Cybin Brings in Capital with Public Offering

On Monday, publicly-traded psychedelic company Cybin announced an overnight public offering, and its stock paid the price. 

This came as no surprise to anyone following the company’s financial state. On March 31, 2023, Cybin had C$16.6 million cash on hand, with a $13.7 million burn rate for the quarter. 

The company cut its burn rate by over $4 million compared to the same quarter in 2022, but that isn’t enough. By the current burn rate, they would not have made it to the end of the year without additional capital. The question was not if they were going to be raising capital, but how. 

Cybin has a strong pipeline but will need a significant amount of additional capital to get a drug all the way through clinical trials and commercialization. This new capital will only get the company through the end of the year. The company’s leadership must have additional funding options in the works. 

Cybin’s public offering consists of an aggregate of 24,264,706 units of the Company at a price of US$0.34 per Unit for aggregate gross proceeds of US$8,250,000. Each unit is made up of one common share and one common share purchase warrant. The purchase warrant can be exercised for a price of $0.40 per share for a period of 6 months. 

$0.40 was the price of the company’s stock before it started plummeting following the announcement of dilutive financing. The stock dropped 20% to $0.32 overnight after the announcement— $0.02 less than the offering price. It fell another 12.5% by mid-day Wednesday. By the time the offering closes on August 4th, the stock will be significantly below the offering price. 

The company also announced its intent to suspend purchases from its purchase agreement with Lincoln Park Capital Fund. The purchase agreement for up to $30 million was announced in May. Cybin reportedly sold just under $500k before suspending sales. The company intents to file a new purchase agreement. 

Dilutive financing isn’t ideal, and it makes investors nervous. However, in a time when psychedelic companies are struggling to keep operations going, executives are going to have to make some difficult decisions. 

Companies like cybin are more concerned with how to keep their doors open than temporary fluctuations in their stock. This won’t be the last time we see psychedelic companies taking on dilutive financing.

It costs hundreds of millions of dollars to get a novel drug through clinical trials, and few psychedelic companies have the cash on hand right now to make it through the entire process. 

Even the psychedelic non-profit MAPS has had to turn to public funding to make it through to the FDA approval of its MDMA program. 

Companies may have to take a momentary hit to their stocks to ensure long-term success. For Cybin, we’ll be keeping an eye on how it continues to fund clinical trials. Given its current trajectory, the company will not be making significant revenue for at least another four years. And even that is generous. 

The company’s main two candidates are only in phase 1 and 2 trials. The final phase 2 trial data for CYB003 is not yet available, so the company’s future is still a bit unsure. Its stock will likely continue to be volatile until there is more certainty that the company will be able to take a drug to market.