The psychedelic industry has taken a rapid tailspin since its heyday in 2020, with some psychedelic drug developers losing 50% of their value (or more) over the last year (Compass Pathways down 63%, MindMed down 43%, Entheon down 69%). To the unsophisticated investor, this sector appears completely dead in the water; a nice attempt at disrupting the mental health industry, but clearly a day late and a dollar short. Wrong. Never before has there been such a wide disconnect between the objective price of stocks and their value proposition. 2021 was an extremely productive year for the psychedelic industry, with the leading drug developers rapidly expanding their patent portfolios, commercializing treatment centers, and (most importantly) advancing clinical studies into the human Phase 1 and 2 trials.
Cybin Inc. (NYSE American:CYBN), one of the industries most prolific developers (they recently completed their 74th preclinical study and have tested over 50 novel psychedelic compounds), shares fell almost 30% since this time last year despite the strong evidence that their two lead drug candidates, CYB-003 and CYB-004 (treatments for alcoholism and anxiety disorders, respectively) are ready for human studies . Field Trip Health (US:FTRP / CAN:FTRP) shares crashed over 25% despite their development of three new brick-and-mortar clinics in its growing North American network of mental health treatment centers. The list goes on and on. You get the idea. We are witnessing a clear disconnect between the potential value of psychedelic-based pharmaceuticals and the current share price. Psychedelics are a value opportunity on an unprecedented scale (well, maybe buying Bitcoin in 2010 takes the cake).
Well-capitalized and sitting on deep portfolios of intellectual property, robust pipelines of novel psychedelic compounds, and a preponderance of human clinical data, the entire sector is poised for a breakout year. Here's why.
If anything positive comes of the SARS-CoV-2 pandemic, it will be the reinvigorated interest in mental health and recognition of the dire medical need for a complete paradigm shift in the way that we treat mental illness. We are witnessing a rapid decline in the global population’s mental health, which can be attributed to abrupt loss of work, stay-at-home orders, forced isolation (or its antithesis, unbearable co-habitation ), and ample time to ponder the existential in silence (maybe Nietzsche was right. God is dead). An idle mind is the Devil’s workshop, and we are in a great “awakening” of the public consciousness as we collectively reconsider our values, fulfillment, and the very meaning of life.
Meaningful work is fundamental to most people’s sense of fulfillment. The nature of that work is dependent on the individual’s proclivities and worldview, however the universality of finding meaning in duty is a constant (it is quite possible that the meaning of life is to fill one’s life with meaning through the cognizant, voluntary assumption of responsibility. The nature of that responsibility is irrelevant, so long as the individual assigns value to it). The transition from in-office to the work-from-home paradigm exposed the inefficiencies in rigid, vertically integrated corporate structures, and made evident the frivolousness of many corporate roles.
“Yeah, I just stare at my desk, but it looks like I’m working. I do that for probably another hour after lunch too, I’d say in a given week I probably only do about fifteen minutes of real, actual, work.”
The “lay down” movement led by young Chinese workers exemplifies the disillusionment of the modern worker and their hostility towards the employer. Laborers are fed up with their Sisyphean struggle to make ends meet while making big corporations, and their C-level goons, wealthy beyond measure. More importantly, this disillusionment is illustrative of the individual’s realization that their lives are hollow, their relationships brittle, and their goals far beyond reach. We are on the verge of a massive mental health crisis that is defined by a fundamental shift in attitude towards work, relationships, and values.
The rise of virtual medical appointments and app-based solutions to healthcare have changed the way we take ownership of our mental and physical health by offering easy access to medical practitioners and virtual treatment solutions. As the stigma of emotional disorders quickly wanes, more people than ever before are seeking solutions for their mental illness from the convenience of their own home. Trained therapists are only 50% of the solution; the other half is pharmaceutical solutions that address the glaring deficiencies of available first-line treatments - SSRIs, SNRIs, tri-cyclics, atypical antidepressants (e.g., Wellbutrin), and mood stabilizers (e.g., Lamictal) . It has been over 50 years since the monamine hypothesis was first introduced and the first-generation SSRIs were developed, yet little progress has been made to address the dubious efficacy and litany of dangerous side effects of these drugs (including suicide) . This is where medicinal psychedelics have the potential to completely change the way we treat mental illness by offering a novel mechanism of action, and therapist-driven treatment plan that includes guided therapy sessions while under the influence of the "trippy" drugs. The economics are extremely compelling; psychedelic medicine has the potential to take over a large share of the rapidly expanding market for mental health treatments. According to a recent report, the global mental health market was valued at almost $400B in 2020 and will reach over $530B by 2030 (CAGR ~ 3.5%) . FDA approved psychedelic treatments could easily take 10% of this market ($40B) within the first year of sales. It is obvious that the first psilocybin-based pharmaceutical will attain “unicorn” status upon FDA approval.
Mounting interest amongst clinicians and patient advocacy groups has spurred North American governments to turn their attention to the regulation of psychedelic-based medicines. Just like cannabis, psilocybin and LSD are classified as Schedule 1 substances by the Drug Enforcement Agency (DEA) in the US. The Schedule 1 designation implies that the substance has no therapeutic potential and has a high potential for abuse . Canadian law prohibits the possession, sale, or production of psilocybin without an exemption or license under the Controlled Drugs and Substances Act. Multiple states within the US have already decriminalized the cultivation and possession of psilocybin mushrooms, even though the DEA maintains its Schedule 1 status. If we learned anything from the cannabis controversy between states and the federal government, it’s that the DEA can demonize plant therapies all they want, and states will still decriminalize and legalize these substances for the benefit of their citizens. In the boldest move to-date, Canada recently opened access to psilocybin mushrooms for end-of-life patient care . The regulatory landscape for psychedelics is changing rapidly, and loosening regulation portends the beginning of a sector-wide boom.
The following is a list of jurisdictions and states that have, or are in the process of, decriminalizing the possession and use of psilocybin:
Canada is paving the way for legalization of psilocybin and related psychedelics for therapeutic purposes. The long-awaited amendments to Health Canada’s Special Access Program have granted patients access to psychedelics, including psilocybin and MDMA, for patients who lack other treatment options. Physicians are now able to advocate on behalf of their patients and request access to psychedelics that have data to support their safety and efficacy . Previously, patients that wanted psilocybin-assisted therapy would have to apply for a federal exception from the Canadian health minister to gain access to the drug, a time-consuming and inefficient process. Regulators anticipate that the amended program will provide patients with the psychedelic-based therapies they need in a timely fashion.
“It’s a seismic shift in the level of legalization in Canada…. They’ve been shifted from an illegal drug to a prescribable medicine... steady liberalization of the medical use of once-scorned psychedelics is undeniable — and seemingly unstoppable.”
Currently, there is only one psychedelic pharmaceutical approved by the FDA, an intranasal ketamine treatment for depression developed by Jansen Pharmaceuticals and marketed as Spravato. This s-enantiomer of ketamine ("esketamine"), a dissociative medication that has been traditionally used as a general anesthetic, did not prove very successful in clinical trials, but was granted approval anyway (likely due to the strong safety profile and novel mechanism of action). Spravato's approval came on the heels of a decade long push to use intravenous ketamine to address treatment-resistant depression (intravenous treatment has never been FDA approved, yet ketamine clinics have managed to thrive without regulatory pushback or patient lawsuit). The commercial success of intravenous ketamine clinics is a testament to the efficacy of the drug, and it is unfortunate that the intranasal version does not provide the same effects. Janssen's failure aside, the approval of Spravato is very important for the industry as a whole because it legitimizes alternative mechanisms of treatment for mental illness. Ketamine, however, is fundamentally different than psilocybin and other serotonin-modulating psychedelics (like LSD and DMT) due to its mechanism of action on the NMDA receptor (Learn more about psychedelics). The industry eagerly awaits approval of the first psilocybin or LSD-based pharmaceutical, which could be ready as early as 2023 (with MindMed and COMPASS Pathways leading the way).
There are over 50 ongoing clinical trials for synthetic psilocybin, DMT, LSD, and MDMA. These clinical studies are growing in size as they advance along the FDA regulatory pathway, recruiting hundreds of patients instead of tens. A rising tide raises all boats. The approval of one of these substances will thrust true psychedelic treatments into main-stream medicine.
Here is a snapshot of development progress of some of the industry leaders, and notable industry juniors.
Mind Medicine (MindMed) Inc. (NASDAQ: MNMD) (NEO: MMED) announced today (January 4, 2022) the completion of its Phase 1 clinical trial of 18-MC, the Company’s non-hallucinogenic proprietary derivative of ibogaine, being developed for the treatment of indications linked to opioid use disorder. The trial was completed in December 2021 with topline results expected in early 2022 .
The company also announced (December 21, 2021) a status update for its Phase 2b trial of LSD for the treatment of generalized anxiety disorder , and announced (December 17, 2021) the initiation of its Phase 2a LSD trial for the treatment of adult ADHD .
COMPASS Pathways plc (Nasdaq: CMPS) (“COMPASS”), a mental health care company dedicated to accelerating patient access to evidence-based innovation in mental health, shared results today (January 4, 2022) of a phase I study showing the feasibility of administering COMP360 psilocybin to up to six healthy participants simultaneously, with 1:1 support. The study, peer-reviewed and published in The Journal of Psychopharmacology as "The effects of psilocybin on cognitive and emotional functions in healthy participants: results from a phase I, randomised, placebo-controlled trial involving simultaneous psilocybin administration and preparation", was conducted by the Institute of Psychiatry, Psychology & Neuroscience (IoPPN) at King’s College London in 2019. The results also showed there were no short or long term detrimental effects on thinking patterns or processing of emotions.
"COMP360 has been designated a Breakthrough Therapy by the US Food and Drug Administration (FDA), for treatment-resistant depression (TRD), and we have completed a phase IIb clinical trial of psilocybin therapy for TRD, in 22 sites across Europe and North America. This was the largest randomised, controlled, double-blind psilocybin therapy clinical trial ever conducted, and our topline data showed a statistically significant (p<0.001) and clinically relevant improvement in depressive symptom severity after three weeks for patients who received a single high dose of COMP360 psilocybin with psychological support. We are also running a phase II clinical trial of COMP360 psilocybin therapy for post-traumatic stress disorder (PTSD). COMPASS is headquartered in London, UK, with offices in New York and San Francisco in the US. Our vision is a world of mental wellbeing."
Cybin (NEO:CYBN) (NYSE:CYBN) had an extremely productive year that included FDA and IRB Investigational New Drug approvals for a Phase 2 clinical trial to treat frontline clinicians experiencing COVID-related symptoms, announced positive CYB003 data for the advantages (significantly enhanced dosing control and faster time to onset) of their lead drug candidate (a deuterated psilocybin analog)over oral psilocybin for the treatment of mental health disorders, a Schedule 1 Manufacturing License from the DEA to expand its internal research capacities, FDA approval for its Investigational New Drug application to proceed with the feasibility study for its ketamine neuroimaging study ("Kernel Flow"), and the completion of 74 in vitro and in vivo experiments for its portfolio of psychedelic drug candidates. To date, more than 50 novel compounds have been evaluated by the company .
VANCOUVER (July 12, 2021) – Numinus Wellness Inc. (“Numinus” or the “Company”) (TSXV: NUMI), a mental health care company advancing innovative treatments and safe, evidence-based psychedelic-assisted therapies, is pleased to announce that Health Canada has cleared the MAPS-sponsored single-arm, open-label safety and feasibility study evaluating MDMA-assisted therapy for post-traumatic stress disorder (PTSD). This study is being pursued in collaboration with MAPS Public Benefit Corporation (MAPS PBC), a wholly-owned subsidiary of the Multidisciplinary Association for Psychedelic Studies (MAPS), the leading developer of MDMA-assisted therapy training programs, treatment protocols and research .
SAN DIEGO, Dec. 23, 2021 /PRNewswire/ -- Tryp Therapeutics (CSE: TRYP) (OTCQB: TRYPF) ("Tryp" or the "Company"), a pharmaceutical company focused on developing psilocybin-based compounds for diseases with unmet medical needs, announced today the receipt of correspondence from the U.S. Food and Drug Administration (FDA) affirming the Company's ability to proceed with a Phase 2a clinical trial evaluating the use of synthetic psilocybin for binge eating disorder .
SAN DIEGO, Dec. 2, 2021 /PRNewswire/ -- Tryp Therapeutics (CSE:TRYP) (OTCQB:TRYPF) ("Tryp" or the "Company"), a pharmaceutical company focused on developing psilocybin-based compounds for diseases with unmet medical needs, announced today that it has received confirmation from the U.S. Food and Drug Administration ("FDA") that its review of Tryp's Investigational New Drug ("IND") application is complete and that the Company may proceed with its clinical study in fibromyalgia .
Englewood Cliffs NJ, Dec. 02, 2021 (GLOBE NEWSWIRE) -- Silo Pharma, Inc. (OTCQB: SILO) a development-stage biopharmaceutical company focused on the use of psychedelics as a therapeutic announced the issuance of a patent relating to its University Maryland Baltimore licensed homing peptide. The novel homing peptide can be used for enhanced targeting of therapeutic agents to the central nervous system. Silo Pharma’s licensed homing peptide can potentially improve pharmacological treatment of disease, lower effective dosages, thereby reducing side effects and toxicity. The present invention provides homing peptides that localize in CNS (central nervous system) tissue characterized by neuroinflammation and methods of using the same .
TORONTO, Dec. 30, 2021 (GLOBE NEWSWIRE) -- Mindset Pharma Inc. (CSE: MSET) (FSE: 9DF) (OTCQB: MSSTF) ("Mindset" or the "Company"), a drug discovery and development company focused on creating optimized and patentable next-generation psychedelic medicines to treat neurological and psychiatric disorders with unmet medical needs, today provided a recap of its 2021 milestones and highlights .
PRINCETON, N.J., Jan. 05, 2022 (GLOBE NEWSWIRE) -- The McQuade Center for Strategic Research and Development, LLC (MSRD), a member of the global Otsuka family of pharmaceutical companies, and Mindset Pharma Inc. (Mindset) (CSE: MSET) (FSE: 9DF) (OTCQB: MSSTF) today announce a collaboration that will support the development of psychedelic medicines. MSRD has made a strategic investment to support the discovery and development of novel chemical entity assets of Mindset, a drug discovery and development company focused on creating optimized and patentable next-generation psychedelic medicines to treat neurological and psychiatric disorders with unmet medical needs.
Psychedelic industry leaders and juniors alike are well-capitalized to aggressively pursue their research endeavors. The top seven leaders by market cap had a combined value of $2.9B, and were flush with over $1B in cash on their balance sheets as of 9/30/2021. These figures are heavily skewed by the giant Atai Life Sciences (market cap ~$1B), but even with this behemoth removed the front-runners are sitting on over $0.5B in cash (enough to collectively burn $10,000,000 per month on R&D for over 4 years). A comparison of the market cap (MC) to cash ($) ratio reveals some very cheap stock (see chart below).
The top seven juniors have a combined market cap of only $195M and just over $21M cash as of Q2/Q3 2021. It is very likely that the juniors will need to raise more funding in 2022, handing biotech investors an extremely attractive opportunity to diversify investment across a wide array of potential blockbuster drugs at insanely suppressed valuations.
Post-traumatic stress disorder (PTSD) is a worsening problem among the military’s service men and women. The US Department of Veterans Affairs estimates that 11-20% of veterans who served in Iraq have PTSD each year, and the statistics are worse for Gulf War vets (12%) and Vietnam War vets (15%). Saddeningly, over 70,000 US veterans have committed suicide since 2005, which accounted for 13.5% of all suicides in 2017 (at that time, veterans constituted 7.9% of the population, so they were twice as likely to commit suicide as the average US adult) . The military has long recognized that this clandestine combatant lurks within its ranks and spends nearly $3B each year to treat soldiers and veterans with PTSD . A report from the Institute of Medicine exposed the inadequacies of the DOD’s and Veterans Affairs’ programs for determining just how effective these therapy sessions really are . Hard data aside, it’s painfully obvious that our veterans are not receiving adequate treatment for their mental health, and the government desperately needs a new therapeutic strategy for its millions of veterans.
Veterans have become their own advocates for the legalization of psychedelic substances, and lawmakers have responded favorably by decriminalizing psilocybin possession in eight US jurisdictions. The Pentagon has also formally recognized the therapeutic potential of psychedelics by investing $26.9M in a UNC project to develop novel PTSD therapeutics. The agreement with UNC’s School of Medicine (research team led by Dr. Bryan Roth) is for a four year R&D project to develop certain “Schedule 1 controlled drugs that engage serotonin receptors” (the politically correct way of referencing psychedelics like psilocybin, LSD, and DMT) .
“Rapidly acting drugs with antidepressant, anti-anxiety, and anti-addictive potential devoid of disabling side effects do not exist, not even as experimental compounds for use in animals. Creating such compounds would change the way we treat millions of people around the world suffering from these serious and life-threatening conditions.”
“It is research we need to undertake given the scale of the mental health crisis our veterans face, and if it works, the payoff is a completely new, safe, and effective therapeutic option that transforms complex and previously intractable mental conditions into something more acutely treatable.”
The greatest legitimizer of psychedelic therapeutics will be Big Pharma's involvement in the sector, and as soon aslarge M&A transactions hit the wire we will surely see an inflection in valuations across the sector. Big Pharma is acquisitive by nature (Learn more about Big Pharma's M&A strategy), and once they see the potential of psilocybin and other psychedelics to take over the mental health market they will stack their pipelines with Phase 2 and Phase 3 assets.
Recently, The McQuade Center for Strategic Research and Development and Mindset Pharma announced a collaboration to develop novel medicinal psychedelics. This is the first time that a psychedelic biotech has received funding from a large pharmaceutical company (McQuade is owned by the pharmaceutical giant, Otsuka Pharmaceuticals). Under the agreement, The MaQuade Center will commit $5M in funding and strategic guidance to support the development Mindset’s novel psychedelics through Phase 1a and Phase 1b clinical trials in return for exclusive rights to any asset sale, licensing opportunity, or future collaborations for MindSet's drugs. They also received a right of first negotiation for any M&A deal involving MindSet as a whole .
“It is our great pleasure to collaborate with MSRD, a member company of Otsuka, to further the development of two of our families of novel psychedelic compounds. We look forward to leveraging their extensive experience in drug development and CNS indications to accelerate and de-risk our development pathway as we prepare to launch clinical trials. There is a high unmet need for innovative treatments of mental illness. This collaboration further validates our belief that optimized and patentable next-generation psychedelic compounds will be the future of treatments for mental illness.”
The growth of intellectual property portfolios encompassing the cultivation and purification of psychedelic substances (like psilocybin mushrooms), the composition of novel psychedelic-based molecules ("New Molecular Entities), and methods of disease treatment will further legitimize psychedelics as valuable therapeutic assets and curate institutional interest. Institutional investors and Big Pharma are more likely to get involved in the sector once they feel comfortable that innovation can be protected by patents. To date, there are 77 issued patents (US and PCT filings) related to psilocybin compositions, formulations, and methods of use or production, and 43 currently under prosecution. There are many more relating to ketamine, MDMA, DMT, and LSD analogs, process development, and methods of disease treatment.
 Cybin Announces Completion of 74 Pre-Clinical Psychedelic Molecule Studies [Link]
 US Divorce Rates Soar During COVID-19 Crisis [Link]
 Depression: How effective are antidepressants? [Link]
 Hillhouse, T. M., & Porter, J. H. (2015). A brief history of the development of antidepressant drugs: from monoamines to glutamate. Experimental and clinical psychopharmacology, 23(1), 1–21. https://doi.org/10.1037/a0038550 [Link]
 Mental Health Market by Disorder (Schizophrenia, Alcohol Use Disorders, Bipolar Disorder, Depression, Anxiety, Post-Traumatic Stress Disorder, Substance Abuse Disorders, Eating Disorders, and Other Disorders), Service (Emergency Mental Health Services, Outpatient Counselling, Home-Based Treatment Services, Inpatient Hospital Treatment Services, and Other Services), and Age Group (Pediatric, Adult, and Geriatric): Global Opportunity Analysis and Industry Forecast, 2021–2030 [Link]
 Drug Scheduling (DEA website) [Link]
 Health Canada's Special Access Program [Link]
 California State Senate Passes Psychedelic Legalization In Latest Wave of the New Psychedelic Revolution [Link]
 MindMed Successfully Completes Phase 1 Clinical Trial of 18-MC [Link]
 MindMed Provides Status Update on IND for Phase 2b Trial of LSD for the Treatment of Generalized Anxiety Disorder [Link]
 MindMed Initiates Phase 2a LSD Trial for the Treatment of Adult ADHD [Link]
 Cybin Provides 2021 Year End Summary [Link]
 Numinus Announces Health Canada Approval of MAPS-Sponsored Open Label Study for MDMA-Assisted Therapy for PTSD [Link]
 Tryp Therapeutics Announces Advancement of Phase 2a Clinical Trial in Binge Eating Disorder [Link]
 Tryp Therapeutics Receives Confirmation from FDA to Proceed with Phase 2a Study in Fibromyalgia [Link]
 Silo Pharma Announces Grant of U.S. Patent For its Novel CNS Homing Peptide [Link]
 Mindset Pharma Recaps 2021 Milestones and Highlights [Link]
 2019 National Veteran Suicide Prevention Annual Report [Link]
 $3B on PTSD Therapy for Soldiers That May Not Work [Link]
 Treatment for Posttraumatic Stress Disorder in Military and Veteran Populations: Final Assessment [Link]
 Roth Leads $26.9 Million Project to Create Better Psychiatric Medications [Link]
 The McQuade Center for Strategic Research and Development and Mindset Pharma Collaborate to Develop Psychedelic Medicines [Link]
Author owns TRYP Therapeutics shares at the time of publishing and may choose to buy or sell at any time without notice.
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