Psychedelic biotech company Filament Health (OTC: FLHLF) has unlocked the process to create standardized dosing from natural psychedelics. It was no easy task, as nature thrives on variation.
Filament’s CEO, Ben Lightburn, recent spoke with Green Market Report about its goal and how the company continues to thrive in a challenging environment.
This interview has been edited for length and clarity.
It’s the first to get FDA approval to administer a natural psychedelic drug candidate in a clinical trial.
All other clinical trials are synthetically manufactured.
Is the difficulty to research psychedelic solutions rooted in the variations in a natural substance versus a synthetic substance?
There are a number of challenges when you’re dealing with something that’s natural rather than something that’s synthetic, like artificial.
As you can imagine, with a synthetically created substance like psilocybin or caffeine, or even THC, you get pretty much the same thing every time. There’s no natural variability because you’re constructing it from basically other chemical building blocks that you just essentially buy from the chemical store.
But when you’re growing something from nature, there’s always going to be some variability in all of the different crops that you get, in all of the different harvests that you get. So you need to overcome that variability with your extraction technology.
That’s what we’ve done. We’ve developed the first – and we still think the only – technology that actually permits you to make stable, standardized doses of natural psychedelics. Standardization’s important, but also stability is very important. Once you’ve made the product, it needs to maintain its potency over time. It can’t just sort of degrade.
So that kind of begs the question, it’s like, well, why bother doing any of this? Why not just make everything synthetically?
We believe that consumers of these substances prefer naturally made products. Just look at the cannabis industry. It’s overwhelmingly natural, even though synthetic options do exist. This is true in pretty much every industry. We’re not begging for more synthetic food coloring. We’re not begging for more synthetic caffeine. People want natural products.
That’s what we essentially started Filament to do. To make the first naturally derived pharmaceutical-grade psychedelics.
In cannabis, there’s a lot of conversation around the entourage effect. Is it the same with psilocybin?
That’s one of the main reasons why people actually want natural psychedelics. Just like in cannabis, there’s much more than just one compound living in the plant or the fungus.
In cannabis, you have all the different cannabinoids, THC, CBD, and then you have the terpenes, etc. In psilocybin, you have psilocybin, you have psilocin, you have norpsilocin, and the list goes on and on. The exact same effect is at play. And the evidence for the entourage effect, there hasn’t been any good evidence that’s been established or published, not yet, but there’s lots of anecdotal evidence.
Lots of people report that different strains of mushroom, this strain or that strain, have different effects. This one makes you laugh, and this one makes you social, and this one makes you yawn. And if those effects are true, it’s probably due to something that’s in the mushroom itself.
That’s why when we make a mushroom extract, we’re actually preserving the ratio and content of all those compounds that are naturally found in the raw material. When you make synthetic psilocybin, you just make exactly the same synthetic psilocybin all the time. You don’t have any of these other compounds, nor do you have any of the variability.
Do you foresee that we could start to get into a mushroom strain type of situation that we see similar in cannabis?
The strains are definitely all different. Just look at them, they all have a completely different appearance. If you go online and look at the mushroom company websites, all of them have a description. This one has this effect, and this one has that effect.
Certainly, we’ll have people looking at different strains of mushrooms, similar to what they do in cannabis, and heck wine for that matter. Every different strain and varietal has a different characteristic.
With regard to the investing side, we’re seeing some signs of strain within the psychedelic sector. We’ve seen a lot of companies start to run out of cash. Where do you see this starting to play out on the biotech side? Do you think that we’re going to see consolidation or just see some companies go out of business?
In the beginning, a lot of companies had many, I would say, kind of disparate elements of their business plans. You would see, “We’re going to run clinics, and we’re going to have mushroom supplements, and we’re going to develop drugs.” But all three of those things are completely different. Why would you do all three of those things in the same house?
Especially the supplement side. I always questioned it, because the mushroom supplement industry already exists and it’s already thriving, and it’s already a multibillion dollar industry. Just because you’re a psychedelics company selling reishi, what advantage do you have selling reishi over the dozens of other companies that are already selling reishi extract?
I know you’re looking for things for your deck and looking for ways to earn revenue, but does it really make that much sense, right? Because you’re just buying reishi powder from the existing suppliers and selling it.
We’re also seeing clinic companies struggle too. One of the biggest ones, Field Trip, is now in creditor protection up in Canada. They split into drug development and the clinics, and now the drug development one is being bought, taken private, and then the clinic one is in creditor protection. So it hasn’t gone particularly well.
People didn’t realize that if psychedelics are going to get developed as drugs, as FDA-approved drugs, it takes half a billion to a billion dollars in 10 years to get a drug approved. I don’t think a lot of them were ready for that reality. A lot of the hype that was around, in all aspects of the market, frankly, in 2020 and early 2021, those really served to pump up, psychedelic valuations. A lot of money flowed into the space.
And then the world changed, especially for psychedelics, but also for all biotech, for all high-risk stocks. And interest rates have risen, and there was inflation.
Psychedelics are kind of the perfect storm of all of that. On Nasdaq, you have a hundred biotech stocks that are trading below the value of their cash. So there’s been a broad pullback from all risky long-term projects, which is a combination of retrenchment from the overexuberance as well as the new economic reality.
It wasn’t a huge sector to begin with and to your point, we’ve already seen a little bit of shrinkage. Do you think that we have more to go?
We have more to go there. There are a lot of zombie companies, companies that are definitely on their way down, and a certain amount of that is healthy. There were way too many companies to begin with.
I think one of the surprising things is that a lot of people mentioned that there would be consolidation and that some companies would use the opportunity to buy up all the other companies, but that hasn’t really happened. There’ve been a very few acquisitions, but it’s not as if there was somebody going around gobbling it all up. But remember it’s very different to cannabis. It’s not like you’re Aurora and you’re trying to get the maximum number of greenhouse acreage.
It’s biotech, and the larger cap biotech companies, like Atai and MindMed, these companies have also been trimming their development programs. So in an environment where they are cutting internal programs because they also can’t raise money and they don’t know which ones they’re going to fund, it’s pretty unlikely that they’re also going to go to acquire new programs.
You can acquire the company for $20 million in stock or $50 million in stock, but now you have another drug development program that they have to fund. So if you can’t fund your internal ones, you’re not going to be able to fund the external ones either.
I was looking at Compass, and it looked like (it had) a huge amount of cash. But then when you look at how much it’s spending, it looks like they’re going to run out of money at the end of the year if they don’t get more in. Or something magically happens where they can start to bring in revenue. But, to your point, this FDA path is a long path.
It’s a long haul. The money that they’re spending is going up, because they have to pay for the phase 3 studies, which are very expensive. The studies have to run, and then they have to finish them and write the reports and all that sort of stuff.
Then they take that and they apply to the FDA, and then six months later, the FDA decides whether to approve their application. So they’re still 18 months away at the earliest from being able to sell products.
Then you have to have money for marketing it. It’s like now you start a whole new process of check writing.
It’s just a license to sell a product, it’s not a license to print money. Then you have to get insurance. All of these questions didn’t really get asked two years ago when all these companies were raising so much money, and now these questions are getting asked because it’s reality.
The one big unknown, the one big wrinkle to all of this is what is going to happen in the meantime with non-FDA-approved legalization. You already have legal psilocybin in Oregon state. You’re going to have legal psilocybin in Colorado coming up in the next 12 months. If these markets can take off and become well established and have good quality control and good rules and regulations in place, you might see a shift away from the focus on drug development.
You can imagine that if Colorado can make a market that is official enough that people are willing to go there for treatment, they may not wait around for the FDA-approved treatment, they might just go to Colorado and take that treatment.
Similarly, in Canada, the federal government is allowing us to prescribe psilocybin on a limited basis. So our psilocybin is being distributed to patients in Canada already, even though it’s not an approved drug. In Australia, beginning in July, they’re going to have legal psilocybin through a similar program as well. So if these programs can grow and increase and expand their scope, it might kind of undercut the FDA-approved market.
People can go get mushrooms now all they want. But that $1,500 ketamine infusion, that off-label, generic ketamine, that’s actually relatively cheap. But in psilocybin, when they have an approved drug, it’s going to be like $30 grand. So will they go get the $1,500 ketamine instead of the approved drug, which is $30,000?
Rather than get the street ketamine to avoid the $1,500, which you can already do with psilocybin, you just go get mushrooms. I don’t know if you have a loved one and a relative that is suffering from a severe issue, you’re probably not going to try homemade therapy. “Come on, grandma, let’s go to the basement and take a bunch of mushrooms.” Some people will do that, and it might work. And luckily it’s relatively safe, but if you have a Colorado or an Oregon where it’s like $1,500 or $2,000, or you have an approved pharma drug, which is $20,000 to $30,000, even if the insurance is paying, you’re still going to have a copay and all these other things that might cost more than the Colorado, Oregon treatment.