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Thursday, Feb 22, 2024
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.

Medical and Pharmaceutical

Investors flock to psychedelic start-ups

Sovereign wealth funds Temasek and Mubadala engage in discussions to finance biotech ventures

Jansen Pharma psychedelic inhaler
A Spravato nasal spray inhaler. Via Janssen Pharmaseuticals

The resurgence of interest in psychedelic drugs for mental health treatment is fueling a wave of investment in biotechnology start-ups. Investors are drawn back to this sector by promising clinical data and anticipated regulatory approvals. January saw biotech groups focusing on substances like MDMA and psilocybin mushrooms raise over $163mn across five deals. This marks the second-highest fundraising month ever recorded.

High-profile investors like Temasek, Singapore’s USD$300 billion investment fund, and Mubadala, the venture capital arm of Abu Dhabi’s sovereign wealth fund, are in discussions with biotech companies to finance the development of psychedelic mental health treatments and clinics. This marks a significant shift as these funds typically invest in biotechs. This is despite their home countries having strict drug possession laws. While Temasek declined to comment, Mubadala stated it continuously evaluates clinical and therapeutic prospects for addressing significant unmet needs.

Once considered relics of the 1960s counterculture, psychedelic drugs have witnessed a revival both in societal acceptance and healthcare research. Therefore, Silicon Valley tech executives have now embraced “microdosing.” Additionally, billionaire investors like Peter Thiel and Christian Angermayer are fueling funding to fuel this resurgence. Angermayer, who initially invested in psychedelics after personal experiences convinced him of their efficacy, emphasized the high demand and dissatisfaction with current treatments.

Regulatory advancements, including landmark FDA guidelines outlined last year, have contributed to dissipating stigma in investment circles. Compass Pathways (CMPS : NASDAQ) and Atai Life Sciences (ATAI: NASDAQ), both backed by high-profile investors, are expected to publish data from phase 3 trials. They are paving the way for formal FDA approval. Lykos Therapeutics awaits FDA decision on MDMA-assisted therapy for PTSD, which could lead to reclassification of the substance for mental health treatment.

Read more: Microdosing LSD shows potential antidepressant effects in landmark study

Read more: WELL Health and HEALWELL AI bring artificial intelligence platform to healthcare providers

Commercial opportunities for psychedelic drug start-ups

The commercial success of Spravato, a nasal spray based on ketamine, highlights the potential of psychedelic-based treatments. Analysts project it to achieve over $1bn in sales this year, setting the stage for future drugs. This emerging commercial infrastructure provides investors with confidence in the sector’s growth potential amid a backdrop of significant unmet medical needs.

Furthermore, the psychedelic industry’s rapid growth is evident with over 50 companies going public in the US. These companies are collectively valued at over $2 billion. Analysts predict this valuation to reach $12 billion by 2030. Additionally, the American Medical Association’s release of reimbursement codes for psychedelic therapies signals integration into the US healthcare system.

Early studies’ groundbreaking results showcase the efficacy of psychedelic therapies, with over 70% of PTSD participants cured after MDMA-assisted therapy. Compass Pathways found a quarter of patients with treatment-resistant depression achieving remission. Therefore, these results have attracted substantial investments, with Compass raising $285mn in a private placement last August.

With regulatory approvals on the horizon and groundbreaking clinical results, the psychedelic industry poised for significant growth, offers hope for addressing the global mental health crisis.


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