Good morning,
Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.
Earlier this week, Bloomberg published a feature that caught my attention…
The $1.7 billion Trip.
(Source, Bloomberg)
It tells the story of the first (and currently only) psychedelic-adjacent drug on the market.
Spravato by Johnson & Johnson.
A first-of-its-kind ketamine-derived nasal spray drug that almost flopped for the first three years on the market.
All because the market wasn’t set up to deliver it.
But four years later, and Spravato set to do US$2.3 billion in sales.
The market finally figured out the care model to deliver it.
Spravato was the canary in the coal mine for the broader psychedelic market.
Fail the clinical care model = Fail to sell the drug.
The US Government announced three priority review vouchers for companies delivering psychedelic therapies for PTSD and treatment-resistant depression.
A psychedelic-assisted therapy will likely be approved in the US soon.
But they still haven’t answered the biggest question: How the hell is the market going to deliver this treatment?
One small-cap stock on the ASX might have the answer.
My Second Armchair Pick… Emryia (ASX: EMD).
Yes, I own 2 million shares in it.
But first…
The Pulse Check
PYC Therapeutics (ASX: PYC) initiates its Phase 1b Multiple Ascending Dose clinical trial for Polycystic Kidney Disease. (PYC)
Arovella Therapeutics (ASX: ALA) appoints Dr Nicole Van Der Weerden as Acting CEO. (ALA)
Neuren Pharmaceuticals (ASX: NEU) reports Q1 2026 net sales of US$101M and Q1 royalties of US$10.4M (+23% YoY). Its partner, Acadia, is reaffirming FY 2026 sales guidance at US$460–490M, implying royalties of A$70–77M. (NEU)
REPORT: Chalmers to lift R&D tax breaks, but the 50% CGT discount is a bitter pill for some. (AFR)
🪑 It’s looking more and more likely that the 50% CGT tax discount is going to be replaced.
I’m working out my thoughts on the situation and will likely have some more commentary on it tomorrow - but initial thoughts are that it's bad for biotechs, bad for stocks, bad for investors.
Cash Injection
InteliCare Holdings (ASX: ICR) completes a $2.05M placement at $0.022 per share. (ICR)
🪑Nice raise, small discount. This does fix the ‘balance sheet’ issue that I wrote about in my coverage of InteliCare last week. Read: Well... that aged poorly: Aged Care Industry Spotlight
Acrux (ASX: ACR) enters a trading halt pending an announcement regarding a proposed capital raising. (ACR)
Seaport Therapeutics, Hemab Therapeutics and Avalyn Pharma raised a combined US$856.4 million in IPOs, extending a strong 2026 run for biotech public offerings. (Biotech Snap)
🪑I was speaking to the Cannacord healthcare team in Sydney yesterday, and they mentioned that their US biotech team is having one of the best years in recent memory.
In the US, capital is hungry for high-potential biotechs… hopefully that comes to Australia soon.
M&A, Big Pharma Wants a Wife
UCB buys Candid Therapeutics, which is developing a portfolio of therapies for autoimmune and inflammatory diseases, for up to US$2.2B. (Wall Street Journal)
Madrigal Pharmaceuticals has licensed an RNA interference candidate from Arrowhead Pharmaceuticals that targets a genetic mutation in patients with MASH. US$25M upfront, US$1B in milestones. (BioSpace)
Under the Microscope
The first psychedelic-adjacent drug to be approved was Spravato in March 2019.
And yet…
For the first two full years after launch, Spravato sales were so low that J&J didn't even break them out on the balance sheet.
The drug worked. The science was there.
The system couldn't accommodate the drug.
UC San Diego, a flagship academic centre that signed up to administer Spravato as soon as it was approved, dosed three patients in its first year.
Three.
Within a year, they shelved the program temporarily.
It was the logistics that killed it:
Each session tied up a clinical room for hours.
Patients had to be observed for two hours post-dose.
Every dose generated a stack of paperwork for the FDA, the DEA, and the insurer, any of whom could audit the program at any time.
Staff had to track every dose from the supplier to the patient and discard it if not used within 14 days.
Insurance approvals dragged on for months.
Specialty pharmacies often didn't stock the drug.
Buying it directly meant risking thousands of dollars per dose if reimbursement fell through.
And, critically, billing codes didn't even exist for the recovery time or the actual administration of the drug. Only for a standard office visit.
Imagine being a clinic administering a several-hundred-dollar drug, taking up a room for two hours, monitoring a patient through a dissociative experience, generating triple-regulator paperwork… and only being able to bill it as a 15-minute office visit.
The mathematics, as one of the doctors put it, were upside down.
The bottleneck wasn't the drug. It was the rails.
Slowly, painfully, one clinic at a time, J&J figured it out.
Not by changing the drug.
By changing everything around the drug.
J&J reps started showing up at clinics like USC Keck Medicine to walk leadership through the mechanics of running a Spravato program.
They hosted dinners where doctors could swap notes. They worked directly with insurers and clinics to create the billing codes that didn't exist. They built rebate programs to support patients with high-deductible plans.
The number of clinics certified to administer Spravato jumped from 2,800 in 2024 to over 7,000 in 2026.
Sales started to grow as well.
The J&J CEO Joaquin Duato told investors last year, "Everybody's trying to copy our model."
He's not bragging about the drug. He's bragging about the infrastructure they built around it.
Third-party clinics built the blueprint that J&J use today
The hero of Sparvarto stroy is one Dr Lisa Harding, a psychiatrist who runs the Mood Institute in Milford, Connecticut.
She figured out, on her own, how to run a Spravato clinic that actually works financially.
Purpose-built facilities, specifically designed to treat and monitor patients who take the drug:
Now J&J pays her to teach other clinics around the world how to do it.
But Spravato is the easy version…
2 hours of clinical observation per dose
One clinical room per patient
One trained clinician monitoring (no formal therapy required during the session)
Twice-weekly dosing in the induction phase, tapering after
Patient walks in, sprays, sits, leaves
The next wave of psychedelic therapies is going to be a much harder logistical challenge.
6 to 8 hours per dosing session
Two trained therapists in the room (not one)
Specialised purpose-built therapy room (not a clinical chair)
Pre-dosing prep sessions and post-dosing integration sessions
Three dosing sessions over a 12-week course
Spravato takes 2 hours and 1 room.
MDMA-assisted therapy can take a full day, two trained therapists, and a purpose-built space.
If a top-tier US academic centre took years to figure out how to fit a 2-hour spray-and-go session into the buttoned-up world of US insurance billing…
How long is it going to take that same clinic to figure out an 8-hour, dual-therapist, multi-session psychedelic protocol?
A while…
But there is one company in Australia that has been solving that problem for the industry even BEFORE it becomes one.
Reminder: Who is Emyria (ASX: EMD)?
EMD provides mental health services through psychedelic-assisted therapies for people with PTSD and treatment-resistant depression in Australia.
Two weeks ago, I launched EMD as my second Armchair Analyst pick.
Read my full launch note here: My Second Armchair Pick Emyria (ASX: EMD)
Since that time, the US administration has issued three Priority Review Vouchers to psychedelic companies in the US.
Compass, Otstuka and Usona.
But while these three companies are deep into their clinical trials, Emyria has been delivering MDMA-assisted therapy commercially in Australia since late 2023.
This is only possible because in February 2023, Australia's TGA rescheduled MDMA and psilocybin from Schedule 9 (prohibited) to Schedule 8 (controlled medicines).
That made Australia the first country in the world to allow commercial psychedelic-assisted therapy outside a clinical trial.
Emyria was literally the first to market.
Not in Australia, but globally.
This gave it a 3+ year head start in building the systems and franchise to actually deliver psychedelic-assisted therapies at scale.
Emyria has the largest trained workforce of psychedelic-trained therapists and authorised prescribers in the world.
100+ trained therapists and 5 purpose-built clinics across WA, Queensland, Victoria and New South Wales.
EMD is building the unsexy, deeply boring infrastructure layer that turns an approved drug into a billion-dollar revenue line for big pharma.
In my launch article on EMD, I wrote about the four vectors of attack to become a global presence in the industry:
Clinical trial site services: Already happening with Psyence Group. High margin, strong patient demand (as it won’t need to be covered by insurance)
Real-world data licensing: EMD’s 12-month longitudinal dataset directly addresses what the FDA identified as missing in the previous applications. Durability data. This will also be very valuable to securing insurance coverage.
Protocol and care model licensing (the Playbook): When US clinics eventually need to deliver approved therapy, EMD’s Empax Model is the most extensively tested delivery system.
Pharmaceutical opportunity: The opportunity for EMD to develop its own pharmaceutical products in combination with the University of WA.
The Johnson & Johnson story basically confirms that Pillar #3: The Care Model unlocks the value of these drugs.
Spravato was the canary in the coal mine.
Before the care model was figured out, Johnson & Johnson was too embarrassed to disclose the sales in its end-of-year financial reports.
Now, Sparvato is a blockbuster drug set to do US$2.3 billion this year.
In a letter to shareholders last year EMD’s Dr. Michael Winlo wrote (after being the marquee speaker at the largest psychedelics conference in the US):
“While many international care teams have been stalled, waiting for FDA approvals or policy changes, we are privileged to be operating within Australia’s established legal pathways.”
While others debate protocol designs, we are actively evolving and measuring care models, responding to patient needs, working with payers, and generating the kind of data that clinical trials won’t capture for years.
Our program is not theoretical. It’s real, it’s working, and it’s being watched”.
Basically, the industry is theorising how this will work.
Emyria is putting up their hand and saying. We have the answer.
Now this is pure speculation on my part, but I suspect that whichever company is first to bring psychedelic-assisted therapy to market will want to speak to Emyria.
It has the playbook to unlock massive amounts of value for the drug.
Now how the company decides to extract value from this… That’s for Emyria to work out.
But it will be in the envios position of having the answer to the single largest problem that J&J faced.
How the hell are you going to deliver this treatment at scale?
Read the full Bloomberg feature here: The $1.7 Billion Trip
See you all tomorrow,
The Armchair Analyst.
