Big Money Players Reveal New Strategies For Psychedelics

Big money is starting to take a more public interest in the science of psychedelics, which makes even the biggest skeptics take notice.

When organizations representing the big money guys, such as investors and bankers, begin to show a more serious interest in psychedelics, it instantly creates a ripple of excitement through the sector that causes even the biggest skeptics to pause and review for consideration.

A first-of-its-kind report by life science strategists at KPMG noted that if the flow of money into psychedelics is an indicator, “it looks like the market is poised for takeoff.” Major biopharma companies have made investments, and that they believe “this is the moment to get in on a new growth area in the treatment of a broad range of central nervous system (CNS) disorders.”

The KPMG report added that at least 18 venture capital firms are committed to spending more than $1.8 billion on psychedelic development, including:

One of the biggest deals in 2021 was between Delix Therapeutics and five investors for a total value of $70 million – just one of five deals for more than $20 million that happened in the last quarter of 2021.

The report also showed how Big Pharma was getting more and more interested as they watched developments from the sidelines, pointing to the recent success of clinical trials and the research findings about psychedelics treating more conditions that require less psychotherapy to be effective.

KPMG’s advice to Big Pharma?

“Given the continuing uncertainty about clinical potential and hypothesized mechanisms of how the class works, pharma companies may want to consider investments in psychedelic start-ups from corporate venture funds or innovation hubs first.”

Morgan Stanley presented its first official commentary on the psychedelics industry in July. In their report, the company noted that many patients simply do not respond to current mental health treatment options.

“Psychedelic therapies are an alternative approach to treating mental health that target unmet needs and redress the lack of innovation in the field,” which offer “a fundamental change in how mental health disorders are treated.”

The commentary also addressed the challenges for psychedelic medicine, stating that many clinicians and patients “are wary of psychedelics” because of the years of negative press and their Drug Enforcement Administration (DEA) Schedule 1 drug status.

“The public will need to see psychedelic medicine as real medicine. Clinicians will have to rethink and expand their definition of what an antidepressant is and even how we should be treating depression.”

Even with that challenge, big investment and banking companies like CitiCorp are now actively courting psychedelic companies. Citi invited a handful of them (Numinus, Mindset Pharma, Field Trip Health and Novamind) to “fireside chats” with the company’s biotech analyst Neena Bitritto-Garg as part of their new Psychedelic Drug Call Series earlier this year.

And in a July, 2021 “industry note,” Aegis Capital analysts wrote that the simple reason to care about psychedelic medicine is that the data coming out of clinical trials utilizing these substances is “extraordinary to the point of being unprecedented, we believe. We think investors are in an advantaged position of investing in a space which is still in the early innings, yet underpinned by molecules that have already amassed a compelling set of supportive data, including both efficacy and safety, and where there are numerous public companies from which to choose.”

Aegis also reported that the DEA is demonstrating “a progressive attitude by a key regulatory body which bodes well for the industry overall,” and that their expectation is that “rescheduling, a gating item to commercialization, can and will occur post any prospective FDA approvals.”

Iter Investments, a venture capital firm for emerging companies, with a portfolio of 17 psychedelics companies, believes that there is convergence in medical research, regulatory and public policy, and public awareness around the potential for psychedelic compounds. “A large number of new companies are operating across the psychedelic value chain, with some early success stories to date. The current funding gap for early-stage companies presents an attractive investment opportunity.”

Investors are beginning to see a bigger picture now with psychedelics. While there is a high probability of failure when working on the research and development of a psychedelic drug, as there is with any pharmaceutical drug, there are other aspects to the business that are more stable for investors to consider, such as the psychedelics infrastructure, including clinics.

While big U.S. banks are still skirting the edges of more involvement in the psychedelics industry, watching and waiting for federal regulatory changes that could allow them safe entry, some smaller Canadian banks are accelerating their work with cannabis companies now, potentially setting the stage for allowing psychedelics in the future.

But these positive reports from investment companies and Canadian banks fly in the face of what is still happening in the psychedelics industry with the banking community. For example, in October 2021, the Bank of America shut down the account of Scottsdale Research Institute (SRI), a Phoenix-based federally licensed research facility for cannabis and psilocybin that was conducting the only federally authorized study of medical cannabis for post-traumatic stress disorder for military veterans in the United States.

The institute’s chief researcher, Dr. Sue Sisley, tweeted her outrage: “SRI conducts FDA-approved controlled trials evaluating cannabis as medicine for treating pain/PTSD in military veterans & terminally ill patients this TRAGICALLY shuts down our research.”

Sisley told the Phoenix New Times that there are other banks that care about the progress of federally regulated and federally legal research and are eager to step up and support her work. “So we will be moving our funding from Bank of America and never returning. Our research continues without harm because other banks that care about scientific freedom were able to step up.”

The legal landscape of psychedelics is being closely watched by bankers and investors, as more discussion about the pure medical benefits of psychedelics are gaining traction.

There are encouraging signs of a greater acceptance of psychedelics from lawmakers in Congress, when, in July, two bipartisan amendments were proposed to the National Defense Authorization Act to study psychedelics for service members with certain health conditions, one from Rep. Matt Gaetz (R-FL) and the other one from Rep. Alexandria Ocasio-Cortez (D-NY).

In the meantime, science marches on in pursuit of predictable, personalized psychedelic medicine, carefully designed and studied, that should help ease any concerns from bankers and investors.

According to Mindset Pharma’s Chief Scientific Officer, Joseph Araujo, responding via email to questions from Psychedealia, there is a need to make the (psychedelic) drugs more convenient and more predictable.

“While the clinical data generated to date for psychedelic drugs is compelling, we need significantly more data to explore the potential applicability of both classic psychedelics as well as next generation drugs to treating a wider range of indications,” he wrote.

“Our view of the future development of the medical psychedelic space is that it will be varied and personalized, with certain individuals and indications responding better to different psychedelic-based medications than others. This is why it’s essential for drug development to progress beyond the ‘classic’ psychedelics.”

Dave Hodes

David Hodes is a business journalist based in the Washington D.C. metropolitan area. He has contributed feature articles to several cannabis and psychedelics publications, as well as general business/lifestyle publications, on a variety of topics. Hodes was selected as 2018 Journalist of the Year by Americans for Safe Access. He is a member of the National Press Club, and the deputy booking agent for the National Press Club Headliners Committee.


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