Psychedelics Take a Trip to the Market. It’s a Long Road.

A growing number of companies are asking investors to try psychedelic drugs. You may flash

A growing number of companies are asking investors to try psychedelic drugs. You may flash back to the 1960s, or to the cannabis stock bubble of 2018, but there’s nothing recreational about the current interest in psychedelics, at least among psychiatrists and their most desperate patients.

“I do believe that psychedelics hold significant promise as therapeutics,” says Jordan Sloshower, a psychiatrist at Yale Medical School who is studying the mushroom ingredient psilocybin as a depression treatment. A number of psychiatric patients get no relief from existing drugs, and the industry has had little new to offer them. So some patients turned to the oldest psychoactive substances known—magic mushrooms, ayahuasca, and ibogaine. Encouraging anecdotes inspired researchers like Sloshower to test the claims of these drugs, as well as newer ones like MDMA, the effective ingredient in the party drug Ecstasy. On Tuesday, voters in Oregon and the District of Columbia decriminalized adult use of psilocybin mushrooms.

Now, entrepreneurs are tapping public markets. In September, U.K.-based

Compass Pathways

(ticker: CMPS) debuted on the Nasdaq at $17 per depositary share. Its stock has since doubled to $36, for a market value of $1.2 billion. Compass is testing a proprietary formulation of psilocybin in patients whose depression wasn’t helped by standard treatments.

Mind Medicine (MMED.Canada), or MindMed, went public in March on Canada’s NEO exchange. At a recent price of 1.21 Canadian dollars, it has a market cap of C$340 million ($260 million) and plans to develop drugs derived from ibogaine and ayahuasca.

Field Trip Health

(FTRP.Canada) started trading in October on the Canadian Securities Exchange, where its stock now goes for C$2.90, valuing it at about C$150 million. Field Trip is setting up clinics to administer ketamine, a legal anesthetic that has antidepressant and psychedelic properties in low doses. Trials on safety and effectiveness have just begun.

It isn’t yet clear whether businesses like Compass or Field Trip will be clinics or drugmakers. Asked about that, Compass chief executive George Goldsmith said the question was premature. Investing in these stocks is probably premature, too.

Mood disorders like depression affect more people than any other psychiatric illnesses. Most patients are helped by generic antidepressants and psychotherapy, but those treatments don’t work for the several million Americans with “treatment-resistant depression.” Psychiatrists also struggle to help patients whose brain injuries have left them with post-traumatic stress disorder, or PTSD.

Research on psychedelics screeched to a halt after Congress banned the drugs in 1970. But stories circulated of patients who claimed long-lasting relief using psilocybin or LSD. In the past decade, psychiatrists at Johns Hopkins, UCLA, and New York University conducted small studies. The results were promising, so nonprofit groups got the government’s blessing to sponsor larger trials.

Usona Institute, a nonprofit, is testing psilocybin for depression, while the Multidisciplinary Association for Psychedelic Studies, or MAPS, is in Phase 3 trials of MDMA for PTSD. The Food and Drug Administration designated both studies as Breakthrough Therapies.

Dozens of U.S. clinics are using ketamine therapy to treat depression. Conventional antidepressants take weeks to start working, but a ketamine infusion gives quick relief that lasts a few days or weeks. Higher doses have a psychedelic-like effect that can help patients achieve psychotherapeutic breakthroughs and long-lasting relief, says Veronika Gold, a co-founder of San Francisco’s Polaris Insight Center.

Properly run psychedelic-assisted sessions are time consuming, Gold says, and therapists require training. “Just being a regular doctor or therapist does not give you the knowledge to use these medicines,” she warns.

Generic ketamine can be had for a few dollars a shot. But last year,

Johnson & Johnson

(JNJ) got FDA approval for Spravato, a kind of ketamine delivered as a nasal spray. It lists for $850 a dose. J&J has said Spravato’s approval required eight years of clinical trials, but clinicians like Gold and Sloshower note that those trials didn’t prove it was more effective than generic ketamine.

The psychedelic community has a collective ethos that honors open science and the native cultures that first used these drugs. It is wary of proprietary products like Spravato.

But investors have another reason to be wary: It’s unclear how the newly public companies will make a profit.

Field Trip plans ketamine clinics, but executive chairman Ronan Levy has his hopes on a proprietary psychedelic he aims to have in Phase 1 trials by 2022. In its Canadian listing statement, Field Trip estimated it will need $12 million to get through the next year, which is a little less than what it had in its coffers. Levy tells Barron’s Field Trip will be “the

Home Depot

for mental health and personal growth.”

Like Field Trip, MindMed has no revenue. Through June, MindMed had a deficit of $14 million, but a stock offering last month left it with $38 million in cash to fund early studies of LSD, MDMA, and other psychedelics.

After its IPO, Compass has $175 million in cash. The FDA designated COMP360, its psilocybin product, a Breakthrough Therapy for treatment-resistant depression, and Compass is conducting a trial. But if COMP360 makes it to market, it could find itself competing with psilocybin from Usona. “Such nonprofits may be willing to provide psilocybin-based products at cost or for free, undermining our potential market for COMP360,” notes Compass’ prospectus.

Write to Bill Alpert at [email protected]

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