18th Feb 2022
What psychedelic companies have already made it big and which ones should we be watching now?
A decade ago, stories about publicly-traded companies selling compounds made from psychedelic mushrooms would have been fodder for science fiction, not articles in leading newspapers. However, many elements of life today were unimaginable a short time ago. Although it doesn’t get as much media attention as some of the other trends, there has been a significant rise in mental illness over the past decade. Depression and anxiety1 were reaching unprecedented levels even before the onset of the pandemic in 20202. And the psychological “sub-pandemic” has now exceeded the capacity of traditional medicine while driving a growing demand for better treatment alternatives.
The extreme need has led to a new interest in psychedelics for the treatment of mental illness. It isn’t the first time–in the 1950s, extensive research was conducted in the field, with over 40,000 patients receiving a psychedelic component called psilocybin to treat alcoholism, anxiety, or depression3. However, stricter regulations paired with non-medical use of psychedelics in the sixties, and the subsequent war on drugs, led to the federal Controlled Substances Act of 1970 which banned the use of many psychedelics and created regulatory hurdles that made research in the field nearly impossible.
Then, in 2018, the FDA granted “Breakthrough Therapy” status to a company called Compass Pathways for therapy for treatment-resistant depression based on psilocybin4. Approval for research into several other formulations and compounds soon followed and psychedelics research centers have opened up at respected research institutions. The parallel growing acceptance and legalization of both medical and recreational marijuana has also paved the way for the introduction of psychedelics into the pharmaceutical industry.
The opportunity, paired with the dire need, has piqued the interest of investors. At the end of October 2021 investments in psychedelics companies reached $595M across 45 deals, setting a new annual record before the end of the year5. Several companies involved in psychedelics research also went public in 2021. Although most psychedelic stocks performed below expectations in 2021, the numbers could change drastically if one or several formulations were to be approved for widespread use.
Companies that have already made it big in psychedelics
Several companies developing psychedelic compounds have already demonstrated their ability to raise significant funds for studies related to psychedelics. Star standouts include:
1. Compass Pathways (CMPS)
Compass Pathways is a pioneer in the field. It was the first company to receive Breakthrough Therapy designation from the US Food and Drug Administration (FDA) for its psilocybin therapy for treatment-resistant depression6, and the first psychedelic medicine stock to list on the NASDAQ. The company’s focus is on psilocybin-based treatments for mental health disorders. Compass already boasts eight patents for its psilocybin formulation and delivery method and has several clinical trials in the works.
2. Atai Life Sciences (ATAI)
Atai Life Sciences, backed by Peter Thiel, was the third psychedelics company to go public, raising $258 million in its 2021 IPO7. The biopharmaceutical company aims to incubate the development of treatments for people with mental health disorders and owns a number of psychedelics holdings, including Compass Pathways. Despite disappointing stock performance in 2021, new initiatives including the launch of a new subsidiary, 11 therapeutic programs, and new clinical partnerships indicate that Atai should continue to be a strong player in the psychedelic market in the future.
3. MindMed (MMED)
Based in New York, MindMed is a publicly-traded company developing mental healthcare using psychedelic-based substances. The company aims to produce prescription psychedelics that can be taken at home8 and is running clinical trials on several compounds including LSD, ayahuasca, ibogaine, and MDMA (methylenedioxymethamphetamine). It also is developing a program to train psychiatrists in next-generation psychedelic treatments and will offer a digital platform to deliver psychedelic-based medications and digital therapeutics.
Cybin was the first psychedelics company to trade on the NYSE, following several companies that began trading on the NASDAQ. The company has raised significant funds, filed 14 patent applications, and developed more psychedelic compounds than other psychedelic medicine companies. It’s also scaling up its European operations and research activities, with a number of clinical trials underway or approved.
Numinus claims to be the only company that has been granted a license by Health Canada to cultivate, extract, and sell “naturally sourced sustainable psilocybin”. In addition to producing psychedelic substances, the company develops treatment programs, trains therapists in psychedelic medications, and runs clinics across Canada. It’s one of the few psychedelic stocks already generating income, and it reported a cash position of CAD$63.2 million as of May 31, one of the biggest cash reserves among psychedelic stocks9.
Who could be the next unicorn?
Although the big players detailed above are currently leading the psychedelics field, there are many new companies entering the field as well. Some, including those detailed below, are uniquely positioned to stand out and potentially succeed in this challenging arena.
One company to keep an eye on is CaaMTech. Founded in 2017, the company stands out of the crowd due to its investment in fundamental research–CaaMTech has already published tens of peer-reviewed scientific research publications. In addition, most companies in the psychedelics field are working on formulations based on specific components like psilocybin. CaaMTech isn’t focused solely on one formulation, and instead has produced an extensive library of novel, analytically pure compounds that are expected to be ready for human trials in the near future.
The company’s robust science has attracted the attention of investors. In September 2021, CaaMTech announced the completion of an oversubscribed $22 million Series A financing round, led by Noetic Fund. Noetic fund plans to work closely with the company to bring its formulations to market, increasing CaaMTech’s chances of becoming a unicorn in the future.
2. Irwin Naturals
Another company uniquely positioned to succeed in the psychedelics world is Irwin Naturals. The publicly-traded company and supplier of health supplements to major US chains such as Costco, Walgreens, CVS, and Walmart, is already a household name. In 2018, the company leveraged its brand to expand into the cannabis space by launching hemp-based CBD products into the mass market and is now one of the largest CBD wholesalers in the nation.
In October 2021, Irwin Naturals announced that the company plans to enter the psychedelic mental health industry and has created a subsidiary called Irwin Naturals Emergence for that purpose. “The mental health crisis is not growing linearly like other health problems. It is on a dangerous exponential path. Pharmaceuticals and talk therapy have helped, but not enough to stop the runaway escalation,” says Klee Irwin, CEO10.
In order to circumvent the cumbersome regulatory process for psychedelic compounds, Irwin Naturals Emergence plans to focus on ketamine-assisted psychedelic treatments for mental health issues in the U.S., at least during the first stages of the company’s development. Ketamine is already legal in the U.S. with a prescription, however, like many other prescription drugs, it is often too expensive for many Americans. Therefore, Irwin plans to leverage the company’s volume and distribution infrastructure to drive prices down. “Irwin Naturals is stepping up as the world’s first household name brand to unapologetically step into the psychedelic space to lower patient costs,” says CEO Irwin. The company plans to open a nationwide network of ketamine clinics in the US, as well as retreats in nearby countries such as Costa Rica and Jamaica where people can be treated with psychedelics such as psilocybin and ayahuasca that are not yet approved in the U.S. This infrastructure will prepare Irwin to take over a significant market share when what many people believe are inevitable drug-law shifts finally occur in the US.
Where should investors look?
The companies detailed above are very promising; however, since the field is still in early stages of development, it can be difficult for investors to accurately predict which companies will eventually gain approval and succeed in the market–there are simply too many unknown variables. Yet the potential is so significant that investors find the field hard to ignore.
Rather than trying to bet on “the winning horse”, another option is to invest in an ETF like Defiance’s PSY. Joining the road of cutting-edge alternative medical investment products, first paved by cannabis ETFs (or weed ETFs), Defiance’s psychedelic ETF gives investors the opportunity to add this promising field to their portfolio, while reducing the risk inherent in investing in a specific company.
1 “Trends in anxiety among adults in the United States, 2008–2018: Rapid increases among young adults”, August 21, 2020 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7441973/
3 “A brief history of psychedelic psychiatry“, September 2, 2014 https://www.theguardian.com/science/neurophilosophy/2014/sep/02/psychedelic-psychiatry
4 “COMPASS Pathways Receives FDA Breakthrough Therapy Designation for Psilocybin Therapy for Treatment-resistant Depression”, October 23, 2018https://www.prnewswire.com/news-releases/compass-pathways-receives-fda-breakthrough-therapy-designation-for-psilocybin-therapy-for-treatment-resistant-depression-834088100.html
5 “Betting On Magic: Funding For Psychedelics Startups Reaches A Record High”, November 18, 2021 https://www.cbinsights.com/research/psychedelic-therapies-funding-startups/
6 “COMPASS Pathways Receives FDA Breakthrough Therapy Designation for Psilocybin Therapy for Treatment-resistant Depression”, October 23, 2018 https://www.prnewswire.com/news-releases/compass-pathways-receives-fda-breakthrough-therapy-designation-for-psilocybin-therapy-for-treatment-resistant-depression-834088100.html
7 “Atai Life Sciences Reports Second Quarter 2021 Financial Results and Business Update” August 16, 2021 https://finance.yahoo.com/news/atai-life-sciences-reports-second-110000373.html
9 “Numinus Wellness Closes Q3 2021 With $63.2 Million Cash Position, Lab and Trial Advances, and Strategic Expansion into Psychedelic Neurology” July 29, 2021 https://www.newswire.ca/news-releases/numinus-wellness-closes-q3-2021-with-63-2-million-cash-position-lab-and-trial-advances-and-strategic-expansion-into-psychedelic-neurology-845511452.html
10 “Herbal Supplement Giant To Enter THC, Psychedelics Industries, Seeking To Become First Household Brand To Do So”, November 9, 2021 https://www.forbes.com/sites/javierhasse/2021/11/09/herbal-supplement-giant-enters-thc-psychedelics-industries-seeking-to-become-first-household-brand-to-do-so/?sh=5a43dd7b351f