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Natural MedTech: Why the Psychedelic Opportunity Starts With Manufacturing · WTR Small-Cap Spotlight

• 0:01
  SPEAKER_01: Welcome to the WTR Small Cap Spotlight Podcast.
• 0:04
  SPEAKER_01: I'm your host, Tim Gerdeman, Vice Chair and Co-Founder and Chief Marketing Officer of Water Tower Research.
• 0:10
  SPEAKER_02: In today's podcast episode, I'm being joined by Luke McFarland, CEO and co-founder of Natural MedTech.
• 0:16
  SPEAKER_02: Also joining us is Watertower Research Healthcare Analyst Robert Sassoon.
• 0:20
  SPEAKER_02: Just some quick background.
• 0:21
  SPEAKER_02: Founded in 2021, Natural MedTech is an Australia-based privately held pharmaceutical API manufacturer and supplier, which specializes in hard to synthesize psychedelic molecules, including psilocybin and MDMA, for pharmaceutical and clinical trial use for folk for focused on unlocking neurological potential.
• 0:42
  SPEAKER_02: These are definitely an exciting times for the psychedelic space, both from the regulatory and clinical standpoints.
• 0:49
  SPEAKER_02: So without further ado, let me welcome Luke and Robert to the podcast.
• 0:54
  SPEAKER_02: Thanks for having me, guys.
• 0:57
  SPEAKER_03: Great to see you again, Luke and Shul.
• 1:01
  SPEAKER_03: So we're going to be an interesting podcast.
• 1:08
  SPEAKER_02: Let me start by asking you to tell our listeners about your professional background, what brought you to establish Natural MedTech in 2021, and then provide us with really a 30,000-foot view overview of the company.
• 1:21
  SPEAKER_00: Yeah, for sure.
• 1:22
  SPEAKER_00: So my background actually is predominantly in financial markets.
• 1:26
  SPEAKER_00: I studied a Bachelor of Finance in Melbourne and Australia at La Trobe University.
• 1:31
  SPEAKER_00: I worked in corporate finance for a couple of years in Melbourne after graduating.
• 1:36
  SPEAKER_00: And then I moved to New York.
• 1:38
  SPEAKER_00: And I got a job for Macquarie Capital on the on the sell side and equity research before moving to the buy side.
• 1:45
  SPEAKER_00: And I ran money for Millennium Management, Ballyazni Asset Management in the States.
• 1:50
  SPEAKER_00: And then I moved home and got a job working with platinum asset management here in Sydney.
• 2:10
  SPEAKER_00: Basically gave me I guess the drive and the energy to want to get into the space and figure a way to actually participate and invest in it.
• 2:19
  SPEAKER_00: Met my co-founders in 2020 and we started discussing a plan to build natural medtech.
• 2:25
  SPEAKER_00: And I left Platinum in 2021, wrote the first check into Natural MedTech and become the managing director and CEO of the business.
• 2:33
  SPEAKER_00: And I've been doing that since.
• 2:34
  SPEAKER_00: From a 30,000-foot view, Natural Medtech went about trying to solve an issue within the psychedelic space that we saw, which was that how could you manufacture these products at scale, uh with a low cost, high quality, consistent product that could actually meet the demands that the clinical market was going to need over the next decade.
• 2:59
  SPEAKER_00: Growing mushrooms was ineffective, inefficient, low yields, high variability, and low stability.
• 3:05
  SPEAKER_00: Chemically synthesizing them was loads of petrochemical starting points, harsh industrial solvents, very likely to be an offshore business in China and India long term.
• 3:25
  SPEAKER_00: And we went about engineering Australian yeast to do that.
• 3:29
  SPEAKER_00: And so we'll talk a little bit about what that means.
• 3:32
  SPEAKER_00: But we've got our own proprietary manufacturing process to psilocybin and to multiple multiple other tryptamines.
• 3:40
  SPEAKER_00: And we grow it in yeast, basically.
• 3:42
  SPEAKER_00: We convert sugar into the product.
• 3:45
  SPEAKER_02: Great.
• 3:45
  SPEAKER_02: Thanks for that overview, Luke.
• 3:47
  SPEAKER_02: And I'll hand it over to Robert for the rest of the questions.
• 3:50
  SPEAKER_03: Thanks, Sean.
• 3:51
  SPEAKER_03: And Luke, it's good to have you on this podcast.
• 3:53
  SPEAKER_03: So let me start out by asking you: Australia opened a prescribe pathway for MDMA and pseudocybin in mid-2023 ahead of most jurisdictions.
• 4:02
  SPEAKER_03: Has that pathway actually translated into meaningful commercial volume for natural medech yet?
• 4:08
  SPEAKER_03: Or does the market remain more of a regulatory opportunity than a material revenue opportunity?
• 4:14
  SPEAKER_03: And if the latter, what do you think are the factors holding the market back?
• 4:19
  SPEAKER_00: Yeah, it's a good question.
• 4:21
  SPEAKER_00: So the answer is no to the material volumes.
• 4:24
  SPEAKER_00: Um, but it's worth going back to 2023 when they approved it.
• 4:27
  SPEAKER_00: Actually, I don't think anybody here in Australia believed that it would ever be rescheduled at that time, either of those molecules.
• 4:34
  SPEAKER_00: And so when the decision was handed out, I remember vividly calling, you know, our connections in the industry, and everybody was shocked.
• 4:41
  SPEAKER_00: You know, and so it really took um 12 or 18 months to get you know the ethics committees in place, the authorized prescriber applications ready to go.
• 4:51
  SPEAKER_00: Um, there were no consultants, there were no, you know, people helping uh psychiatrists figure out how to do this.
• 4:57
  SPEAKER_00: Um and it probably took 12 or 18 months to get the first authorized prescriber through, you know, and even after two years, I think there was only about 20 total authorized prescribers approved.
• 5:07
  SPEAKER_00: Um, and today there's about 90 in either approved or in application.
• 5:11
  SPEAKER_00: And so I I guess the context is that um it was a very slow start, but it was a, you know, since then Australia's built world-class infrastructure in managing this rollout, in giving uh the guidelines to authorized prescribers to understand what's required, you know, in defining what a therapist is and can be, you know, and how involved the psychiatrist needs to be.
• 5:32
  SPEAKER_00: They've collected an enormous amount of data ahead of the rest of the world, or the rest of the global regulators, on what you know, safety incidence looks like in terms of what adverse events look like.
• 5:44
  SPEAKER_00: Um, you know, and so sitting here today, I've never been more certain that we're about to see the ramp in in clients.
• 5:50
  SPEAKER_00: You know, you can see there are some publicly listed clinic businesses that are putting out their um, you know, forecasts on on the number of patients they have capacity to treat.
• 6:00
  SPEAKER_00: Um and it's it's it's growing very quickly at the moment.
• 6:04
  SPEAKER_00: So um it's been a slow start.
• 6:06
  SPEAKER_00: There's great infrastructure, great people now set up, and it's it's now actually time to start treating patients uh at scale.
• 6:13
  SPEAKER_00: Um, you know, one of the big drawdowns, drawbacks, I guess, in Australia is the cost of this therapy is still um very large.
• 6:21
  SPEAKER_00: Um, you know, when the TGA initially rescheduled uh these medicines, a psychiatrist was required on dosing day for the whole dosing day, you know, and that meant that your most expensive unit of labor uh needed to sit in a room for six to eight hours uh with a patient uh on both dosing days.
• 6:38
  SPEAKER_00: And as a result, you know, the cost of a dosing day here is about 10,000 Australian dollars, you know, call it call it 7,000 US dollars a day.
• 6:46
  SPEAKER_00: For MDMA, you need three of those dosing days.
• 6:48
  SPEAKER_00: For psilocybin, you need two of those dosing days, and it's just a very expensive treatment.
• 6:52
  SPEAKER_00: Now, you know, probably two months ago the TGA removed the requirement for the psychiatrist to be in the dosing day.
• 6:59
  SPEAKER_00: They still have to be on site for dosing for about you know 45 minutes or something like that, um, you know, which is the first step out.
• 7:06
  SPEAKER_00: They also added, you know, a nurse, a registered nurse, a clinical psychologist, or an occupational therapist as leads in uh the psychedelic dosing day, which means you have more flexibility around who's sitting in that room.
• 7:20
  SPEAKER_00: And I think ultimately over the next 12 to 24 months, the TGA will remove the need for the psychiatrist to be on site for the day at all.
• 7:28
  SPEAKER_00: Um, you know, again, they needed the safety data to be able to make a decision like that.
• 7:33
  SPEAKER_00: They're getting more comfortable.
• 7:34
  SPEAKER_00: The adverse events are are very small and not really happening.
• 7:38
  SPEAKER_00: And so um, at that point, when you don't have to have a psychiatrist there, they're writing a prescription like they do with every other medicine, you know, they're managing the diagnosis and um all of a sudden these the the costs of these treatments will collapse and you can really start processing a lot more people through the system.
• 7:57
  SPEAKER_00: Um, and then the last point to note is that we really only had insurance.
• 8:01
  SPEAKER_00: You know, Medibank Private stepped in late last year.
• 8:04
  SPEAKER_00: You had the Departments of Veterans Affairs step in this year and start insuring these treatments.
• 8:08
  SPEAKER_00: You know, we're hearing that multiple other uh large uh insurance businesses are now looking at this uh mode of treatment.
• 8:15
  SPEAKER_00: Um, and as you get more and more people stepping into the market, again, that will obviously make it a whole lot easier for people to receive these treatments.
• 8:23
  SPEAKER_00: Um they're very difficult cohorts to treat.
• 8:26
  SPEAKER_00: Um, you know, they don't generally, it's very difficult for someone with treatment resistance depression to hold down jobs to have the the affluent wealth that you require to get into a$30,000 dosing day.
• 8:36
  SPEAKER_00: And you know, you're gonna need insurances to to help uh cover many of those costs for these patients.
• 8:43
  SPEAKER_03: Thanks for that.
• 8:44
  SPEAKER_03: Uh of course, um Natural MedTech is being sort of positioned as more of a global uh company.
• 8:51
  SPEAKER_03: So let's if we look at the big picture, 2026 has been a really pivotal year for psychedelic medicine.
• 8:57
  SPEAKER_03: We've seen positive uh phase three data, President Trump's executive order, greater regular regulatory clarity of following the FDA's finalized guidance, and of course, major farmer interest with EDI's uh recent acquisition of uh At I Beckley.
• 9:12
  SPEAKER_03: So, what do you think this means for the prospects and timing of rescheduling and for the commercial market that uh uh NMT is uh is building toward?
• 9:22
  SPEAKER_00: Yeah, so the rescheduling question is still um probably the biggest opaque or unknown piece of all of this.
• 9:29
  SPEAKER_00: Um I think if you'd asked the big drug developers in this space, I bet they're lobbying for no rescheduling of psilocybin or MDMA or LSD and only a rescheduling for their product, for their indication for the market they're looking to service.
• 9:45
  SPEAKER_00: Um, you know, if if that's the way regulators go, you'll create a monopolistic, you know, industry structure where there's two or three manufacturers and and no one else will service, cost of this drug will skyrocket and the cost of this treatment will rise substantially.
• 10:03
  SPEAKER_00: Um, you know, from our view and watching the Australian rollout, um it's very unlikely or it's very difficult, I think, for regulators post these phase threes, post the last decade of work, to uh be able to argue that psilocybin particularly has um a high potential for addiction, a high potential for abuse, and has no medical use case currently.
• 10:28
  SPEAKER_00: You know, that's what a Schedule One effectively is.
• 10:30
  SPEAKER_00: It's no medical use case, high potential for abuse, high potential uh for addiction.
• 10:35
  SPEAKER_00: Um none of those are true for psilocybin.
• 10:37
  SPEAKER_00: And so you are going to have and global regulators, um, and we're we're discussing with, you know, I think five different countries in Europe, um, a couple here in Asia, uh, obviously right across what's happening in the US and Canada.
• 10:50
  SPEAKER_00: Um, you know, all of these global regulators are trying to figure out where psilocybin and MDMA should fit in a rescheduling effort.
• 10:57
  SPEAKER_00: Um, and uh, we're of the view that if you if it wasn't a political decision, if the 1970s hadn't happened, you'd be a Schedule 4, maybe, um, something like that.
• 11:06
  SPEAKER_00: I don't think regulators take that first step, but I think that there is a rescheduling effort.
• 11:10
  SPEAKER_00: Um, and that's gonna open up uh authorized prescriber networks all over the world.
• 11:15
  SPEAKER_00: Um, and it's gonna make uh psilocybin much more accessible globally.
• 11:21
  SPEAKER_00: Uh, and it's not just these very hard to treat uh you know niche indications like treatment-resistant depression.
• 11:28
  SPEAKER_00: You know, we're of the view that uh, you know, the next two or three years, uh, these medicines become not last-line treatments, but very much frontline treatments as a function of, you know, it's going to be very difficult knowing the safety profiles, knowing that there is real efficacious sort of outcomes in treatment-resistant clients to, you know, ensure that someone that's diagnosed today with depression doesn't have the opportunity or doesn't have to sit in a bucket where they take multiple antidepressants that we know don't work over periods of time and have a very high probability that you end up in a treatment-resistant category in five years.
• 12:05
  SPEAKER_00: There's no reason that person should suffer for five years to get a treatment that is is widely ready for you know for to be rolled out and actually help that person today.
• 12:15
  SPEAKER_00: And I think that's where regulators are currently trying to uh figure out how they how they fit there and how they can roll out an Australian style model to give people access earlier, but obviously have the guardrails that are needed in a clinical setting to make sure that um we have safe and effective oversight of these medicines as they're actually being rolled out into markets.
• 12:37
  SPEAKER_03: Yeah, absolutely.
• 12:39
  SPEAKER_03: Uh next year could be a marky year for psychedelics with its first approvals.
• 12:43
  SPEAKER_03: We've uh uh Compass uh Pathways potentially becoming the first company to bring a pseudocybin-based treatment to market if Comp360 is approved for treatment resistant depression.
• 12:53
  SPEAKER_03: Other programs could follow.
• 12:55
  SPEAKER_03: Campus has said it wants to be launched ready by year end uh and anticipating approval and launch in the first half of 2027.
• 13:02
  SPEAKER_03: So are you starting to see through your order book any evidence that the leading developers are are already preparing their supply chains for commercial launch?
• 13:10
  SPEAKER_03: And if so, how far ahead of approval are they placing orders?
• 13:15
  SPEAKER_00: Yeah, it's it it's uh we don't have visibility on that candidly.
• 13:19
  SPEAKER_00: Um, you know, I think all of the phase three developers would have nominated and chosen their manufacturing partner ahead of the phase three.
• 13:27
  SPEAKER_00: Um they would be working, it's very difficult to change a manufacturer or even add a manufacturer during that trial process.
• 13:35
  SPEAKER_00: Um on the other side of that manual of the of the approval, they've got a lot more flexibility.
• 13:40
  SPEAKER_00: So I don't really have visibility there, but I mean you can look at the DEA uh permits that are being granted for both psilocyber and psilicen.
• 13:49
  SPEAKER_00: Um there are very large permits, uh, you know, I guess quotas that they're that are being applied for and ultimately I think developed into.
• 13:57
  SPEAKER_00: Um so I don't know candidly, but it seems like they've they've they've already gone and manufactured quite a lot of supply um and are ready for rollout uh from that side.
• 14:06
  SPEAKER_00: I guess where we fit into that is you know, we're constantly looking um to engage with those large groups that are looking for supply.
• 14:14
  SPEAKER_00: Um, you know, we have what we believe is the best uh product that is in the market.
• 14:19
  SPEAKER_00: Um we make multiple formats, you know, trihydrate, the Sherwood Polymorph A and the Comp360 Polymorph A B combo.
• 14:28
  SPEAKER_00: So um theoretically we can service all of them if they have interest, but um, you know, to some degree today uh we are competitors with them as well, um, given that we're looking to roll out our our psilocybin, you know, globally.
• 14:42
  SPEAKER_03: Okay.
• 14:43
  SPEAKER_03: Now, given that the drug substance is only a small component of the total cost of psychedelic assisted therapy, what are the key advantages NMT offers customers and what ultimately drives their decision to buy from you?
• 14:56
  SPEAKER_00: Yeah, for sure, for sure.
• 14:58
  SPEAKER_00: So um, as I mentioned earlier, um, we make biosynthetic psilocybin.
• 15:02
  SPEAKER_00: Um what that means is that we have engineered a strain of yeast to replicate the same metabolic pathway that a psilocybin mushroom uh makes or produces, um, but it does it at much higher yield, um, much more consistency, um, and it gives us the ability to purify our product into a 99.5% psilocybin output.
• 15:23
  SPEAKER_00: Um, the only impurity that we have in our product is Bayocysteine.
• 15:27
  SPEAKER_00: It's a you know sub point two percent impurity.
• 15:30
  SPEAKER_00: It exists in a natural mushroom.
• 15:32
  SPEAKER_00: Um, and the reason that's really important is that we have all of the benefits of a naturally grown or a mushroom extract, which is that um it's naturally grown, there are no petrochemical inputs, you don't have harsh industrial solvents, um, and you don't need to rely on supply chains that are that are predominantly offshore.
• 15:52
  SPEAKER_00: Um but we have none of the difficulties of a naturally grown mushroom, which is that we have um very high purity, we have very long stability as a function of that.
• 16:02
  SPEAKER_00: Um, we have no variability in the product.
• 16:05
  SPEAKER_00: It's a room temperature, um, you know, 24 months plus stable product.
• 16:10
  SPEAKER_00: Um, you know, everything's ICH guided.
• 16:12
  SPEAKER_00: Um, we have an enormous amount of data.
• 16:14
  SPEAKER_00: Um so we effectively have all the benefits of a synthetic uh molecu molecule with none of the drawbacks, and it's vice versa with the natural product.
• 16:23
  SPEAKER_00: We have all of the benefits there with none of the drawbacks.
• 16:25
  SPEAKER_00: So we have this very unique product in the market that we think um has a competitive advantage at the same price point uh or lower than our peers.
• 16:35
  SPEAKER_00: Um they they love the fact it's naturally grown, they love the fact that it's not a petrochemical starting point, um, and it's at the same price point, so it's an intangible benefit they get.
• 16:47
  SPEAKER_00: So that's the first point.
• 16:48
  SPEAKER_00: Um the second point is that we are not a C DMO.
• 16:52
  SPEAKER_00: Um, you know, we're not here rent seeking for a period of time while this industry takes off and and and we will be allowed around and a partner of psychiatrists and people prescribing these medicines for decades to come.
• 17:04
  SPEAKER_00: That's really important to think about when you're when you're actually um choosing a manufacturing partner or a drug um supply partner.
• 17:12
  SPEAKER_00: Um, you know, we've we sell multiple different SKUs as final dose formats.
• 17:16
  SPEAKER_00: We we have you know, one migs, five meg, tens, twenty-five migs.
• 17:20
  SPEAKER_00: Um and you know, our technology or our patents will last for a couple of decades here.
• 17:25
  SPEAKER_00: It's really important that we highlight that we've got a low cost advantage for a long, long period of time.
• 17:31
  SPEAKER_00: Um, and and so our our clients and our customers um are really happy with the fact that they're gonna be able to access our medicines and prescribe the same medicine over and over and over to their patients for years to come.
• 17:44
  SPEAKER_00: Um they're not gonna have to go through the headache of finding a supplier, changing them, and ultimately, you know, swapping suppliers.
• 17:51
  SPEAKER_00: We we've got um a fantastic price point, fantastic product, and ultimately the supply chain management to help them do what they need to do, which is to work on the front lines and actually treat people.
• 18:01
  SPEAKER_00: Um and then the last one is is that because our our process is is very modular, it's very low capital intensity, um, we actually intend to be local manufacturers in most of the markets we're servicing.
• 18:14
  SPEAKER_00: Um, you know, it's it's incredibly modular.
• 18:16
  SPEAKER_00: Um, we can move our yeast all over the world, we can set up our bioreactors, think of a little gin distillery as effectively what our lab looks like.
• 18:25
  SPEAKER_00: Um and we can operate out of a commercial building in any of these major cities all over the world to help local supply chains to employ local people to make these medicines that are needed locally for these groups.
• 18:38
  SPEAKER_00: Um, you know, and that's very different, difficult, though different, I guess, to a synthetic manufacturing customer base, um, which has to be large scale in certain locations and will ultimately end up getting offshore as these products move to be generic products through time.
• 18:54
  SPEAKER_03: So, with that following up on that, can you just help us get the operating picture right?
• 18:59
  SPEAKER_03: NMT currently all outsources manufacturing.
• 19:02
  SPEAKER_03: So, what does the company actually own that makes the business proprietary and defensible?
• 19:07
  SPEAKER_03: How do you manage manufacturing partners and the supply chain to ensure you could reliably meet the demands of your growing order book?
• 19:14
  SPEAKER_03: And if one of your manufacturing partners wanted to sell Cless IBIN API directly tomorrow, what stops them?
• 19:20
  SPEAKER_00: Yep, um, it's a good question.
• 19:22
  SPEAKER_00: So we we our our technology, if if we can go right down into it, or what we own um is an a uh a gene class uh in a host for the purpose of converting tryptophan into tryptamine.
• 19:35
  SPEAKER_00: And I know that's a bit of a mouthful, but um, when you feed sugar to yeast, for example, it converts that yeast or it very efficiently produces tryptophan as a function of its metabolic process.
• 19:46
  SPEAKER_00: Um, our gene class is very efficient at converting that tryptophan into tryptamine, and then it's there's there's a multiple step to take that tryptamine into psilocybin.
• 19:55
  SPEAKER_00: But the IP uh and the most difficult process within that metabolic pathway is converting that tryptophan into tryptamine.
• 20:02
  SPEAKER_00: Um, when we started the business, there were two known gene classes that could do that globally.
• 20:07
  SPEAKER_00: One exists in the psilocybin cubenzo mushroom, and one exists in the Madagascar flour randomly.
• 20:12
  SPEAKER_00: Um, neither of them, both of them were found in the 70s, neither of them are patentable.
• 20:16
  SPEAKER_00: Um, and our gene class will be the third gene class globally that will be patented to do that.
• 20:21
  SPEAKER_00: Um it's also at the added benefit that we have orders of magnitude higher efficiency than those other gene classes.
• 20:27
  SPEAKER_00: Um, and that's not just not just in a microtider plate anymore, that's at a scaled-up bioreactor that we've got, you know, thousands of hours of trade secrets as it relates to how we grow it, how we harvest it, how we purify, and how we extract it.
• 20:41
  SPEAKER_00: So what do we actually own?
• 20:43
  SPEAKER_00: We own a strain of yeast that can effectively scale globally all over the world in a bioreactor and it produces pure psilocybin within it or a very high concentrated broth of psilocybin in it.
• 20:56
  SPEAKER_00: And so right now we take that broth into CDMOs, they purify and extract it for us, and we end up with a pure API product out the other side, which we then encapsulate.
• 21:06
  SPEAKER_00: So if we were to stop or if the CDMO wanted to make psilocybin on their own, they'd have to go and develop their chemical synthesis process, they'd have to buy the 20-plus raw material ingredients that they need to start with, and they'd have to synthesize it, you know, like everybody else, I guess, is doing.
• 21:24
  SPEAKER_00: Um, the downside of that is that their cost curve is uh tied to the petrochemical inputs, which the hydroxy indoles are still very expensive.
• 21:33
  SPEAKER_00: Um, and then it's ultimately about how quick they can process that and how much their labor costs and compliance costs.
• 21:40
  SPEAKER_00: And naturally, um in that model, China and India win that race every single day of the week.
• 21:46
  SPEAKER_00: The big difference with us is we deliver these C DMOs uh a big batch of broth currently, uh, and they they conduct a very simple, uh, very repeatable, very scalable uh purification extraction process.
• 22:00
  SPEAKER_00: That's very short time and facility, but a very high quality and high yielding output.
• 22:05
  SPEAKER_00: And so it's far easier for them to process our material than it is to buy these raw materials.
• 22:10
  SPEAKER_00: And ultimately for us, you know, when we're scaling up, we'll consolidate all of that into our own lab and we won't need to use a CDMO along the way through, or we can partner with CDMOs, depending.
• 22:21
  SPEAKER_00: But the main point will be is all of that margin will accrue to us because it's a very simple process that we have.
• 22:27
  SPEAKER_00: So they can compete.
• 22:28
  SPEAKER_00: It's at a higher price point or a cost structure.
• 22:31
  SPEAKER_00: It's much easier to compete using our product or our prof.
• 22:35
  SPEAKER_00: But ultimately, you know, we will just consolidate all of that into one unit and run it ourselves.
• 22:41
  SPEAKER_03: Right.
• 22:41
  SPEAKER_03: So you're currently now in the process of raising 12 million Aussie dollars in a Series A.
• 22:46
  SPEAKER_03: That's around 8 million US dollars in part to bring manufacturing in-house.
• 22:50
  SPEAKER_03: So what's the thinking behind that strategy?
• 22:52
  SPEAKER_03: How does it change NMT's supply economics and what justifies the additional capital intensity?
• 22:58
  SPEAKER_00: Yep, for sure.
• 22:59
  SPEAKER_00: So, you know, our biggest risk as a business is getting to scale.
• 23:04
  SPEAKER_00: That's full stop.
• 23:05
  SPEAKER_00: You know, we're massive believers that the demand for our product is going to be there.
• 23:10
  SPEAKER_00: Um, but what we need to do is collapse the cost curve globally in a way that allows us to take market share as this as this industry uh unfolds, reschedules, and rolls out.
• 23:22
  SPEAKER_00: Um so the thinking right now is that we are using, you know, we're currently fermenting at uh at a pilot scale.
• 23:30
  SPEAKER_00: Um we need to get up into larger fermenters so that we can show both the large consumers of this product or potential customers we can service that we can manufacture much larger volumes, um, but also uh to cut you know collapse our cost structure in a way that enables us to be a low-cost manufacturer of this product through cycle.
• 23:49
  SPEAKER_00: Um, you know, CDMOs are very good at finding out um what your cost structure is, you know, where you're selling your price, your product, and they they you know look to extract their portion of that rent on the way through.
• 23:59
  SPEAKER_00: Um we're looking to take back that uh you know productivity and and and margin for our own business, and then ultimately um, you know, get control of the operating process, uh get control of the time frames under which we're running that, and ultimately control our own destiny.
• 24:14
  SPEAKER_00: Um it gives us a footprint and a platform by in-housing our manufacturing to service global clinical trials, to service global uh rescheduled markets, and to do it from a regulatory uh overlay here in Australia that has mutual recognition all over the world, um, meaning that um, you know, the whether it's the US or it's Europe, um we have a fantastic regulatory um backdrop for manufacturing.
• 24:39
  SPEAKER_00: We're we will be a low-cost manufacturer, we'll have the best product in the market, um, and we're very hopeful that translates into to partnerships all over the world.
• 24:47
  SPEAKER_00: Um but as I said, this is a you know largely a proof of concept um to make sure that we can scale up.
• 24:53
  SPEAKER_00: You know, what our ultimate goal is is to ensure that we're manufacturing locally and and we have an operation and a footprint in Europe, we have an operation and footprint in the US, and and our first operating lab here in Australia will give us the cash flows required to do that.
• 25:07
  SPEAKER_03: Got it.
• 25:08
  SPEAKER_03: So another part of the raise will be allocated to accelerate the development of your AI platform.
• 25:13
  SPEAKER_03: So help us understand what AI actually changes for the business and the role you expect it to play in MNT's uh evolution.
• 25:20
  SPEAKER_03: Does it primarily make your existing biosynthesis platform faster and more efficient, or does it enable you to develop new molecules and proprietary IOP that you could that could materially expand the business?
• 25:32
  SPEAKER_00: Yeah.
• 25:32
  SPEAKER_00: So, you know, the last five years, um what you know when we started this business, I guess, maybe go back there in 2021, um, biosynthesis it w was a was a science experiment.
• 25:43
  SPEAKER_00: I mean, biosynthesis has been around for for decades, right?
• 25:46
  SPEAKER_00: It's not not nothing new.
• 25:46
  SPEAKER_00: You've got insulin and penicillin that's produced via biosynthesis effectively.
• 25:51
  SPEAKER_00: Um but but the the development process was was um uh a very unknown timeline, an uncertain probability of success, um, and a capital cost or a capital requirement that you couldn't define at the start, you know, ultimately for a yield and an economic structure that you couldn't predict.
• 26:08
  SPEAKER_00: Um what AI has done uh very effectively is it's enabled biosynthesis in many ways to become a systematic, repeatable process that we can develop uh new pathways much faster, with much higher certainty or probability.
• 26:25
  SPEAKER_00: You know, we can complete technoeconomic analysis much earlier, and ultimately we can get to jump-off points as to whether we should continue or not continue on a pathway well before uh you've ever been able to historically.
• 26:37
  SPEAKER_00: Um, and that's really helpful for us.
• 26:39
  SPEAKER_00: What we've been doing over the last two years is building our own proprietary framework.
• 26:42
  SPEAKER_00: There are, you know, I think the the Alpha Fold guys um won a Nobel Prize a couple of years ago in 2024 for predicting uh genes and how they fold into enzymes uh and then ultimately how they are used uh in hosts to produce different things.
• 26:58
  SPEAKER_00: You know, AI is now predicting uh new to nature genes and enzymes that uh actually can complete reactions that nothing in nature's ever been able to do.
• 27:09
  SPEAKER_00: And I think you know what we're positioning for is that over the next 12, 24 months, um, we are going to be able to make enormous inroads in our starting point and getting to our proprietary genes and enzymes that we need to conduct certain chemical reactions in the cell for us.
• 27:24
  SPEAKER_00: Um but the kicker here and the key important piece is that it's only people with wet labs, with molecular biologists that are working with infrastructure already set up that are going to be able to generate the data sets that AI needs to actually feed into that front end, to refine its models, to refine its predictive resolution, and to ultimately get us successful economic strains, you know, of yeast three coli to make these medicines.
• 27:52
  SPEAKER_00: And so how is AI changing our business?
• 27:54
  SPEAKER_00: Um it is rapidly accelerating our ability to get new products to market.
• 27:58
  SPEAKER_00: It's it's completely changing the way we think about the potential economics of those new products.
• 28:04
  SPEAKER_00: Um, we're of the view, and we we we talked a little bit about it before, but we're not a C DMO.
• 28:10
  SPEAKER_00: We think over the next five or ten years, we can develop our way into multiple very high-yielding uh strains that can produce large, legal, um, developed drugs uh today at a cost structure that the industry cannot compete with chemically.
• 28:26
  SPEAKER_00: Uh, and it gives us the optionality of reshoring that manufacturing into Western worlds, you know, to help them actually go about um taking ownership of their medicine manufacturing again.
• 28:37
  SPEAKER_00: Because when you develop a strain, you don't need humans largely like you do in the chemical synthesis process.
• 28:43
  SPEAKER_00: Most of the chemical reaction happens in the cell.
• 28:46
  SPEAKER_00: Um and it's really about what the yield is of that strain, how much recovery of it can you get, and then ultimately how much can you utilize your lab to offset the compliance and headcount costs that you require in those markets.
• 28:58
  SPEAKER_00: And biosynthesis is perfectly able to do that.
• 29:01
  SPEAKER_00: We're um really accelerating our um our our, I guess, our um new product with this capital raise, and partially half of it's going to new products.
• 29:11
  SPEAKER_00: Um, and it's developing that high throughput screening, that data gathering and ultimately analytic capability to be able to create new products very quickly and ultimately compete with chemical manufacturers.
• 29:22
  SPEAKER_00: Because I think our thesis is, and I know I'm I'm going on a little bit long here, but our thesis is over the next five years that drug developers will ultimately want to build their drug IP on top of a biosynthetic manufactured IP because it's the strongest end-to-end, I guess, capability that you can have.
• 29:42
  SPEAKER_00: Um, I think historically, manufacturing's being looked at as a commodity business with low IP potential.
• 29:49
  SPEAKER_00: And so it's about finding the lowest cost partner and the cheapest partner.
• 29:53
  SPEAKER_00: Um, and that would typically accrue offshore into India or China.
• 29:56
  SPEAKER_00: Um, in five years' time, I think biosynthesis will be able to compete head-to-head with chemical synthesis and actually in many times beat it across the structure.
• 30:06
  SPEAKER_00: And so drug developers will have the optionality of actually building their IP on top of a proprietary manufacturing process and a proprietary impurity profile to allow them to have um a higher IP stack, higher pricing potential, and longer, you know, longer pricing potential uh of their product if they're able to get through that regulatory timeline.
• 30:27
  SPEAKER_03: Sorry, I'm gonna try to answer that because uh sort of interesting.
• 30:30
  SPEAKER_03: So that leads me to another question.
• 30:31
  SPEAKER_03: Ultimately, where do you want NMT to sit in the pharmaceutical value chain?
• 30:35
  SPEAKER_03: Is it the ambition to build a leading API manufacturing business or to use the biosynthesis that you've been talking about in the AI platform to move into early stage drug development and capture more value downstream?
• 30:48
  SPEAKER_00: Yeah, we're still figuring that out candidly.
• 30:51
  SPEAKER_00: Um, and you know, if we were sitting here in 2018 and we had the same technology we had, I would be sitting here pitching you that we have a proprietary manufacturing process, a proprietary chemical output, and we would be about to run our own uh clinical trials.
• 31:05
  SPEAKER_00: That's what I would be doing.
• 31:06
  SPEAKER_00: We're not doing that with psilocybin because those clinical trials are largely done.
• 31:10
  SPEAKER_00: You know, compass is at the end of their timeline.
• 31:13
  SPEAKER_00: We're we're here to create and commercialize um you know our our product, our proprietary product into these rescheduled markets.
• 31:20
  SPEAKER_00: Um, but as we develop our AI capability, as we're coming up with new um, you know, SKUs and products as a function of that, as we're protecting them with manufacturing IP, um there's no reason why we're not thinking about downstream.
• 31:35
  SPEAKER_00: Now, you know, in this earliest format, that might be just licensing, that might be selling, that you know, that might be partnering with groups to help us with that clinical process.
• 31:44
  SPEAKER_00: Um, but you know, depending on what we can actually engineer into and what we think the largest value creation or accrual point for NMT might be, uh, we may end up having a proprietary process and pathway to a molecule that hasn't been run through clinical trials yet.
• 31:59
  SPEAKER_00: And we may build the team around that and are happy to do that.
• 32:02
  SPEAKER_00: I think our current operating sort of um, you know, thought process is um let's get the IP, manufacturing IP, let's let's figure out via a technoeconomic analysis where the highest accrual point for us and our shareholders is, and let's make a decision there.
• 32:18
  SPEAKER_00: Um, you know, I guess as a function of being bootstrapped as a startup, I'm not from this industry originally.
• 32:24
  SPEAKER_00: Um we've stuck to our lane of being a manufacturer today.
• 32:27
  SPEAKER_00: Um, you know, but as we we add guys like you know Doug Drysdale to our board as a chair or, you know, John Skerrett, um, who is the the head of the TGA here in Australia, the equivalent of the FDA, um, you know, we're we're improving our capability um to think about manufacturing and and and ultimately progressing drugs downstream.
• 32:47
  SPEAKER_00: Um, you know, if if we're just a C DMO in five years' time, I I don't think it will have been a great success for us.
• 32:55
  SPEAKER_00: Um, you know, what we're really hoping to be is a proprietary manufacturer with um high quality, uh sustainable economic IP that allows us to have a competitive cost curve edge in in these products that we're manufacturing.
• 33:09
  SPEAKER_00: Um, we're going after difficult to synthesize tryptamines, um, you know, indoles, ergalines, and phenethylamines.
• 33:16
  SPEAKER_00: Um, you know, and that that may end up uh with proprietary products that we're ultimately developing as well.
• 33:22
  SPEAKER_00: There's a lot of optionality, I guess, is what I'm trying to say there.
• 33:25
  SPEAKER_03: Right.
• 33:26
  SPEAKER_03: Um optionality is good, especially at the your stage of development.
• 33:30
  SPEAKER_03: Um so some competitors or your competitors have adopted a drugs for data strategy, effectively trading API supply for clinical data, IP and development opportunities, rather than maximizing near-term supply revenue.
• 33:42
  SPEAKER_03: So, how do you view that strategy?
• 33:44
  SPEAKER_03: Is that something that NMT would consider pursuing?
• 33:48
  SPEAKER_03: And if not, where do you see the greater value in maintaining a conventional commercial supply model?
• 33:54
  SPEAKER_00: Yeah, it's look, I I can't speak for other people's strategies per se, um, because it's all circumstantial, right?
• 34:01
  SPEAKER_00: You know, like uh I would ask, um, and we've been asked this, you know, we multiple times by groups looking for product in the market.
• 34:09
  SPEAKER_00: Um, you know, what stage clinical trial is it?
• 34:12
  SPEAKER_00: What level of data can we have?
• 34:14
  SPEAKER_00: Um, how does that translate and when into a potential registration for our pot product?
• 34:20
  SPEAKER_00: Can it?
• 34:20
  SPEAKER_00: And then does it translate, you know, and then what's the probability that that trial is successful?
• 34:25
  SPEAKER_00: Um, because I always come back to the same point for us.
• 34:28
  SPEAKER_00: We've never been put in a position where we've been asked that question, where we've been motivated to act and give product away.
• 34:34
  SPEAKER_00: You know, I always say, we started, you asked me earlier, the drug is such a small component of the clinical trial, it's tiny, you know, it's it's it's de minimis, actually.
• 34:43
  SPEAKER_00: Um, and I always ask that that partner that wants us to give product away for free, whether they're interested in having interested in having a sustainable partner that is going to be around at the point that they need us to ramp up that manufacturing capability on the other side of that trial, or whether they're just considering us as a as a commodity manufacturing partner that they're happy to replace on the other side of this.
• 35:07
  SPEAKER_00: Um, and generally what we find and what we've we've we've I said, but no one ever tells us this, of course, they just go missing.
• 35:14
  SPEAKER_00: Um, people grab the free product because their view is that, hey, manufacturing is not important, having a good partner that's sustainable and that's around in five years isn't important.
• 35:22
  SPEAKER_00: We'll just get our trial done and we'll find someone else to make us the product on the other side of that.
• 35:26
  SPEAKER_00: And so we walk away from a lot of that business.
• 35:28
  SPEAKER_00: We're not interested in that.
• 35:29
  SPEAKER_00: We're looking for people that are aligned with us.
• 35:32
  SPEAKER_00: Um, and if you know you can't afford the the very small fraction that that the drug costs to do your clinical trial, I question whether that clinical trial ever makes it to the other side, whether it's successful, um, and whether whether we're a manufacturing partner for that group on the other side of this.
• 35:47
  SPEAKER_00: And look, again, I can't speak for others because um I completely understand why um you know Compass would give away their Comp360 to anyone that would want it because they're looking to defend the moat that they've set up in the States.
• 36:00
  SPEAKER_00: That's that's um totally a completely different scenario.
• 36:04
  SPEAKER_00: Um, you know, there are groups in MDMA um that that exists that are doing the same thing.
• 36:09
  SPEAKER_00: Um, you know, MDMA I think is very different to our our biosynthetic psilocybin in that um there are lot there are lots of manufacturers.
• 36:17
  SPEAKER_00: There will be uh you know a very um competitive commercial supply out there.
• 36:22
  SPEAKER_00: Um and if that is your only product, I understand why you need to give it away to ensure that your business has the data it needs to register as a generic at some point.
• 36:30
  SPEAKER_00: So yeah, I think to each their own.
• 36:32
  SPEAKER_00: Um we've not done it yet.
• 36:33
  SPEAKER_00: I don't think we we plan on doing it, but we are really good commercial partners.
• 36:37
  SPEAKER_00: I'll leave it with that, and and we're really open to working with groups to figure out how we can service their needs.
• 36:43
  SPEAKER_00: Um but naturally, you know, we we with all of our products, um, we're we're phase three ready or developing to be phase three ready to make sure that we can supply them on the other side of this.
• 36:53
  SPEAKER_00: We complete and conduct.
• 36:54
  SPEAKER_00: We don't charge for all of the ICH guided stability studies that these groups need.
• 36:59
  SPEAKER_00: You know, we have all of the ethics documents that they need, you know, with IBs and certificates analysis, all these types of things.
• 37:06
  SPEAKER_00: Um we're doing everything we can as a partner, as a manufacturing partner, to ensure that there is nothing to worry about from these groups that need this drug on the other side of their clinical trial, that we're ready to go, we're ready to scale, we've got scale, and we're ready to supply, um, and they have all of the information ready to go.
• 37:24
  SPEAKER_00: Um and I I think it's um probably wildly underestimated by many uh in the industry how difficult that is, how much that costs, how long that takes, um, and how important it is, because um we haven't touched on it, but actually um uh what we've learned down here in Australia is that um the most important piece uh of this entire uh I guess these medicines is that dosing day, uh, is ensuring that on that dosing day there's enough medicine to get someone into a clin their therapeutic window, first of all, but that medicine is stable, that the um uh prescriber of that medicine can actually administer that with certainty that they know what they're dosing that patient, because actually the worst patient outcome here is that they get in, you know, they're treatment resistant, they're depressed, um, they finally got some hope that they may actually get out of um, you know, this this suffering that they've been in, and they get into that dosing day, and you've got a product that has uh not sat on the shelf properly, that's degraded through time, they don't get enough medicine to get into that therapeutic window and they walk out of there thinking that their one big hope, uh which is psilocybin or MDMA, um, actually wasn't uh the the hope that they thought they were going to be.
• 38:36
  SPEAKER_00: And it wasn't because they they they had enough medicine to actually get that mystical experience.
• 38:41
  SPEAKER_00: It's because they didn't get enough medicine, because they'd they'd chosen a partner, a manufacturing partner, that perhaps hadn't done the studies that they needed to, that didn't have the stability that it needed to, had more variability than they disclosed um than they should have as a product.
• 38:57
  SPEAKER_00: You know, and that's what we we're trying to build a product and a business around um that certainty, consistency, durability of supply that um our partners need in clinic.
• 39:08
  SPEAKER_00: Um and hopefully through time um you know we we accrue business as a function of that.
• 39:14
  SPEAKER_03: Great.
• 39:14
  SPEAKER_03: So final question from me.
• 39:16
  SPEAKER_03: Uh who do you ultimately see owning uh natural med tech?
• 39:20
  SPEAKER_03: Is this the ambition to build an independent company and potentially pursue an IPO?
• 39:25
  SPEAKER_03: Or could uh NMT become strategically valuable to a larger C DMO, pharmaceutical company, or other player that wants to secure its own supply of difficult-to-manage manufacture APIs?
• 39:37
  SPEAKER_00: Yep.
• 39:37
  SPEAKER_00: Um it depends how wild my imagination is, to be honest.
• 39:40
  SPEAKER_00: Um, you know, like the the for example, our our psilocybin um strain that we manufacture, we manufacture bacystine and nor bacystine at really high quantities, um, and we've got a proprietary strain that does that.
• 39:53
  SPEAKER_00: Um those two products are uh the entourage molecules in a psilocybin mushroom.
• 39:58
  SPEAKER_00: Um neither of um are scheduled uh in the US or Canada.
• 40:01
  SPEAKER_00: Um, you know, we're currently uh asking the DEA what their viewpoint is on those products.
• 40:06
  SPEAKER_00: There's a lot of work that needs to be done, but but they've been consumed in very high quantities in humans.
• 40:11
  SPEAKER_00: They're very safe, uh, or at least the the literature suggests that way.
• 40:15
  SPEAKER_00: Um, you know, they're non-hallucinogenic molecules.
• 40:17
  SPEAKER_00: You know, my craziest idea, they're consumer products at some point in the future with a little bit more work.
• 40:22
  SPEAKER_00: Um, and you'll have groups, consumer product groups that will want that strain of yeast because it'll be a drink, it'll be a powder, it'll be a supplement that you'll ultimately be able to uh consume for uh anti-anxiety or sort of anti-angiolytic properties or the antidepressive properties of both of those products.
• 40:39
  SPEAKER_00: You know, if the psychedelic business works, depending on how rescheduling goes, um, you know, in the very near term, it's it's it's these very treatment-resistant patients.
• 40:48
  SPEAKER_00: In the very long term, it's a frontline treatment, medium-long term, it's a frontline treatment.
• 40:52
  SPEAKER_00: Um, it's an enormous product business in and of itself.
• 40:55
  SPEAKER_00: We have a proprietary manufacturing process.
• 40:57
  SPEAKER_00: We're going to have 20 years on our patent out to 2042.
• 41:00
  SPEAKER_00: Um, we should have a very large, sustainable market share that we can that we can command in this industry.
• 41:06
  SPEAKER_00: Um, and so, you know, is that a C DMO acquirer?
• 41:09
  SPEAKER_00: Is it actually someone that says, actually, uh, we want to build on top of the psychedelic manufacturing IP that Natural MedTech's already bought?
• 41:18
  SPEAKER_00: Um, we think it's probably more that it's a drug developer that's interesting on extending our IP.
• 41:23
  SPEAKER_00: Um, but then, you know, you go right out into the AI piece and you know, it's an anthropic or it's an open AI that it'll buy us because um I think what the industry here is still grappling with is can AP can AI actually uh predict these enzymes without data from a lab?
• 41:39
  SPEAKER_00: Um our view is the answer is no to that.
• 41:41
  SPEAKER_00: Um, and ultimately we feel that as we develop into that space, as we get better and better at generating that data and ultimately proving up that we can start to finish, collapse the timelines of new API manufacturing processes and then, you know, commercially partner with them or drug development to the future.
• 41:59
  SPEAKER_00: Um, these large compute businesses is going to understand that um as AI gets better and better, as our data gets larger and larger, we're gonna have an enormous uh ability to expand this across a portfolio of drugs.
• 42:12
  SPEAKER_00: Um, you know, biosynthesis has historically been one drug, one pathway, but ultimately in the areas with which we're going after, which is there's about 13 billion US dollars annually of revenue in this space, just in the API market alone, um, and it's growing at mid-high signal single digits, um, we're gonna be able to actually expand into that entire portfolio very quickly and then maybe translate outside of the space we're currently operating into, into much other drugs.
• 42:37
  SPEAKER_00: And, you know, I laugh, like, you know, everyone's happy to underwrite um SpaceX because we're going to Mars or because we're going to have this, you know, spacefaring community.
• 42:46
  SPEAKER_00: Um, but I always ask, how are they going to get the drugs there?
• 42:49
  SPEAKER_00: You know, like most drugs on a shelf will be off before they get to Mars.
• 42:52
  SPEAKER_00: And the only actual way that they can do it is to buy a biosynthetic strain of yeast that they can pop in a freezer on that, on that vessel, and they'll ultimately be able to manufacture it out of a glass bioreactor uh on the space, the spaceship when they get there or on the way or when they get there, and they'll make it in real time.
• 43:09
  SPEAKER_00: And that's where our yeast strains are going to be incredibly valuable through time.
• 43:12
  SPEAKER_00: I know that's a very long-dated thing, but um if we have proprietary strains that uh have uh multiple pathways to generic but non-generic medicines as well, um that portfolio is worth an enormous amount as and when you need to actually start moving people around off this planet because uh you'll have a little cartridge, you'll pop it into a bioreactor, you'll make your medicines in real time.
• 43:33
  SPEAKER_00: It'll take you two or three days to ferment it, and all of a sudden you'll be able to consume it on the other side out of grass certified organisms.
• 43:40
  SPEAKER_00: So um, yeah, it's there there's lots of potential here.
• 43:43
  SPEAKER_00: Um, the upside's enormous if we can get it right.
• 43:46
  SPEAKER_00: Um, it's not a CDMO business.
• 43:48
  SPEAKER_00: Uh you know, and I think if it's a if it's only a CDMO that may that that buys it out in the future, it it probably means that um we haven't been able to achieve a lot of the things we're hoping to.
• 43:57
  SPEAKER_03: Yeah.
• 43:58
  SPEAKER_03: Right.
• 43:58
  SPEAKER_03: By the way, I think it'll take five or six months to get to Marsworth here.
• 44:02
  SPEAKER_03: Um so uh thank you.
• 44:04
  SPEAKER_03: I'll I'll wrap it up there and thank you, Luke, for guiding us pretty thoroughly through Natural MedTech and its business model and to better understand the company's ambitions.
• 44:12
  SPEAKER_03: And I wish you every success.
• 44:13
  SPEAKER_01: So I'll have to Thank you for listening, and don't forget to subscribe as well as visiting www.watertowerresearch.com to stay up to speed on the company's small cap written research reports, podcasts, fireside chats, industry specific symposiums, and conference schedules.
• 44:30
  SPEAKER_01: We will see you next time for another edition of the WTR Small Cap Spotlight Podcast.
• 44:35
  SPEAKER_01: Finally, a special thanks to the producer and editor of the podcast, Christoph Fitzpatrick.