remote, right?

Jon - 00:20:54: Yeah.

Doug - 00:20:55: And then we bring people together intentionally when we have a problem to solve. So we'll pick the right folks and put them in the... A room for a few days and solve the problem. But that's also an opportunity to socialize. And then obviously bring the follow groups together fairly frequently as well. But we've learned pretty well how to manage without an office. I'd say that our culture is one of respect, for sure. And trust that we've been talking about earlier. I think it's respect. Same thing, really. We have expectations of excellence. And that's also part of the trust, you know, that everyone wants to do really well and will do the best work. So they expect the person next to them to do the best work as well. If you're not doing the best work, you're not going to cut it. But that's not a sort of harsh top-down mantra. It's just that the team's going to self-select you in our own. We're definitely results-oriented. But, you know, our people are our most important asset. We're a knowledge-based company. So it's all about maintaining that culture. We're very sensitive to it. We're always keeping checks on it. We're a mental health company as well. So we're all conscious about our employees' mental health. So we give people plenty of time off. We encourage people to take down time. We mandate it, actually. And I think that sort of level of respect just permeates across the organization. And when you grow from zero, I've learned now that it's a lot easier to create a startup than it is to do a turnaround. Turnarounds come with all kinds of cultural issues that you inherit. That's not easy sometimes. But as a startup, we've self-selected the team. And the team has selected itself. Somebody a long time ago, a very smart person, said to me that in a startup, the future of our company is in the hands of people we haven't met yet. Spot on. Yeah, you get the culture right, but then you've also got to get the systems right so that ongoing recruitment sticks to the cultural guidelines and the cultural sensitivities. Because if you start to dilute that, then you lost what you had to start with.

Jon - 00:22:57: Absolutely. So Excedr is also a remote-first company. And, I think the communication and trust is like, you've got to be super intentional, especially being a remote first company. But we then also, just like you guys, supplement it with these in-person gatherings, which you can't, you just can't replicate. So I love the kind of the ability to balance both being remote, but also, you know, in person and with intentionally for specific moments. But this is really, really exciting. And I love hearing kind of where you got. It sounds like you guys found progress very, very fast. And, you know, I'm excited to kind of watch and be an observer from the outside. And as you're looking forward, one, maybe two years, what's in store for Cybin?

Doug - 00:23:37: Yeah, now I think it's all about execution. So we've had a lot of unknowns in the beginning when you've got early science, you really don't know where things are going, how they're going to translate and work. But now we're in late clinical phases. So it's really about execution. So we've gone from a fairly small phase two program to one, a phase three program has 550 patients in it, probably 60 plus sites across seven or eight countries. So scaling for that execution is our biggest focus at the moment. And then, you know, we're looking at creative ways to continue to add to the balance sheet so that we can add new indication and add more value to the pipeline as we go. So, yeah, phase three kicks off this summer. And then our phase two program for GAD reads out at the end of the year. So we have a couple of big catalysts coming up. 

Jon - 00:24:24: Amazing. That's super exciting. Well, Doug, thank you so much for your time here. And in traditional Biotech Startups Podcast fashion, we have two traditional closing questions. First, would you like to give any shout outs to anyone who's supported you throughout your career?

Doug - 00:24:40: Oh, absolutely. My wife. Absolutely. I mean, of all the time I'm like, you know, tied up with work or traveling or whatever, couldn't do it without her. So I offer her everything really. So for putting up, for putting up with that, for sure.

Jon - 00:24:56: Yeah. Likewise. Likewise. And sometimes she's like, I need you to stop talking about Excedr. I'm like, okay, fair enough. I'll give you that. I'll give you the room. That's totally okay. And the second question is, if you can give any advice to your 21 year old self, what would it be?

Doug - 00:25:11: That you don't have to have it all figured out, that it's not going to be a straight line. You know, I've seen plenty of successes where it was a very long, winding road to get from point A to point B where the goal was. And we did it, but not necessarily the way we thought we were going to do it. So I think just pursue what you enjoy doing and don't worry about having it all figured out.

Jon - 00:25:36: Absolutely. And that's probably the advice that I needed as well. When I was 21, there's certainly a lot of like, at that age, existential dread. You're like, what am I going to do? And hearing that, and hopefully anyone out there listening can impart that advice in their career. So Doug, thank you so much for your time. You've been so generous. And, you know, I'm very excited to see the kind of the next phase this summer for your phase threes. But yeah, thank you again.

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Doug - 00:26:05: Thank you, Jon. It was great chatting with you. Thanks very much.

Jon - 00:26:07: Likewise.

Outro - 00:26:09: That's all for this episode of the Biotech Startups Podcast. We hope you enjoyed our four-part series with Doug Drysdale. Be sure to join us for our next series with Derek Hennecke, a biotech entrepreneur and board member with over 30 years of experience in the CDMO industry, whose mission is to support the biotech revolution and create value for patients, customers, and investors. In addition to his experience as an investor and board member for multiple biotechs, Derek was the founder and CEO of Xcelience, a Florida-based contract development and manufacturing company that specialized in developing clinical phase one through three drug products, which eventually sold to Capsugel Lonza in 2016. His extensive experience in pharma and cell therapy manufacturing makes for an insightful conversation that founders can learn from. The Biotech Startups Podcast is produced by Excedr. Don't want to miss an episode? Search for the Biotech Startups Podcast wherever you get your podcasts and click subscribe. Excedr provides research labs with equipment leases on founder-friendly terms to support paths to exceptional outcomes. To learn more, visit our website, www.excedr.com. On behalf of the team here at Excedr, thanks for listening. The Biotech Startups podcast provides general insights into the life science sector through the experiences of its guests. The use of information on this podcast or materials linked from the podcast is at the user's own risk. The views expressed by the participants are their own and are not the views of Excedr or sponsors. No reference to any product, service or company in the podcast is an endorsement by Excedr or its guests.