🍄 Psychedelics - a new Eldorado?
🍄 Psychedelics - a new Eldorado?
$10.75bn market by 2027...Why you should care about psychedelic medicine
Contrary to popular belief, a lot of capital has already been allocated to companies in the psychedelic medicine space. Most of these organizations aim at providing medicine and therapies to improve patients well-being.
LSD, psilocybin, MDMA and Mescaline are the substances widely considered as psychedelics by experts. Some add cannabis to the list, but I will stick here with the 4 usual suspects mentioned above.
🍄 Regulatory environment
The biggest wild card when investing in new medical solutions is regulations. Regulations don’t tend to move fast, but the renaissance in psychedelics medicine is actually already well under way, in that aspect too.
The FDA approved several years ago the use of a drug similar to ketamine for treatment-resistant depression. In 2023, It will be legal, in the State of Oregon, to buy a guided Psilocybin experience from a licensed guide using psilocybin from a licensed grower.
Pundits such as Michael Pollan, author of the bestseller and Netflix documentary How to change your mind, forecasts that; 1) MDMA will be approved for the treatment of PTSD by the FDA within 2 years and that, 2) psilocybin will be approved for the treatment of depression within ~4-5 years.
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🍄 Market size and investors
Considering that the market for psychedelic substances is projected to grow from $2 billion in 2020 to $10.75 billion by 2027, we can see why savvy capital has been pouring in the psychedelics industry for several years already.
Brand name investors such as Christian Angermayer, Tim Ferris, and Peter Thiel have been active in the space alongside institutional investors such as JLS Fund, Noetic Psychedelic Fund, and The Conscious Fund.
🍄 Psychedelic medicine companies -public
There are actually already more than 50 publicly traded companies related to the development or administration of psychedelic-like drugs in the US alone. The top three most notable companies are:
Atai Life Sciences, (NASDAQ: ATAI - US$714M market cap), is the largest biotech stock focused on psychedelic drugs. It has been backed by Peter Thiel, GrayBella Capital and infinitas Capital Group to only name a few. The company was founded in 2018 in Berlin, Germany and went public in June 2021. Its psilocybin-based drug was as effective as the antidepressant Lexapro in clinical trials. They teamed up with Japanese drugmaker Otsuka (OTC:OTSK.Y) to develop R-ketamine in treating depression, which is the first major collaboration between a psychedelic-focused biotech and a big pharma company.
Compass Pathways, (NASDAQ:CMPS - US$765M market cap), was founded in 2016 and is based in The UK. It focuses on depression treatments by way of psychedelics. The company conducted the largest clinical trial in history of a psilocybin therapy. Atai is one of the largest shareholders in Compass Pathways.
Mind Medicine, (NASDAQ:MNMD US$368M market cap), was the first psychedelic drugmaker to conduct an initial public offering on Canada’s NEO Exchange in March 2020. The company was founded in May 2019 in Toronto, Canada. Tackling opioid addiction with psychedelics is top priority for MindMed. Canaccord Genuity and Kevin O’Leary are investors in MindMed.
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🍄 Psychedelic medicine companies -private
If you are an angel investor interested in investing in psychedelic medicine startups, do not fret! Private companies in the psychedelic medicine space are plentiful and they are raising capital. They might be a bit more complicated to source than Fintechs, but once in a while one pops up on crowdfunding platforms.
For example, in February 2022, FrontFundr supported Emotional Intelligence Ventures (mental wellness through psychoactive compounds, nutraceuticals and technology), to raise capital. At the time, the deal was only accessible to accredited investors with a minimum ticket of $1k. ~US$21.7M was raised / ~US$20M target.
Rules still apply when investing in psychedelic medicine private startups, especially in the current context of valuation rerating.
Considering the specific lifecycle of health-related organizations, revenues are likely to be inexistent, valuation high and capital to be raised before commercialization very significant.
As a general rule, investing in early-stage biotech is not for the faint of heart. In addition, old stigmas associated with psychedelics still taint the industry despite the numerous efforts made by some scientists, politicians and legal experts to change the public mindset.
Nonetheless, psychedelic medicine startups offer great potential for financial returns for startup investors and entrepreneurs.
There are currently no companies in the space available through crowdfunding platforms that I will recommend and will keep a keen eye for you, Dear Reader 😊
🍄 Food for thoughts
This is a bite-size appetizer on the psychedelic medicine space that I believe is worthy of your attention. The limited coverage due to the absence of critical size and the presence of public bias has kept the story under wraps, however it will be valuable for investors and entrepreneurs to monitor the situation to benefit from the evolution of the space.
The recreational aspect of psychedelics, the corollary of the medical industry and usually where the eyes and ears tend to perk up, also has the potential for solid financial return generation. The regulations are, on that front, still extremely disparate among Cities, Counties, States, Provinces and Countries.
Similarly to what we have seen with Cannabis in Canada there will be big winners in the psychedelics industry. Staying abreast of the evolution of the space will allow you to be on the right side of history!
I hope you enjoyed reading this edition 😃
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