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How an Investor Evaluates Five Leading Psychedelic Therapy Companies

How an Investor Evaluates Five Leading Psychedelic Therapy Companies

Five publicly traded companies have established themselves as early leaders in the evolving market for psychedelic-assisted therapies. Compass Pathways, MindMed, Numinus, Field Trip and Cybin are among the companies leading the field in market capitalization or the total market value of their outstanding shares. All five companies are receiving strong support from investors. 

Lucid News talked with Lindsay Hoover, managing partner of the JLS Fund, to gain insights into how an investor looks at the market strategies of these companies which are developing therapies based on DMT, MDMA, ibogaine, psilocybin and LSD. 

The JLS Fund was created to invest in companies at the intersection of science, technology and neurology with an eye on the potential of plant-based and psychedelic medicines to heal illness and enhance overall wellness. The fund is especially interested in tools that facilitate drug development and delivery and optimize therapeutic benefits. Hoover also independently invests in companies in the psychedelic space, including Lucid News. 

So what does Hoover look for when evaluating the prospects of companies creating psychedelic therapies? One important criteria is how far a company has progressed in clinical trials that may lead to FDA approval of a therapy or a drug targeted for a specific condition. This analysis is part one of a two-part series that examines benchmarks that matter to managers of funds like JLS. 

A cluster of mushrooms at the Field Trip research and cultivation facility at the University of West Indies (UWI) in Jamaica. Photo credit: Rupika Delgado.

Frontrunners Compass Pathways and MindMed

Many companies developing psychedelic-assisted therapies are investing in research, but Hoover notes that Compass Pathways has an early lead with its Phase II clinical trials for its synthetic psilocybin product COMP 360

“If you look at it from an investor perspective, Compass is ahead of the race on clinical trials and raised significant capital even before the recent release of promising – but not definitive – Phase II clinical data,” says Hoover.

Compass has indeed amassed a large war chest raising $116,200,000 in funding over three rounds, with $80,000,000 from their latest Series B round on April 27, 2020. The B raise is a substantial uptick in funding from their seed round of £3,000,000 three years prior – which gives Compass the lead in market capitalization among all companies developing psychedelic therapies. 

Hoover notes that the company is also pursuing an assertive strategy on intellectual property (IP) for its psilocybin therapy to treat major depressive disorder (MDD) including treatment-resistant depression (TRD). Compass’ patent applications and patent for the formulation of for COMP 360 have been challenged by critics who say the company is claiming ownership over past research and a crystalline form of a long-established molecule. The company has also been criticized for what some view as an attempt to patent common elements of psilocybin-assisted therapy such as “a room with a substantially non-clinical appearance.” 

Despite promising Phase II data, Hoover says Compass’ ability to defend IP claims to its proprietary formulations and therapeutic processes may prove challenging. But she notes that Compass has an early-mover advantage both operationally and in its capacity to acquire key assets and talent. 

Hoover says that like Compass, MindMed is also pursuing an aggressive IP strategy working with the oldest university in Switzerland, the University of Basel, to acquire an existing portfolio of patents. MindMed signed a multi-year agreement with the laboratory of Dr. Matthias Liechti at University Hospital Basel. The deal gives MindMed exclusive worldwide rights to data, compounds, and patents associated with the laboratory’s Phase 2 clinical trials of LSD for treatment of anxiety and research into other psychedelic compounds.

MindMed is also developing 18-MC, a derivative of ibogaine which it hopes can be used to treat addiction. Some analysts have expressed concerns that MindMed’s drug development strategy is somewhat flawed or that the candidates they’re working with might not quite have the desired outcomes. Hoover believes, however, that MindMed has taken a prescient, resourceful approach to development, partnership and IP acquisition.

“Between Compass and MindMed, they have enough money and knowledge. They’re already in trials and publishing clinical data,” which positions them as market leaders, says Hoover. “Both companies are in a position to acquire the IP of others.” 

When the initial enthusiasm over the development of psychedelic therapies settles into the realization that it will take some years before there will be any commercialization of these treatments, Compass and MindMed will likely survive as they both have a significant amount of capital, says Hoover. What they need now from an investor’s perspective is a strong management team capable of executing a plan and a strategy to pick up IP along the way.  

“Investors are counting on this happening and have been for a while,” says Hoover. She says her investment group believes that there will be public companies that meet the criteria for long term success in the psychedelic space and Compass and MindMed have already demonstrated their strengths. “Acquiring or partnering with other companies is part of their strategy for survival,” says Hoover. “We know they’re already talking to all the companies in this sector that have interesting patent positions and interesting scientific themes, pursuing exciting positions.” 

Numinus and Field Trip are each pursuing different business strategies that involve the creation of clinics that offer psychedelic therapies. Numinus is focusing on extractions of psilocybin mushrooms for Treatment-Resistant Depression (TRD) while Field Trip is working on treating depression in a clinical setting with esketamine, a form of ketamine sold as a nasal spray under the Spravato brand.

Researchers at the Field Trip research and cultivation facility study psilocybin-producing mushrooms and plant-based psychedelics at the University of West Indies (UWI) in Jamaica. Photo credit: Rupika Delgado.

The distinctions between different types of depression may seem like splitting hairs, especially as companies developing psilocybin therapies are now attempting to distinguish their target demographic between TRD, and for example, Major Depressive Disorder (MDD), also known as Clinical Depression, or merely Depression, 

By targeting their therapies for different patient groups, these companies are addressing the shifting approach to treating depression which is characterized by at least two weeks of pervasive low mood, low self-esteem, loss of interest in normally enjoyable activities, low energy, and pain without a clear cause. 

The definition of depression has evolved to include treatment-resistant depression and clinical depression as defined in the Diagnostic and Statistical Manual of Mental Disorders (the current version is DSM–5). Manic depression has also shifted to what is now known as Bipolar Disorder.

The present FDA-approved medication for treatment-resistant depression, Olanzapine-Fluoxetine (Symbyax), is a combination drug that contains the active ingredients in fluoxetine (Prozac) and olanzapine (Zyprexa) together in one tablet. These drugs have not evolved in decades. The resurgence in psilocybin research offers hope for an alternative to these medications and other selective serotonin reuptake inhibitors (SSRIs) now commonly used to treat depression.

How necessary is it for companies to focus on one specific form of depression instead of taking the market for general mood-enhancing or mood-stabilizing treatments into consideration? 

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According to Hoover, the distinction has more to do with the strategy of getting products approved through the FDA than demand for these medications once they’re on the market. 

“There’s the off-label use of products,” says Hoover. “We understand that companies might be trying to get a fast track with designations for indications which may be orphan or maybe harder to treat. There’s a strategy involved in selecting those designations, because they’re trying to demonstrate to the FDA that they can serve a market that’s particularly underserved or might be particularly unique and challenging to address and thus achieve break-through or orphan designation. But at the end of the day, those who get through the trials with an approval will be the first ones to be able to try off-label indications because they will have an approved drug in the market.”

“At a certain point,” she says. “The process of addressing specific forms of depression, for example, may shift to some degree whereby the first approved therapeutics are then tweaked for dosage and delivery mechanisms to better serve particular patient groups. To some degree, the efforts to calibrate dosages and delivery formats for particular indications – such as the severity of depression – are a factor in the design of proprietary formulations and new molecular entities, with certain companies for example focusing on developing the first medications that can be taken orally at home. But, those who are first to market with approved therapeutics will have leverage to explore other indications.”

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Field Trip Clinics and Jamaican Research Center

Field Trip believes that because the therapeutic effects of psychedelic-assisted therapies rely so significantly on the experience of the treatment, as well as the choice of psychedelic itself, the company focuses on end-to-end development and delivery of psychedelic therapies through its own clinics which currently provide ketamine-assisted therapy.

Hoover says she was initially skeptical about the “clinical model.” But she notes that Field Trip has raised enough money to carry out a novel, chemical entity strategy leveraging its network of clinics. She says this approach provides the company with a great “potential feedback loop” not only for gauging effectiveness of therapeutics, but also for refining the patient experience.  

The new Field Trip research and cultivation facility for the study of psilocybin-producing mushrooms and plant-based psychedelics based on the campus of the University of West Indies (UWI) in Jamaica. Photo credit: Rupika Delgado.

In regards to psilocybin therapies, Field Trip is building out the physical spaces for providing these treatments through its Field Trip Health division which presently develops clinics for ketamine therapy. Field Trip clinics are currently open in Toronto, New York, LA, Chicago, and Atlanta and Houston. 

An additional clinic in Amsterdam, which is expected to open in a few weeks, will provide therapy with truffles containing psilocybin. The Amsterdam clinic is also developing psychedelic drugs and products through its Field Trip Discovery division which is advancing clinical trials for the compound FT-104. This next-generation psychedelic molecule is similar to psilocybin in terms of subjective experience and receptor binding in the brain. The company hopes to have Phase 1 clinical trials for FT-104 underway by the end of 2021. 

“We asked ourselves an analytical question – can we find a molecule that is very psilocybin-like in it’s a great experience both subjectively as well as objectively, that has a much shorter duration. And if so, then we think we can thread the needle so to speak in terms of having an experience that’s long enough to create the impact because there is a question about whether a super short or longer DMT trip can actually create the therapeutic outcomes,” explains Field Trip’s Executive Chairman Ronan Levy. 

As Field Trip develops its FT-104 designer molecule, it is also conducting research into psilocybin-producing mushrooms. The company is developing model cultivation techniques and genetics through its recently-opened research and cultivation facility within the Faculty of Science and Technology on the campus of the University of West Indies (UWI) in Jamaica. The research center is dedicated to studying psilocybin-producing mushrooms and plant-based psychedelics. 

From a product development perspective, Field Trip is focused on cultivating psilocybin mushrooms through its UWI facility to provide psilocybin therapy in jurisdictions where it’s legal or on track to become so, such as in Oregon and the Netherlands. While psilocybin therapy was approved by voters in Oregon, the framework for legal delivery of the therapy is still being determined. 

According to Hoover, creating a clinic setting and interacting with patients gives Field Trip an edge because it can collect data about effective treatment. Once the company receives approval for its therapies from the FDA or other regulators, it will also have an infrastructure to deliver it. 

Hoover observes that companies such as Field Trip, Numinus and Cybin, which are building treatment centers, can also generate income from these clinics, which is useful given how expensive it is to develop therapeutics and deliver a capital intensive care model. 

“They can deliver approved therapies now, such as ketamine, and add additional therapies and other services to their clinics to offset the infrastructure overhead, while maintaining something of an “intelligence advantage” regarding the patient experience,” says Hoover. 

Part 2 of this story will look at the challenges of meshing a clinical model with drug development and the market strategies of Cybin and Numinus. 

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