A couple of weeks back in my regular FT column I dug a bit deeper into the psychedelics space. You can read that column here: https://www.ft.com/content/21aff832-fe26-4a53-b9cd-01dfac1c50f9. The long and short of it is that I think this is the beginnings of a really big shift that will help existing therapies and medications for treating chronic mental health issues and addiction. It will also make these treatments more mainstream and hopefully drag the various compounds away from the failed war on drugs narrative.

In that column, I mentioned one of the less high-profile players in this space called Cybin – another Canadian-listed firm. This week analysts at Ocean Wall – whose report I mentioned in my column – added a bit more detail on this relatively new firm (founded 2019) which is developing psychedelic therapies by utilizing proprietary drug discovery platforms. It went public in November 2020 and was co-founded, by Paul Galvine (COO), John Kanakis (Director and SVP of Business Development), and Eric So (President) with Doug Drysdale as CEO.

According to Ocean Wall Cybin is one of only four companies with active clinical trials and is currently working towards a” Phase IIa and a Phase IIb clinical trial to study psilocybin use for major depressive disorder. The trial will include 120 patients taking four doses of a sublingual film containing psilocybin over a four-month period.  As of May 18, 2021, Cybin was granted IRB Approval for Phase II Clinical Trials of its Sublingual Psilocybin Formulation for the Treatment of Major Depressive Disorder.

“As of December 2020, Cybin signed a definitive agreement to acquire Adelia Therapeutics as part of its commitment to strategic growth. Adelia Therapeutics (based in Boston) broadens out Cybin’s access to novel therapeutics, delivery methods, and therapeutic regimens. Cybin also partnered with Kernel – technology leader in neuroimaging hardware and software – allowing them to record and to quantify brain activity during a psychedelic experience in real time – giving an extra dimension in its research to develop breakthrough psychedelic treatments for mental health.

“They currently have 12 patent filings covering: Novel psychedelic compounds, delivery mechanisms, supportive treatment platforms and a drug discovery pipeline of modified and novel tryptamines and phenethylamines.

“Funding: The Company closed, in Oct 2020, a C$45 million subscription receipt financing in relation to its reverse takeover transaction, which marked the largest subscription receipt financing in the Canadian psychedelic sector. In Jan 2021, they raised C$30m through a highly successful bought deal – which was upsized from original C$20m size. They have raised a total of nearly C$90m to date. Investors include several Blue-Chip US Investors including Janus Henderson, LifeSci Ventures and RA Capital.

Crucially for investors, Cybin has very recently announced that they are looking to move to a Tier 1 US stock exchange in the near future.  According to Ocean wall, “this should lead to increased liquidity in the stock and, in turn, reduce the stock price volatility.”.

StepEx steps up to the postgraduate funding challenge

It’s nice to see fintech businesses stepping up to an acute funding challenge with a novel repayment structure. The big challenge for all undergraduate, postgraduate and advanced technical training is how to fund the expensive programmes.

I’ve never supported the idea of free undergraduate tuition, partly because it is a subsidy to the middle classes, partly because a move back to free tuition would result in the contraction of the university sector, and partly because I think students should pay for the extra education.

That said I always favored a graduate income tax rather than a loan based system. We started off with a loans system, but if we are collectively honest we are gradually moving to a tax-based system. Probably a majority of the outstanding principal on undergraduate loans will never be paid back and there is an argument for now going the whole hog. Just write the debts off and institute a flat tax for all students once they have finished their course. My suggested social contract would be:

  • Debts are written off
  • The interest rate falls to zero
  • But the minimum threshold falls to closer to £20,000
  • The maximum payback period is 20 or 25 years
  • All eligible students pay a flat rate tax

Personally, I think within five years we will end up with this system.

But this won’t solve the challenge of funding post-graduate education and advanced technical training (which may involve more mature students early or midway through their career). I think a lifetime technical and vocational educational voucher system would help some of the way and would benefit a vastly larger number of people. But even that, expensive, solution won’t help those taking expensive courses to benefit their careers.

Which leaves us with the existing muddled system. Post graduate education is increasingly becoming the preserve of the wealthy middle classes, along with a few people who aren’t frightened of taking on vast debts. This is a terrible result for a nation that requires many more advanced, trained postgraduates.

The left would love to fill in the gaps with generous state funding but that is never going to happen. Why should the state pick up the tab so that someone can take very expensive advanced education to boost their pay levels? Sure, the government needs to massively augment STEM-based post graduate funding but I fail to see why say a student taking an MBA or learning to be a pilot should be funded by the government (one could also add LLM courses to what would be a long list of ‘never going to happens’).

So, what’s the solution apart from lashings of debt? One novel idea is to develop a system where investors invest in a career and then receive a payback based on their expected earnings stream.  The idea has been developed in the US and is hugely successful but here in the UK, we’ve lagged behind…inexplicably.

But one provider has stepped up to the market – and has been raising capital to fuel expansion. In my humble view, this is the next big fintech frontier and we should see more players in this space.

The ‘news’ bit of this is that StepEx “has raised a £1.1m pre-seed round. The round included BBVA Anthemis Venture Partnership and Triple Point Ventures, as well as renowned fintech angel Chris Adelsbach.”

Here’s a bit more detail on the excellent Stepex model:

  • “Stepex and its Future Earnings Agreement model present students with the opportunity to pay a percentage of their earnings for a fixed period of time, once they finish their course and cross an agreed salary threshold, with payment terms calculated using StepEx’s proprietary machine learning model trainees on the largest, highest-quality graduate earnings dataset
  • “StepEx is already working with two of the top three business schools in the world – London Business School and INSEAD – as well as several providers of courses focused on in-demand technical skills such as coding and AI
  • Through StepEx’s Future Earnings Agreements, students pay a percentage of their earnings for a fixed period. This is only triggered upon completion of their course when they cross an agreed salary threshold based on StepEx’s forecast of their expected earnings. StepEx charges course providers an up-front fee per student, and takes a small commission on each monthly repayment.

Last but no means least here is an interesting quote from one of Stepex’s founders which I think hints at the much larger market opportunity:

“Using outcome-based finance to expand access to postgraduate business degrees and professional or technical qualifications could increase cumulative lifetime earnings by as much as £8 billion. But that doesn’t account for a whole host of other qualifications that could unlock new, higher-earning opportunities for people in what used to be called ‘blue collar’ occupations. The Future Earnings Agreement model works just as well for an Amazon warehouse worker who wants to earn more money as a truck driver, but can’t afford the training, as it does for a freelance designer wanting to develop coding skills or an entrepreneur currently priced out of an MBA [my emphasis added].

If we are looking for a new form of social impact investing, why can’t we open this product up to a wider investor community? One could imagine wealthier investors focusing on funding advanced training in areas they know well – and have expertise on. They in turn will help fund a new generation of skilled, trained post-graduate and technically advanced workers. If we are serious about the S in ESG this is a big frontier for investing.