Photos By Siobhan
Green Market Summit, The Economics of Psychedelic Investing
- Business Insider's Jeremy Berke talked to leaders in the medical psychedelics field about who was investing in their companies, testing procedures, and the similarities and differences between this industry and the cannabis sector.
- The investor base for companies creating psychedelic drugs can be categorized into three groups, said Florian Brand of ATAI Life Sciences: the visionaries, the "momentum investors," and more recently, pharmaceutical and biotech investors.
- Companies such as MindMed, Eleusis, and ATAI Life Sciences are hoping that medical psychedelics will be able to tackle big issues like the opioid epidemic, the vaping crisis, adult ADHD, and chronic inflammation.
- Business Insider previously sat down for an exclusive interview with MindMed last year to talk about how the company raised millions in funding from big names such as 'Shark Tank' host Kevin O'Leary and Canopy Growth's Bruce Linton. Read the article here.
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Investors may be eyeing psychedelics as the next big trend in healthcare.
That's according to leaders in the medical psychedelics field, who say there's a serious growing interest from established backers who have traditionally stayed away from companies that deal with federally illegal substances.
Once that interest manifests into investment - and a few asset managers begin to put money into medical psychedelic companies - Shlomi Raz, founder and CEO of medical psychedelic company Eleusis, said at The Economics of Psychedelic Investing conference on Friday that he expects the rest to quickly follow.
"Once the lead steer moves into this space, you'll see the whole herd moving in," he said.
The Epidiolex of psychedelics
JR Rahn, founder of MindMed - a company that develops psychedelic-based medication - said that the barriers to entry for medical psychedelics are even higher than they are for cannabis. That's because medical psychedelic companies are looking to have their products approved by the US Food and Drug Administration.
In MindMed's case, the company is pushing to get FDA pproval for a compound called 18-MC, which would effectively remove the hallucinogenic properties from ibogaine, a psychedelic West African drug, while preserving its medical properties.
18-MC must undergo a series of clinical trials before being approved by the FDA to address opioid abuse disorder.
"It's a very different industry [from cannabis]," Rahn said, noting the strenuous clinical testing. Beyond addressing the opioid crisis, Rahn said on Friday that he thinks he would want to look into addressing the teen vaping crisis as well.
Raz told Business Insider's Jeremy Berke at the conference that he and his company were inspired by the example of GW Pharmaceuticals and its development of Epidiolex.
"That's where we're coming from," Raz said, "to take a stigmatized drug and make it a valuable medicine, develop it just like any other life science company."
Eleusis has, through clinical trials, tested low doses of LSD for its effects on inflammation associated with aging, which would have deep implications for Alzheimer's.
Treatment vs. Policy
Several cities have already decriminalized psychedelic mushrooms and though the topic of adult-use came up at the conference, the companies present seemed more focused on treatment and testing rather than getting involved in policy changes.
Because psychedelics are such powerful compounds, Florian Brand, cofounder and CEO of ATAI Life Sciences, a biotech company that develops psychedelic medicine for mental health purposes, said that in general he is quite skeptical of legalization for adult-use.
"We're focused on getting better treatment for patients, not so much what could be happening from a policy perspective in 12 years," Brand said.
But still there seems to be much interest in the psychedelic field from those coming from cannabis, where traditionally, there is a heavier focus on policy changes to allow for adult-use.
Business Insider previously reported on Field Trip Ventures, a psychedelics-focused VC firm founded by those who came from the cannabis sector.
"There's no shortage of investment interest in the psychedelic space right now," Ronan Levy, cofounder of Field Trip Ventures, told Business Insider last year. "Almost everybody who's been participating in the cannabis industry is looking at it."
The kinds of investors
The investor base for companies creating psychedelic drugs, according to Brand, can generally be categorized into three groups for ATAI Life Sciences. There are the visionaries, those who "believe there is something there that deserves to be backed."
The second group is the "momentum investors," the group that is looking for the next big trend.
And finally, and most recently, there is now serious interest from more traditional biotech nad pharmaceutical investors who were so far staying far away from the psychedelic field. Interest from the third group is very recent, Brand said, really only seriously picking up within the last month.
Raz said that he put a lot of his own assets into establishing Eleusis and other early investors into the company were either individual investors or family offices.
But, Raz said, he expects the opportunity for these sort of backers - who are not traditional life science investors - to play a crucial role in companies like his is closing very quickly as interest from more established financiers pick up.