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ALL ALONG THE PIPELINE

Psychedelic medicine companies to watch

Boxes containing magic mushrooms sit on counter at coffee and smart shop in Rotterdam
REUTERS/Jerry Lampen
You’ll probably never be allowed to pick these up at a pharmacy and just take them at home.
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After decades of promising research, fading stigma, and rising need, psychedelic drugs may soon be available to treat pervasive health conditions such as PTSD, depression, and addiction.

Over the past few years, a robust business community that includes startups, investors, and even public companies sprung up in an effort to bring drugs like MDMA and psilocybin to  patients in need. The market for psychedelic medicine, valued at about $2 billion in 2019, is expected to more than triple to nearly $7 billion by 2027, according to a 2020 analysis from Data Bridge Market Research.

Because of the regulatory and administrative requirements to test, develop, and eventually administer psychedelic medicine, companies have sprung up at every stage of the pipeline. Whether today’s psychedelics startups are tomorrow’s IPO contenders will depend in part what each company is set up to do, and the point at which its founders and private investors expect an exit event.

Why go public at all when psychedelic medicine isn’t yet on the market? “Going public is not so much about the fact that they’re public, but that, for lots of financial reasons, it enables access to deep pools of financial capital,” says Henri Sant-Cassia, founding partner of the Conscious Fund. Public companies’ visibility can give them a stronger shot at being acquired in the future, and investors may prefer a company that’s public because it’s a liquid asset. “For backers, that matters,” Sant-Cassia says.

Here are a handful of the most valuable outfits in psychedelic medicine, which together show that there’s money to be made beyond drug discovery.

Drug discovery

Example: Compass Pathways, MindMed, Bright Minds, Cybin, Small Pharma

These companies are developing and testing proprietary compounds that they hope will treat psychiatric or other conditions. The drugmakers are hoping to receive approval from the US Food and Drug Administration (FDA) to allow their medicines to go on the market.

Some are vying to be the first out there: Compass Pathways, which went public in September 2020, received breakthrough therapy designation from the FDA for psilocybin in 2018. Others, however, are planning to be the second or third generation of psychedelic pharmaceuticals on the market, and are adding compounds that could make the experience more convenient or appealing for patients. (This approach also protects the company’s intellectual property, as MDMA and psilocybin are not patentable.) These second-generation drugs could, for example, eliminate the hallucinogenic aspects entirely, or reduce the amount of time the drug is active, should such modified drugs be shown to have similar efficacy for patients.

Biotech

Example: AITA Life Sciences, Havn Life

“Biotech” serves as a bit of a catch-all here, as the two companies on our list have different business models. What they have in common, though, is that they’re set up to help other companies discover safe psychedelic medicine.

AITA Life Sciences, which went public in June 2021, works with other companies to develop compounds in exchange for a majority stake in their business. According to CNBC, “ATAI helps the scientists to raise money, work with the regulators, and conduct clinical trials.”

Havn Life has its own drugs in the pipeline in addition to already selling “nutraceuticals,” substances based on medicinal compounds that fall into the same regulatory category as melatonin. But the most unique aspect of its business is that it grows mushrooms to an FDA-compliant standard and is able to send the drug, in perfectly dosed out portions, to licensed researchers running clinical trials. “Our IP will be a trade secret, not a patent,” says Havn Life CEO Tim Moore. “By having first-mover advantage, we will have a leg up there.”

Clinics/outpatient services and other healthcare services

Example: Field Trip Health, Numinus

Most experts agree that if psychedelic medicines do get approved by the FDA, they’ll come with certain restrictions on who can administer them and where. “Approval will not mean you can pick them up at your local pharmacy and go home and take them,” says Matt Lamkin, an associate professor of law at the University of Tulsa. Patients will take the drugs only under the supervision of a trained mental health professional, for the duration of a trip that often lasts between six and eight hours.

A number of companies are setting up specialized facilities where drugs can be administered safely and under the requisite supervision. Such facilities would also be scalable and improve patient access to medications.

Private equity

Example: Orthogonal Thinker

Startups are all well and good, but they need investment to hit their goals. Organizations such as Orthogonal Thinker and the Conscious Fund have sprung up to funnel investment to these companies.