Rick Doblin Explains MAPS’ New $70 Million Investment Fund With Vine Ventures
Since founding the Multidisciplinary Association for Psychedelic Studies (MAPS) 35 years ago, Rick Doblin has funded the pioneering psychedelic education and research organization strictly through donations. To date MAPS has raised $115 million from donors, much of which has gone towards psychedelic therapy research, including the current Phase 3 clinical trials of MDMA-assisted therapy for PTSD.
To bring MDMA-assisted therapy to market once it receives FDA approval, MAPS launched a Public Benefit Corporation, MAPS PBC, as a wholly-owned subsidiary in 2014. If the FDA grants approval for this therapy, MAPS PBC gets a six-year period of data exclusivity in the U.S. and ten years in Europe. Even as nearly $2 billion has been raised from investors to fund companies in the emerging psychedelics industry, Doblin has resolutely stood by MAPS’ donation-only approach.
But that’s about to change. This afternoon, at the Horizons Business Forum, Ryan Zurrer, founder and managing director of Vine Ventures, announced that MAPS and Vine are partnering on a new investment vehicle. This social impact Special Purpose Vehicle called the Regenerative Financing Vine “will infuse $70 million into patient access infrastructure and research for MDMA-assisted therapy for PTSD,” according to the press release. The fund’s structure enables the nonprofit MAPS to retain 100% ownership of the for-profit Public Benefit Corporation.
The fund is part of a $150 million target set by MAPS for the next three years. Earlier this week, Doblin discussed MAPS’ fundraising strategy with Lucid News, and explained why MAPS is taking this new approach. The interview has been edited for clarity.
Do your plans for the $150 million MAPS plans to raise over the next three years include using these funds to complete the clinical trials?
We have enough money to finish the trials in the US, Israel and Canada. The $150 million is composed of three different purposes. One is commercialization expenses. We’ve hired the Boston Consulting Group and they’ve done the whole go-to-market story for us. They say it’s going to cost in the neighborhood of $70 to $80 million to prepare for commercialization before the drug is even approved. That’s for hiring a 60 or 70 person team composed of various medical affairs, government relations and sales people, as well as all sorts of ways that we have to verify we’re complying with regulations. Another $35 to $40 million is for Phase 3 clinical trials in Europe. That starts the globalization effort. And then the other bit of the money is to keep MAPS staff doing other things until we reach sustainability, We expect to have approval at the end of 2023 for prescription use of MDMA, and by the middle of 2024 we hope that there’ll be enough money coming in, and profits from the sale of prescription MDMA, that it would cover a staff of roughly 200 people.
Did you plan to raise this $150 million through donations?
I feel in some ways a sense of massive failure in that I had hoped we would have this bridge to sustainability come through philanthropy. But I think we’re a victim of our own success in the sense that now there’s all these for-profit companies, and people are saying, “Why should I donate? Let me just invest.” So we are working now on a $70 million fund for investors. But while on one hand it’s a failure, on the other hand it feels like a success, in that it’s mission aligned people. They’re not going to have a seat on the board, they’re not going to own any stock. They’re not going to really interfere with what we do. They’re sympathetic. We’re encouraging them to donate $1 for every $10 invested, things like that.
What has been the reasoning behind MAPS’ past strategy to only raise funds through donations?
There are places around the world where there’s a lot of trauma, but not a lot of money. For example: South Africa, Somaliland, Palestine. People are talking about MAPS Bosnia. We’re trying to do stuff in Armenia, Kosovo. If we don’t have financial pressures, then we can really focus on mass mental health. Having to return money to investors might change the decisions we make. At least with the new fund, if we don’t have the ability to pay the money back, they lost their money. They don’t bankrupt MAPS, they don’t get our data.
So how does the fund work? You said that investors aren’t actually purchasing equity in MAPS PBC?
You’re doing some innovating here.
I would say first off that MAPS is innovating psychedelic-assisted therapy. Our second innovation is the Public Benefit Corporation, trying to market drugs by maximizing public benefit, not profit. The third innovation is now this fund, which we’re doing with Vine Ventures. We’re selling a percentage of North American revenue from MDMA. — and not what we might make in the future from marijuana, Ibogaine, or anything else. Nor is it sales from Europe or the rest of the world. It’s just Mexican, Canadian and U.S. revenue from MDMA. And it has a time limit that expires after 10 years. In the US, we’ll have six years of data exclusivity, so it extends beyond the period of data exclusivity. And there’s safeguards built in for the investors. So if we’ve not returned their money, plus 8% per year, by 10 years from the time we start, then it goes out to 20 or 25 years. But the amount that we pay is fixed. So for the $70 million we give back $115 million as a minimum. Then some of the investors have already pledged to donate $1 for every $10 invested.
So investment dollars go into the fund, which is controlled by the PBC, and the money that is donated goes into the MAPS nonprofit?
(Following the publication of this interview, MAPS clarified that SPV funds will be applied to the continued development and commercialization of MDMA-assisted psychotherapy for PTSD, including operations of MAPS’ subsidiaries such as the PBC. Those who fund the SPV can also make a suggested voluntary donation directly to the MAPS nonprofit that demonstrates support for their mission.)
What is Vine’s upside from this deal?
What Vine gets is the ability to put some of their own capital into this. They’ve pledged a minimum of $13 million. And they are not charging, which makes it more attractive for everybody else to join. They also get to say that they are innovating a new way to fund psychedelic companies. It’s a regenerative financing option.
So they are investing based on future revenue not income?
Once they reach 2X their money, if they do get that baseline, it’s going to be roughly 6.1% of revenue. The important point is that it’s revenue, not income. We’re not going to have income, because we’re just going to keep reinvesting all the money in more research, more education. There’s no dividends. Also, when we peg it to North American revenue from MDMA, then they can’t say, “Hey, why are you going to South Africa? We could make more money if you go to this other country.” Then the other part is that they get what’s called waterfall, where once they get 2X their money, then the percentage of revenue they get goes down. So the better they do, the better we do.
Some people point to the drug development and marketing costs of other pharmaceutical companies and suggest that preparing for the commercialization of MDMA-assisted therapy for PTSD will cost more than $150 million. Is it possible that you’re not raising enough money?
Well, the Boston Consulting Group said $70 or $80 million. I think that’s likely to be high, because we’re unlike the normal effort to commercialize drugs. The only people who can prescribe MDMA are people we’ve trained, the only therapists who can treat patients are people who have been through our therapy program, or universities or schools we’ve licensed our program to. So we’re going to have a list of all the available prescribers and therapists. It’s not like we have to go out and persuade people to take our training program.
Is the balance of the $150 million you’re raising, after the $70 million fund, expected to come from donations to the nonprofit?
I’m hoping this $70 million will be the last investment money we take directly from investors. Then we’ll also be able to raise additional funds through partnership agreements. For example, we put out a press release about a partnership with Wesana, they’re interested in MDMA for Traumatic Brain Injury. We’re also exploring a partnership with Awakn to do MDMA for alcohol use disorder.
In the Wesana partnership, they’re effectively paying for research you both share. Do you then partner on the product?
It’s redundant to have multiple different sales organizations. So yeah, they would fund the research. They would also give us a cash payment for the contributions for the safety data that we’ve already generated, which becomes unrestricted operating capital for us. And then we do a revenue split, once we are able to actually market for TBI.
How many partnerships like this do you anticipate having over the course of the next couple of years?
Well, in two, three years I’d say three or four. But longer term there’s going to be 50 or 60. Because we already have partnerships with about 60 groups that are called investigator initiated trials, IITs. These are people that have contacted us because they want to do something with MDMA, for a wide range of things. And they don’t want to have to generate all their own safety data, all their own GMP MDMA, which has cost us $7 or $8 million. Plus we have the regulatory affairs relationships. These 60 companies have said, hey, I want to partner with you. If you provide us with the MDMA and access to your existing data at the FDA, then we’ll pay for research into this specific indication. And then if that indication works out, they’ll want to partner with us to go to market. So we could end up with quite a large number of partnerships.
When do you need to conclude this $150 million raise before money gets tight? How much runway do you have?
At this point, I’d say that we’re running out of money around June. But we’ve already negotiated really favorable terms on a $15 million loan from a private lender, if we need it.
The goal is to complete the $70 million in the next couple months. And we’re already analyzing a bunch of different partnerships. The next reality check for us is going to be in May, 2022, when we get the interim analysis for the second Phase 3 study. If that looks good, then the chances are higher that we will get FDA approval. Which means if we need money, the risk is lower and we should be able to make a better deal. Then in October of 2022, we should have the results from the second Phase 3 study. So our cost of capital should decrease over time as the risk goes down.
Are you concerned that the fund will weaken your ability to bring in money through donations?
First off, what MAPS nonprofit is doing is not monetizable, like the public education we do. The Zendo project is not a moneymaker, or the Israeli Palestinian project that we’re looking at. So we’re still going to need millions of dollars in donations. Now that we’ve opened the door to investors, that makes me nervous, because it does make our story for donors more difficult. But how much will we actually end up making from the sale of MDMA? Potentially there’s in excess of a billion dollars in profits during this period of data exclusivity.
Do you anticipate ever selling equity in MAPS PBC as an option down the road?
Only as a last resort. I’ll just say we got an offer to invest the full $150 million dollars for 20% of the Public Benefit Corporation. They valued MAPS PBC at $600 million and said if they put in $150 million, it’s value goes to $750 million. But they wanted board seats. They wanted to say, “hey, we own this thing and now we want more money back.” But how do you value MAPS at $600 million, when you got Compass at $1.5 billion? And Compass doesn’t even have Phase 3 trials. They said, “it’s because you’re a Public Benefit Corporation and we don’t think you’re going to try to maximize profits, so we’re valuing you at a lower rate than we would if you were just a profit maximizing company.”
You noted before that MAPS arguably opened the door by its successful clinical trials for other companies to come in and pursue FDA approval for their products. Now three of those companies have billion dollar valuations. Do you find it a little ironic that you are now competing with these companies for capital?
I do. We’re the victims of our own success. On the other hand, what is our real mission? If our goal is mass mental health, and now there’s almost 400 for-profit psychedelic companies of one kind or another, that’s something that we should celebrate, as well.
What’s your biggest concern about the future of MAPS?
My biggest concern at this point is what compromises do we have to make to get the capital we need? And do we really need to make compromises? Can we find mission aligned people? When I look at the compromises we need to make for the initial $70 million, I feel pretty comfortable. It’s not going to change our priorities. They don’t get board seats. But what happens when we take on different partnerships? Because then we’re also aligning with their investors. Let’s say we have a partnership with Wesana. They’re going to expect that MDMA for traumatic brain injury goes as fast as possible. Well, what if we want to focus first on eating disorders? It’s difficult to see what might happen, but that’s my biggest worry.
Clearly MAPS approaches things differently than a more conventional for-profit company.
One of the biggest differences, of course, is drug policy reform. A lot of the for-profit companies think that drug policy reform is bad for their business model. Because if you can buy it for 20 bucks, and then go to your friend’s who read a treatment manual about how to sit for people, why should they go to clinics? But I actually think that’s going to increase demand for the clinics, particularly for the more difficult cases, because people will want to go to trained professionals. But regardless of that, there’s a moral imperative to end the drug war. So even if it was bad for our business, we should be for it. That’s one of the ways that MAPS is different.
This story has been updated to note that North Star and Horizons PBC partnered to produce the Psychedelic Business Forum where the investment vehicle developed by Vine and MAPS was announced. This interview also includes a clarification from MAPS about the use of SPV funds.
Image: Nicki Adams