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The big name VCs backing Aussie magic mushrooms start-up

Yolanda Redrup

Yolanda RedrupReporter

Oct 27, 2022 – 5.00am

Global investors have thrown their support behind an emerging local biotech start-up developing new therapies to treat mental illness modelled on naturally occurring psychedelics such as psilocybin from magic mushrooms.

Psylo has raised $5 million in a round supported by local fund Main Sequence Ventures, as well as California-based early-stage investor Lionheart Ventures, psychedelic-focused funds Negev Capital and Empath Ventures, and New Zealand-based healthcare VC fund CaraMed Capital.

Psylo was founded by Josh Ismin and Samuel Banister in 2021.

The start-up, which is still in the pre-clinical phase, was founded by serial entrepreneur Josh Ismin (formerly behind The Video Network, which was acquired by Tremor Video in 2015) and medicinal chemist and biotech entrepreneur Samuel Banister last year.

The company is using computational chemistry – a branch of chemistry that combines theoretical chemistry with computing power to calculate the structures and properties of molecules – to develop therapeutics based on psychedelics. They intend to optimise the pharmacology of these compounds to develop new drugs that don’t have the hallucinogenic effects.

The business is based out of the University of New South Wales, where it has built a lab and has been part of the UNSW Founders SynBio 10x accelerator program.

Speaking to The Australian Financial Review, Mr Ismin said there were more than 100 clinical trials happening globally in this space, but the vast majority were utilising “first generation” hallucinogenic compounds.

“Of the 100-plus trials happening, about 70 per cent are using psilocybin and a number are using MDMA, which has been around for decades and has a long track record of human consumption,” he said.

Psilocybin is one of the most common substances being tested by biotech companies globally as a treatment for mental illness. Getty

“We’re one of the few companies really focusing on optimising the pharmacology of these first generation compounds to develop entirely new therapeutics.

“The whole program is addressing the intense perceptual effects, and either reducing their duration or tempering them to make [the therapies] more applicable to a wider patient population.”

Psylo will use the capital raised to identify its first drug candidate to take into clinical trials.

It is possible that the first approval by the US Food and Drug Administration for an illicit drug-based treatment for mental illness will be approved by late next year, after MAPS (the Multidisciplinary Association for Psychedelic Studies) completed its phase three study of MDMA-assisted therapy for treatment of severe post-traumatic stress disorder.

Another company, Compass Pathways, is also making progress, having recently announced a phase three study using psilocybin as a therapy for treatment-resistant depression.

Taking the long road

But because Psylo is developing new compounds, its journey to commercialisation will take longer than those biotechs utilising psilocybin or MDMA.

Mr Ismin said the company targeted investors with deep tech or biotech experience, who were comfortable with the long development timeline and able to provide patient capital.

“Investors that weren’t aligned with the long timeframe we were disqualifying from the start,” he said.

Main Sequence partner **rielle Munzer said the fund had known the Psylo founders for some time and were impressed with their success.

“Mental illness is one of the great societal challenges of our time, and it’s vital we explore a number of approaches to combat this growing issue,” she said.

Psylo is still about 18 months away from commencing human studies. The company has worked with cellular models and animal studies to assess if their compounds have hallucinogenic effects and if they have the propensity for anti-depressive properties.

Despite the longer commercialisation pathway, he said the company was able to learn from the results of biotechs with more progressed studies, and any approvals from the FDA in this space would spark new interest from biotech giants.

“Big pharma is on the sidelines watching the early movers and I think that will start to change,” Mr Ismin said.

“A lot of companies divested their neuroscience programs on the back of failed investments in Alzheimer’s and dementia ... but they will see this as their way back into that field.

“There are also a few psychedelic companies that have a war chest of capital and will probably consolidate others in the space.”

Yolanda Redrup is an award-winning senior journalist who writes on technology, healthcare and occasionally covers Street Talk from our Melbourne newsroom. Connect with Yolanda on Twitter. Email Yolanda at yolanda.redrup@copyright link