- The future of psychedelic science
Future of Health
Just now·7 min read
Imagine a world where the countless millions who suffer from mental health conditions such as depression, anxiety, and PTSD could have a few simple therapy sessions that permanently remove the shackles of their disease, allowing them, for the first time maybe, to live their life to its full potential. Or one where a pill could make you 10% more creative, more energetic, or more focussed. Imagine what humanity could achieve if, across the world, scientific researchers, creative minds, and leading thinkers were able to flip such a psychological switch to unlock new insights. What if, at the point where we reach the end of our lives, there were a medication we could use that would help us feel a radical sense of peace and acceptance, enabling us to enjoy our remaining time.
This is just some of what those in the world of psychedelic medicine suggest could well be possible in the not too distant future.
The word psychedelic from the ancient Greek words psyche (meaning soul) & deloun (meaning to make visible or to reveal) and in modern parlance has come to refer to the broad range of substances that have ‘mind-manifesting’ effects. In large doses, they are typically hallucinogenic and result in extraordinary states of consciousness. Most fall into one of three chemical classes: tryptamines, phenethylamines, and lysergamides, all of which seem to act on 5-HT2A serotonin receptors in the brain. A reduction in activity across a disparate network of neurons known as the default mode network is thought to play a significant role in their effects, but their mechanism of action is fundamentally unknown.
Project MK Ultra
Psychedelic substances (for example, Peyote and Ayahuasca) have been used for medicinal and spiritual purposes for thousands of years. But it was Albert Hoffman’s synthesis of LSD at Sandoz laboratories in 1938, and his subsequent accidental discovery of its psychedelic properties 5 years later that really marks the first formal involvement of the western world in psychedelic substances. Throughout the 1950s and 1960s, a psychedelic heyday then ensued, both informally with the psychedelic counterculture that sprang up in San Francisco and more formally via the experimentation undertaken widely such as the CIA’s secret Project MKUltra, Timothy Leary’s work on the Harvard psilocybin project, Stanislav Grof’s extensive therapeutic experimentation as a psychiatrist and countless FDA approved trials. Government regulation and criminalization then came into force in the late 60s, effectively placing a 3-decade pause on research and pushing production, trade and use into the illicit underworld.
However, over the past few years, we’ve seen an unprecedented spurt of deregulation and consequently a huge growth in research, innovation and funding across the psychedelic space. The wave of cannabis decriminalization across Canada and then the US led the way, and psychedelics look set to follow this path. Cannabis’ shift from being a key target of moral panic and the war on drugs during the Nixon and Reagan era to cult new technology akin to craft beer and loved by retail investors was a long one. It started with decriminalization in Oregon in 1973 and took many years of gradual organization of pressure groups, gathering of evidence from regional decriminalization experiments and a steady shift in public perception driven by the development of arguments which primarily revolve around three main areas:
- Economic benefits of allowing this to grow into a legitimate industry both for the government’s tax revenues and for the jobs and innovation it would inevitably spur
Crime reduction that would result from no longer having to unnecessarily imprison and criminalize users and from starving the illicit black market and criminal gangs of oxygen
Medical marijuana’s increasingly widespread use particularly for pain and anxiety
It’s possible that psychedelic science could follow this path to reach mainstream adoption and widespread decriminalization in just years rather than decades, especially because the medical benefits are so much more compelling than marijuana even.
Despite laws and regulations only having changed slightly so far, there is an increasingly vibrant research community, awash with new funding, budding researchers, and exciting breakthroughs from the Imperial Centre for Psychedelic Research led by Dr Robin Carhart-Harris to the Johns Hopkins Psychedelic Research Unit led by Roland Griffiths and many more institutes and organisations across the world.
Mental health is the most compelling use case for psychedelics in the first instance and already a large number of drugs are progressing through clinical trials for depression, anxiety, PTSD, alcohol use disorder, and opioid use disorder amongst others. Psilocybin alpha has a fantastic tracker of where drugs are in development here. At the time of writing, MAPS are the furthest ahead with a number of phase 2 & 3 trials using MDMA for a range of indications. But there are around 15 additional companies already in phase 1 or 2 trials for psilocybin (the active ingredient in magic mushrooms), novel patented compounds, LSD, and DMT. Countless others are at preclinical stages.
Psilocybin Alpha’s drug development tracker: https://psilocybinalpha.com/data/psychedelic-drug-development-tracker
Backing all this new research is an exponential growth in funding with big-name investors such as Peter Thiel getting involved with a $12m investment in ATAI Life Sciences ahead of its rumoured goal of going public this year with a valuation of $1–2bn. Others are already public such as Compass Pathways with a market cap of $1.6bn & MindMed at $1.3bn. My back of the envelope calculation places the current combined valuation of the medical psychedelic science industry at roughly $5–7bn (summing the largest 18 companies valuation or market cap). For comparison, the still-nascent cannabis industry has an estimated market size of ~$25bn in 2021 which is growing at ~20% a year. And in my opinion psychedelic medicines could easily dwarf cannabis as an industry given their potential as a therapeutic.
Mental health is a huge market already with some of the main interventions being behavioral therapy (~$100bn market size), anti-depressant medication (~$15bn market size) & mindfulness/meditation apps (~$5bn market size). The revenues of a single successful drug in this space can be $3bn annually (peak annual revenue for both Zoloft (Sertraline) and Prozac (Fluoxetine) in the year before going off-patent). And these don’t even work in a majority of patients and only partially in many of those that do respond, so if we had something that actually worked properly there is a lot of potential. And this is not to mention the potential for psychedelics outside of mental health as direct to consumer cognitive enhancement.
What does the future hold?
Ultimately it’s our belief that psychedelic therapy has huge future potential. This area is clearly at a very nascent stage of development which could really explode over the next few years as funding exponentially increases, the trend of deregulation and decriminalization continues and clinical trials start to show really compelling results.
We think that this has much more potential than the cannabis industry, primarily because of the unparalleled medical potential of psychedelics in the first instance. However, it will be the potential to enhance the already healthy with direct-to-consumer products for micro-dosing and mind-expansion that ultimately represent the largest market.
Investing in this space is of course high risk/high reward. Just one negative trial result or change in policy by the US government could send valuations crashing, so this is for sure a risky space. But for those companies that do show success, there is also the potential for exceptional returns. Psychedelic companies are also a prime candidate for retail investor hype which could give these stocks a massive boost in the short to medium term as we have seen previously in the cannabis space.
If you do decide to invest, there are already many public psychedelic companies out there including one recently launched psychedelic-themed ETF (Ticker: PSYK) although as of writing this is currently only available on the rather niche Canadian NEO exchange.
Some of the most promising startups you might want to consider are:
- Compass Pathways — currently the largest public company in this space, based in the UK, with a number of phase 2 & 3 clinical trials using MDMA and others researching psilocybin
- MindMed — currently the second largest public company with a variety of trials looking at LSD, psilocybin, and their own synthetic compound, 18-MC, just listed on the Nasdaq as of 3rd May 21
- Numinus — one of the smaller publicly traded companies but with a series of ketamine-assisted psychotherapy clinics in operation and a pipeline of drugs in trials
- Champignon Brands — a Canadian company that owns ketamine clinic operator AltMed, has a series of drugs in phase 1 and preclinical trials and a track record selling consumer mushroom-based products
- ATAI Life Sciences — the largest of all, but currently private and aims to be a biotechnology business builder with stakes across multiple psychedelic companies including a large investment in afore-mentioned Compass Pathways. Expected to go public this year.
- Date of publication:
- Mon, 05/03/2021 - 08:32
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