Magic mushrooms give investors a bad trip

Convincing Friends Considering an Expensive Divorce to Try a pharmacotherapy psychedelics may have been the most valuable financial advice German billionaire investor Christian Angermayer has ever given, according to colleagues in finance and technology. It won’t be long before the politicians are traveling together to settle their differences, they admitted.

When he’s not defending the therapeutic effects of psychedelics -sometimes with her friend the actress Uma Thurman-, Angermayer tries to consume them himself once a year (only where legal). He even convinced his parents to participate.

This charming candor made the founder and chairman of the Berlin-based drug development company Atai Life Sciences NV a an effective advocate for the potential mental health benefits of psychedelics such as psilocybin, the active ingredient in magic mushrooms. Although these compounds remain illegal in most places, in recent years they have seen an extraordinary boom in medical research and financial investment.

Angermayer is also leading by example: after Atai raised $260 million last year in an initial public offering that valued it at $3 billion, its family office pledged not to not sell its main stake for at least two years. Earlier this month, he doubled down by investing a modest amount in financial derivatives that pay if Atai’s share price doubles in the next three years.

But in this moment, charm offensive doesn’t work so well. An exchange-traded fund that tracks psychedelic stocks has lost two-thirds of its value since peaking last year. Although some of these companies have not suffered as much – for example, the enterprise value of GH Research Plc is still close to $730 million – retail investors who get carried away with enthusiasm have often suffered big losses. The fall also weighed on the heritage of Angermayer. Factoring in his money, investors now value Atai’s drug portfolio at $470 million.

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In 2021, psychedelic companies raised nearly $1.8 billion from public and private investors, according to research firm Psilocybin Alpha. But while clinical trial results have been very encouraging, the dozens of companies that have appeared in this space are mostly a long way from getting regulatory approval and therefore having a marketable product.

Rising interest rates have also made providers of capital less lenient towards companies that won’t make a profit for years, and psychedelic companies are no exception. Those who don’t have a strong cash cushion have a harder time getting financing.

Angermayer told me that investors bear some of the blame for funding “meaningless” companies. who promote psychedelics, but that they do not have “a clearly defined strategy or a viable economic model”. (Does not include Atai or his psilocybin company Compass Pathways Plc in this group.) I think capital providers will need more assurances about regulation, the scalability of psychedelic drug treatments, and the advocacy of human rights. intellectual property before carefully re-entering.

There is no doubt that the attitude towards psychedelics has changed lately. With the help of popular books like How to Change Your Mind by food writer Michael Pollan and support from influencers like Tim Ferris, psychedelics are quickly shedding their countercultural baggage.

Many in the medical and psychiatric community share this enthusiasm because of the mounting evidence that psychedelics can help treat depression, anxiety, addiction, and other mental disorders. The need is greater than ever, as the isolation and stress caused by covid has left many more people struggling with these issues, while existing drug treatments are not always effective.

For some, the wait may be almost over. Oregon is preparing to authorize psilocybin for therapeutic use starting next year, while Canada has begun allowing doctors to order the substances for treatment-resistant disorders. Having gained expedited status to test methylenedioxymethamphetamine (MDMA) for treating post-traumatic stress in 2017, the nonprofit Multidisciplinary Association for Psychedelic Studies may gain Food and Drug Administration (FDA) approval for its acronym in English) of the United States in 2023.

At the risk of generalizing, it appears that psychedelics help calm the ego, break negative thought patterns, and help some patients cope better with trauma. By stimulating neuroplasticity – the brain’s ability to change and make new connections – patients may experience a positive shift in perspective. There is evidence that these antidepressant effects can be quite long lasting.

Although not generally known to be addictive, psychedelic trips can be frightening and impair judgement, Therefore, therapists emphasize the importance of “the whole and the environment”, i.e. creating the appropriate expectations before the therapy and the appropriate physical and sensory environment to carry it out. . Patients may need hours of clinical supervision while travelling, as well as psychological support to prepare and process what they are experiencing.

Obtaining federal approval for psychedelic therapies will therefore only be half the battle. Government health programs and private health insurers must also be persuaded to foot the bill. Companies don’t typically disclose costs for psychedelic therapies, but analysts at Cowen estimate the cost to be $3,000 per treatment, compared to about $700 per year for daily antidepressants.

Reimbursement issues are one reason some investors doubt psychedelics will ever be a lucrative business. Another, somewhat ironic, hurdle is the potential effectiveness of drugs. If a few psilocybin trips cure a patient, how is a pharmaceutical industry used to repeat prescriptions and make money?

However, companies have found ways to convince investors that they will enjoy a return on their capital. One approach is to acquire a broad portfolio of psychedelic and non-psychedelic compounds, as Atai does, in order to be less exposed to clinical mishaps with a particular drug.

Others, like Field Trip Health Ltd. and Numinus Wellness Inc., combine drug development with the operation of therapeutic clinics, which have a more immediate revenue stream. In the United States, ketamine, an anesthetic and club drug, and esketamine, a related FDA-approved compound developed by Johnson & Johnson as a nasal spray, are already available at these types of centers.

The startups also hope to develop shorter-acting psychedelics, such as DMT (the active ingredient in the Amazonian drink ayahuasca), which potentially offers a more cost-effective experience with the same therapeutic benefits. (It is an open question whether the duration of up to eight hours for a psilocybin trip, or 12 hours for LSD or acid, is critical to the healing process.)

Unlike the cannabis industry, companies active in this field do not generally push for the legalization of the recreational use of psychedelics. And by synthesizing and modifying existing psychedelic compounds (which are natural or whose patents have expired), they hope to achieve better intellectual property protection, reassuring investors but infuriating purists.

Some of the private capital invested in psychedelics will end up being wasted, but much of it will help advance knowledge and regulatory acceptance of these molecules, and ultimately alleviate the suffering of people with mental disorders. It would not be the first time that a financial bubble has destroyed the wealth of short-term investors, to leave a legacy of innovation and social change.

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