Shifting Strategy, MAPS Turns to Equity Investment
The non-profit Multidisciplinary Association for Psychedelic Studies (MAPS) has for the first time offered to sell shares in its for-profit, drug-development subsidiary, MAPS Public Benefit Corporation (MAPS PBC), as it struggles to raise the money needed to bring MDMA to market as a prescription medicine.
Last year, MAPS asked Cowen & Company, a New York investment bank, to seek investors in MAPS PBC, a wholly-owned subsidiary that is closer than ever to gaining FDA approval for its plan to treat PTSD with MDMA-assisted therapy.
Cowen’s bankers brought a proposal to sell equity in MAPS PBC to about 40 investors with an interest in biotech startups, but found no takers, according to Rick Doblin, MAPS founder and president. While no deals have been consummated, MAPS says a variety of investors have expressed interest and are in various stages of discussion with the PBC.
Last fall, MAPS developed a new plan to take bridge loans from well-to-do investors that would be converted into equity if the loans are not repaid, Doblin said. The organization has put that proposal before selected investors.
The willingness to take on outside investors is a turnabout for MAPS, which for decades since has led efforts to bring psychedelic medicines into the mainstream.
It’s also a disappointment for Doblin, who previously said that MAPS PBC would sell shares only as a last resort.
“They don’t have any other option to get to the next level,” says a MAPS ally who has spoken with Doblin, but asked not to be identified because their conversations were private.
MAPS Closes In on FDA Approval
MAPS PBC is tantalizingly close to fulfilling Doblin’s long-held dream of getting a psychedelic-assisted therapy approved by the FDA. The company has completed two successful Phase 3 trials of its protocol to treat PTSD with MDMA-assisted psychotherapy. FDA approval of the treatment, which could come next year, would be a milestone for psychedelic-assisted therapies and medicines.
Building the infrastructure, training therapists and marketing the treatment could cost anywhere from $80 million to $250 million, according to donors who have discussed funding requirements with MAPS.
Since its founding in 1986, MAPS has funded its work through nonprofit philanthropy, raising about $140 million from individual donors and foundations. Neither the National Institutes of Health, which funds medical research, nor the Veterans Administration, where about one in eight veterans in its care have been diagnosed with PTSD, have funded MAPS.
Lately, the arrival of dozens of startup companies researching psychedelic therapies, many of whom launched in the wake of MAPS’ promising research, has slowed fundraising, according to Doblin. “It’s been very, very difficult,” Doblin says. “The need for private funding has slowed down this field enormously.”
During the first nine months of last year, MAPS reported raising less than $10 million in philanthropic donations for all of its operations–a fraction of what it will cost to commercialize its therapy.
In its first effort to go beyond philanthropy, MAPS created an investment fund with venture capital firm Vine Ventures late in 2021. Investors in the Special Purpose Vehicle (SPV) called the Regenerative Financing Vine, were promised a return on their investment that was tied to a percentage of future North American revenues of MDMA, while MAPS retained full ownership and control over MAPS PBC. The deal raised questions about whether the funding model could replicate and succeed. To date, the fund has raised $43 million, well short of its $70-million goal.
Ryan Zurrer, founder of Vine Ventures, says, “To raise $43 million into a novel fundraising mechanism for a non-profit in the middle of soaring inflation, global geopolitical conflict and general bioscience venture market collapse was a resounding success, dare I say a near-miracle.”
MAPS then retained Cowen & Co., in an effort to try to raise funds from equity investors. Torreya, a boutique investment bank that focuses on life sciences, notes that access to capital has tightened for many biotech firms which are trading at share prices that value the company at less than the cash they have on hand.
In the wake of the Cowen & Co. search for equity buyers, MAPS is pursuing a new idea: borrowing money from accredited investors and institutions who would be paid a competitive interest rate – about 5 percent over two years, according to Doblin. If MAPS PBC cannot repay the principal after two years, the investors could convert their debt into equity. MAPS PBC says they are finding interest from potential lenders.
It’s still to be seen what percentage of its Public Benefit Corporation MAPS would sell and whether the newly-minted shares would come with voting rights.
While MAPS declined to comment on the details of it newest funding initiative, Betty Aldworth, MAPS director of communications, confirms that “MAPS has secured, and continues to accept, some non-philanthropic dollars through a loan to fund MAPS PBC’s continued drug development and commercialization efforts.” Aldworth adds that “if the extraordinary costs associated with bringing a drug to market exceed the capacity of philanthropic funding, MAPS will consider more traditional financing …Therefore, repayment of the loan may be funded through any number of methods.”
Aldworth added that if MAPS PBC does sell shares, the company “would seek to enshrine governance controls that center public benefit.”
Prioritizing Purpose Over Profit
MAPS’ challenge is to find the money to commercialize MDMA-assisted therapy without giving up control over MAPS PBC or compromising its values. Created in 2014, MAPS PBC is chartered in Delaware as a public benefit corporation, meaning that it is required to operate in ways that serve the public good.
Part of the company’s mission is “prioritizing purpose over profit.” For example, MAPS PBC could make its treatments available to those who cannot pay for them. Any profits from the PBC would be returned to MAPS for research and advocacy.
Some investors who want to maximize profit are wary of public benefit corporations. Even so, Doblin has said that MAPS PBC has been approached in the past by investors wanting to buy shares. In 2021, he told Lucid News that MAPS had turned down an investor who was willing to pay $150 million for 20 percent of MAPS PBC. The company, he said, would sell equity “only as a last resort.”
Doblin said at the end of 2021 that he had hoped to raise funds needed for commercialization of MDMA-assisted therapy through philanthropy. “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.’”
How Much Funding Is Needed?
Just how much MAPS PBC needs to commercialize MDMA-assisted therapy is a matter of spirited debate inside and outside the organization. It would depend, among other things, on how aggressive the company wants to be in marketing and rolling out the treatment.
Doblin said in 2021 that the Boston Consulting Group studied the question and told MAPS it would need $70 to $80 million to prepare for commercialization. This year, Doblin wrote in Psychedelic Alpha that building the commercial infrastructure “may cost as much over the next two years … as MAPS has raised in the last 37 years,” which is $140 million.
Some veterans of the pharmaceutical industry hired by MAPS PBC say the company will need no less than $200 million and as much as $250 million to market and distribute MDMA-assisted therapy. A high-profile rapid rollout would enable MAPS PBC to reach more patients, generate more revenue and capitalize on a six-year period of data exclusivity that the FDA provides for medicines that are off-patent. During this period, other companies can generate their own data if they want to market MDMA-assisted therapy for PTSD, but are barred from using MAPS’ data to market a generic version.
On the other hand some funders believe that a slower rollout for commercialization will cost less and enable MAPS PBC to correct mistakes as they arise and learn from its early experiences. Much will be at stake as the first psychedelic-assisted therapy goes to market.
It remains unclear how MAPS will raise the money it needs. MAPS also requires funds to sustain its operations, advocate for drug reform and pursue research into psychedelic-assisted therapy for eating disorders, among other initiatives.
“It’s a heartbreaking situation for a very worthy cause,” says Carey Turnbull, who with his wife, Claudia, have been among MAPS’ biggest donors. Like others who supported research into psychedelics when neither government nor investor money was available, Turnbull now invests some of his fortune in startups developing psychedelic medicines.
“There’s suddenly a tremendous amount of competition,” he says. “It used to be Usona, Heffter and MAPS. That was it. There was nowhere else to give money.”
T. Cody Swift, whose Riverstyx Foundation has been a major donor to MAPS, made a $1 million loan to MAPS PBC as part of the Vine Ventures fund because he saw it as a “middle path” between philanthropy and profit maximization. Investors were promised a social benefit as well as a financial return, and MAPS PBC retained its independence.
“The Vine deal was very elegant in getting everyone’s needs addressed,” says Swift.
The path forward for MAPS remains unclear. Doblin says he would ideally like to borrow the money to get MDMA-assisted therapy for PTSD into the market, and then repay it with a mix of philanthropy and earned income.
One MAPS donor noted that the organization sent out an email pitch on March 26 praising the work of Alexandra Cohen, the president of the Steven & Alexandra Cohen Foundation who “spearheaded the creation of The Cohen Psychedelic Research & Health Initiative which has gifted $3.4 million dollars to MAPS to date!” Her husband is the hedge fund billionaire and owner of the New York Mets.
Daniel Goldberg, a founder of the venture capital fund Palo Santo and Bridge Investments, says he believes that Doblin could find the necessary funding and that the psychedelic industry should support MAPS PBC to the degree that it can.
“It’s incredibly important to the entire sector and to the movement in general that MDMA gets across the finish line,” says Goldberg. “If anyone can do it, MAPS, and particularly Rick, will find a way to get it done.”
Update: This story has been updated to reflect assertions by MAPS that while no deals have been consummated for the purchase of equity in MAPS PBC, a variety of investors have expressed interest and are in discussions with the organization. MAPS PBC says they are also finding interest from potential lenders. An additional quote from Daniel Goldberg, a founder of the venture capital firms Palo Santo and Bridge Investments, has been added to the story.