The second Armchair Pick is…

(Market Cap $40M | Cash Balance: $10.5M)

Good morning, Armchair Army!

We never like to play favourites… 

But with stocks, sometimes we do.

We all have one.

The one that we talk about to anyone who would listen.

... particularly to my wife. Sorry honey.

For me, that stock is Emyria (ASX: EMD | MC: $40M | Cash $10.5M).

EMD provides mental health services through psychedelic-assisted therapies for people with PTSD and treatment-resistant depression.

Medibank has agreed to fund treatment for all of its eligible members.

So has the Department of Veterans Affairs.

Even before I started the Armchair Analyst newsletter, EMD was my largest personal position.

Last week, I visited one of its facilities in Perth and met with the Chairman, Greg Hutchinson, and Medical Director, Jon Laugharne, to hear more about the story:

As I was writing this article over the weekend, the US Government decided to throw a giant curveball.

Trump signed an executive order to accelerate psychedelic treatment for PTSD in the US.

Thanks, Trump, now I have to rewrite my entire intro.

But seriously, this is very, very good news for EMD.

While the rest of the world is still in clinical trials for psychedelic medicines, EMD is building a commercial business in Australia. 

How?

Because it can.

In February 2023, the Australian Therapeutic Goods Administration rescheduled MDMA and psilocybin from Schedule 9 (prohibited substances) to Schedule 8 (controlled medicines).

Meaning that organisations like EMD could start delivering psychedelic-assisted therapies commercially.

So far, EMD is the only one to do this at scale.

EMD is at least two years ahead of anyone else in Australia, and three years ahead of anyone else in the world.

So with it looking more and more likely that the US will have an approved psychedelic therapy in the next 12-months…

The ONLY organisation to actually scale the delivery service model is EMD.

EMD has grown from a single boutique clinic to 4 clinics across Perth, Brisbane, Melbourne, and soon Sydney.

… in just nine months.

With over 90 trained therapists and six authorised prescribers (growing to 15 soon).

The treatment works and is having remarkable results in changing the lives of people with serious mental health conditions.

Resolving the mental health crisis in Australia very important to me.

While I was at university, I worked at a youth mental health organisation called LifeChanger, and I have all of the horrible statistics seared into my brain.

Suicide is the leading cause of death among males.

Over 1.5 million Australian adults have PTSD.

Over 1.1 million Australians have treatment-resistant depression.

I could go on, and on…

There hasn’t been a good solution for a long time, and things are getting worse.

Health insurance companies are feeling it too. 

Billions in mental health-related claims, and insurance premiums are increasing for the rest of Australia.

EMD is having remarkable results from the early work…

But scaling the business is the challenge.

They charge $10,000 per dosing session and have a capacity of about 70 sessions per week.

But right now, they are delivering only a fraction of the capacity revenue because of limitations on scaling up trained staff and authorised prescribers.

The faster EMD grows, the harder it will be to replicate its business model.

This is because EMD has already secured:

All achieved while nearly every other country in the world is hamstrung by heavier regulation of delivering psychedelics for treating mental health.

This is the operational moat that EMD is building:

The main benchmark that I am looking for from EMD is not revenue (just yet), it is scale…

Are they building more clinics?

Are they training more staff?

Are they getting more approved prescribers?

The demand is there… scale is the key.

I am betting that Emyira becomes a global mental health franchise, delivering psychedelic care to millions of people with PTSD, treatment-resistant depression and other mental health conditions.

EMD has the playbook; others implement it at scale.

Think Jim’s Mowing, but for psychedelic-assisted mental health therapies.

Here is my investment memo on EMD.

I took my shares at 5 cents, a premium to the last traded price:

I thought long and hard about exactly why I have such a strong conviction on EMD, but I think this analogy captures it best.

A marketing professor posed a question to his class: 

"Imagine you're launching a restaurant. 

If you could only have one edge, what would it be?"

The room came alive. 

"Location!" someone called out. "Quality food!" said another. "Unbeatable prices!"

The answers kept flying until the class had exhausted every idea they could think of, and the room fell quiet. Students glanced at each other, waiting.

The professor let the silence hang for a moment, then smiled.

"A starving crowd."

In the market that EMD operates in… the industry is FAMISHED.

There hasn't been a new drug approved for the treatment of PTSD in over 20 years. 

1.5 million adults in Australia have PTSD.

In 2024, insurance companies paid out $2.2 billion for mental health-related issues. Up from $1.2 billion in 2019.

AusSuper just pushed up premiums on all members by 40%, citing a dramatic rise in mental health claims.

Insurance companies are starving for answers. Patients are, too.

Bupa’s CEO recently said that mental health is “the new pandemic”, but the provision of mental health services is too fragmented right now.

EMD is looking to centralise care, build a national franchise and be the answer to the billion-dollar question…

What is Australia going to do about it?

In February 2023, Australia did something very unAustralian.

The Therapeutic Goods Administration (TGA) made an unprecedented decision in the history of global pharmaceuticals…

It rescheduled MDMA and psilocybin from Schedule 9 (prohibited substances) to Schedule 8 (controlled medicines).

These substances could now be prescribed by specially approved psychiatrists, and EMD had been building toward this moment for two years.

In October 2023, EMD’s trial became the first to dose a patient with MDMA in a purpose-built private clinic under the TGA’s new framework.

Then, in January 2024, the TGA granted Authorised Prescriber status to EMD’s lead psychiatrist.

(Equivalent of regulatory marketing approval).

EMD could now commercialise psychedelic treatments to eligible patients with PTSD.

BUT, the out-of-pocket expense was high, and the initial uptake was small.

Then, just six months later, Medibank, Australia’s largest private health insurance company, announced that it would fund treatment for all of its eligible members.

It was a big deal at the time, and it made two things abundantly clear.

FIRST, EMD’s psychedelic treatment is working. 

Medibank wouldn’t agree to fund treatment unless it believed the data were promising.

SECOND, EMD needs to scale up… fast. 

With the backing of a large Payer, EMD can now deliver this service to more patients, gather more data and secure more funding.

A few months after the Medibank deal, the Department of Veteran Affairs announced its own coverage plan for psychedelic therapies:

This was the exact type of external validation that I like to see.

Despite operating only on a small scale, it was clear that EMD had found a service that worked.

None of these health insurance companies would cover treatment without proof.

EMD tells a story about Kate, an ambulance first responder who was one of the very first people to undertake the psychedelic therapy.

After five years of therapy for PTSD, nothing worked (in fact, things got worse).

Almost immediately after the MDMA-assisted therapy treatment began, she started to improve.

Two years later, she is back at work and a functioning member of society. 

This story is the rule, rather than the exception, when it comes to EMD’s treatment.

At the PAX centre (EMD’s first clinic), I had a chance to speak with EMD’s Medical Director, Jon Laugharne.

He explained the therapy protocol and shared some of the remarkable stories of people whose lives have been turned around.

He said to me..

“In thirty years as a psychiatrist specialising in trauma, I have never seen clinical results like this… I sometimes have to call up my other colleagues to ask if I'm just kidding myself here?”

The results he was talking about were from his real-world experience with patients.

But also, EMD has run a small-scale clinical trial, where 66% of patients no longer met the criteria for PTSD, 76% of patients had clinically significant improvements.

What is important is the durability of the results.

It shows that EMD is facilitating genuine recovery, not temporary symptom suppression.

THAT is why I suspect that Medibank was so interested.

While EMD charges $10,000 per dosing cycle (generally $30,000 per patient), it is just a fraction of the cost over the lifetime for someone with PTSD.

Of the 10 patients that EMD have treated with work-related PTSD, all 10 have gone back to work. 

This stat would be of particular interest to an organisation like WorkCover, whose largest expense line item is payouts to the Police Force.

As I said. There is a starving crowd.

So… what is this all worth? What’s the business model?

Quick maths time.

EMD charges $10,000 per dosing cycle (either to the insurance company or to the patient).

Each patient does either two or three doses, depending on their condition (PTSD or Treatment-Resistant Depression):

We’ve established the demand for the services…

But the real challenge is supply.

The answer?

A national rollout of its psychedelic therapy franchise.

Nine months ago, it was just one clinic in Perth.

Now EMD is in Perth, Brisbane, and Melbourne, and soon in Sydney.

With just these clinics running at full capacity, EMD could net $700,000 in revenue per week.

(70 dosing days per week, $10,000 per dosing day)

Right now, it is a LONG way off capacity.

This is because EMD doesn’t have enough trained staff or authorised prescribers to run the clinics at full capacity… yet.

It will take time to scale up, but this is the potential serviceable revenue that EMD can expect at full scale.

These are the key numbers to pay attention to:

Number of clinics. Number of authorised prescribers. Number of trained psychiatrists.

I put together this table from publicly available information on where EMD is with each:

Each authorised prescriber can cover multiple rooms in a clinic per day.

BUT, that authorised prescriber might only work one day per week at the clinic.

This means that revenue is highly sensitive to the availability of Authorised Prescribers.

Scaling these numbers up (particularly with in-built redundancy) is critical to EMD’s success.

Right now, EMD have 6 authorised prescribers… with about 15 more pending.

This means that EMD is only generating a fraction of its potential revenue because it has yet to fill each new region that opens with the therapists and authorised prescribers to operate at capacity.

Recruiting, training, scaling, coordination, alignment.

That’s what will drive growth for the business.

Revenue will follow.

A brick-and-mortar services business, particularly one that is delivering entirely new therapies in a highly regulated environment, is very difficult to scale.

It takes someone with a deep understanding and experience to pull this off.

… enter, Chairman Greg Hutchinson.

EMD’s Chairman Greg Hutchinson founded a chain of physiotherapy clinics and sold them to Sonic HealthPlus in 2010.

(Sonic HealthPlus is a subsidiary of the $10 billion capped ASX-listed Sonic Healthcare)

He then became the CEO of the subsidiary, and over 15 years, he turned it into Australia's largest provider of occupational and community medical services.

1,800+ staff, 40+ locations across every state and territory, 7,000+ active clients.

What Greg is is a clinic rollout machine. 

In November 2023, Greg Hutchinson joined the EMD board and moved to Executive Chairman when he left Sonic in 2025 to work at EMD full-time.

He is looking to apply the exact same playbook that helped build Sonic HealthPlus:

I spoke to Greg on my trip to Perth, and he said, “EMD is the fastest-moving company I have ever been a part of”.

He has also invested approximately $1 million of his own money into EMD across multiple capital raises and is the largest shareholder.

While EMD is building its Australian network, all eyes are on the US psychedelic therapy market right now. 

Over the weekend, President Donald Trump signed an executive order to accelerate psychedelic treatment for PTSD.

(Yes… that’s Joe Rogan in the background).

Right now, billions of dollars are being deployed by NASDAQ-listed companies as they pursue FDA approval for these same treatments that EMD can run in Australia.

I expect even more now that the administration has signalled its intention to get an FDA-approved psychedelic product in market.

The US is still operating under the old rules that Australia had before the TGA downscheduled MDMA and psilocybin in 2023.

But there are a number of companies with Phase 3 trials (Lykos Therapeutics, Compass Pathways, Heliums Pharma).

As of today, EMD has announced that it would support clinical trials in the US, leveraging its network of trained therapists to provide services to US-based companies.

It already has one partner, Psyence Group; more will come.

Right now, there are more than 50 psychedelic-assisted programs in clinical development, but very few specialised organisations that actually support the therapies.

So demand for clinical services is set to take off in the US.

But implementation partners to help roll out the services are scarce.

Particularly ones with the networks of trained therapists and purpose-built facilities like EMD.

As EMD mentioned in their announcement:

Clinical delivery capacity, not drug development, is emerging as a primary constraint to a global rollout.

I don’t know if EMD will ever go directly to the US to deliver clinical services, but that doesn’t mean they don’t have a big role to play.

US companies will start developing the clinical care model from scratch.

EMD is not.

It has multiple years to work out protocols, train staff, scale up services, and, most importantly, real-world patient data for use in any reimbursement application.

This is EMD’s “playbook”.

What’s the true value? Only time will tell.

Here are the four vectors for EMD in the US:

Let’s touch on that last point now….

In 2021, the University of Western Australia gave EMD exclusive rights to a library of more than 100 novel MDMA analogues.

While EMD has been building out its clinical services business, these MDMA analogues have been developed, behind the scenes, by the University.

These are molecules with the therapeutic potential of MDMA but potentially shorter-acting, with cleaner side-effect profiles, designed to make the "therapy window" more controllable.

The potential for a 2-hour session instead of an 8-hour session is very attractive to clinical services companies, as it essentially quadruples the daily throughput.

Big pharma is interested, with two major deals in the space over the last six months for similar products that have progressed through clinical trials.

FIRST, AbbVie purchased Gilgamesh’s psychedelics program for US$1.2 billion in August last year:

SECOND, Otsuka purchased Trancend for US$1.2B for MDMA analogues:

While not the focus for EMD, I do see these as potential upside opportunities later down the track for the company.

For all the momentum, EMD is still a small company treating a small number of patients.

The path from here to the revenue numbers that would justify a large re-rating is gated by four ceilings that must be broken simultaneously.

Each of these creates a bottleneck for EMD and will slow progress toward scale.

This mainly comes down to execution risk.

Capital/financing risk: Revenue is growing fast, but the company isn't yet profitable. Each new clinic requires capital before it generates revenue. If the ramp is slower than expected, the dilution risk is real.

Insurance concentration. Medibank is the anchor payer. A non-renewal of that agreement would be materially damaging.

Regulatory risk. Changes to the AP scheme, new eligibility criteria, or a political backlash against psychedelic medicine could shift the landscape materially.

Options overhang: EMD has 229 million options exercisable at 5 cents (around its current price), with the majority set to expire in March next year. As that time approaches, there may be some options overhang that create a price ceiling for EMD.

EMD is my largest position for a reason.

I think that the company is building something genuinely unique and difficult to replicate.

The moat is the combination of interlocking stakeholders that would each take a competitor years to nurture independently, let alone all at once. 

The CEO has done this before. 

The payer infrastructure is established. 

The data is compelling. 

And the US opportunity is enormous. 

Mental health challenges are not slowing down, and neither is EMD.

It has the playbook, the insurers, the therapists, the access, the clinics.

EMD is just scratching the surface of what it could become.

A big thank you to Greg Hutchinson, Dr Jon Laugharne and the rest of the Emyria team for letting me share this amazing story with my audience.

See you later with the daily pulse check

The Armchair Analyst