When I last came to SXSW, Austin’s high rent version of Mardi Gras, in the ancient mid 90s, it was all about the bands. Times change. This year, as a journalist covering the event, I was invited to a SXSW talk by the president and CEO of the U.S. Chamber of Commerce warning against the evils of overregulation. Entering the SXSW exhibition hall, I was greeted by the massive floor presence of the CIA booth. True to form, the lovely CIA outreach woman insisted that they were not there to recruit. When I mentioned that I publish a news site that covers psychedelics, she enthusiastically shared that her best friend was deep into the topic and asked for my card.
This weird container turned out to be a strangely appropriate spot for experiencing the first wave of fallout from the financial crash now shaking the psychedelics industry. SXSW featured a three-day psychedelics track which brought out a representative group of leaders in the field. As they arrived in Austin, the surprise collapse of Synthesis Institute was on their minds, while the SVB bank run added another layer of unease. Then came the conference hallway chatter, which inevitably veered into stories about layoffs and companies closing their doors.
Going down. Here’s a summary of the carnage: Peter Thiel’s atai Life Sciences cut its workforce by 30 percent. Cybin scaled back by 15 percent. The Canadian companies Silo Wellness and Havn Life are restructuring. Businesses that rely on ketamine telehealth for their bottom line have been hit particularly hard. Mindcure is winding down operations. Field Trip is closing at least five clinics. Rumors floated about layoffs at Nue Life Health. And perhaps most dramatically, Ketamine Wellness Centers, acquired two years ago by Delic, Corp., shuttered its network of clinics overnight.
Looking ahead, Greg Ferenstein of the mental health consulting firm Frederick Research predicted, “It’s going to be a bloodbath.”
It’s likely that over 70 percent of psychedelic companies are in trouble, according to Tim Schlidt of Palo Santo, one of the most active VCs in the space. Schlidt has been privy to a good number of psychedelic balance sheets. “If a company has less than $2 million in the bank now, it won’t make it. Capital will be scarce at least until early 2024,” he said, adding that the banking crisis will make VCs more risk averse. A psychedelic drug development start-up would need even more cash to continue research, Schlidt noted, but they could keep the lights on for a year or two.
Saw it coming. We’ve entered the contraction that industry analysts have expected since the bubble burst in 2021. But Schlidt remains bullish on psychedelics being embraced by the mainstream in the long term, through both FDA approval and state level legislation. Drug policy reform “will still chug ahead,” he said, seeing no conflict between state regulated legal access to psilocybin, like in Oregon and Colorado, and psychedelic therapies made available through the biopharma model.
“The patient populations are so large, with different types of patients, that they’re in different lanes. Grandma might prefer the pharma route, while others will go to service centers.” As precedent, he pointed to pharma companies that have done well offering medications that overlap with nutraceuticals. “They can coincide,” he said.
A larger concern for Schlidt, though, is the contraction’s effect on psychedelic research. Some studies are already being discontinued, he said, as companies cut back on cash outlays and “leave academics high and dry.” Moreover, fewer businesses pursuing clinical trials means fewer studies undertaken, a shift that raises questions about the future of the 21 psychedelic research centers that have opened on U.S. campuses these past few years.
Forward motion. But most of the researchers, activists and industry people I spoke with at SXSW placed the financial crunch within the context of a larger mainstreaming of psychedelics that continues apace. “The train has left the station” is a phrase I heard several times.
Payton Nyquvest, CEO and founder of the Vancouver-based company Numinus, told me that his enthusiasm is as great as ever. He cited MAPS PBC heading toward FDA approval next year for MDMA-assisted therapy to treat PTSD, as well as the liberalization of laws in Australia. He expects Canada to follow with similar reforms soon, noting that Numinus is supporting Canadian training for psychedelic therapists, which includes an experiential session with psilocybin.
The conversation has shifted, according to Nyquvest, from whether or not psychedelics can be effective as medicine to “What are the best practices? What are the appropriate models of care? How does this work?” He noted that many of Numinus’ patients don’t come seeking psychedelic experiences, but rather are looking for mental health support more generally, after other therapies proved ineffective. In their last quarter, Numinus served just under 20,000 patients through their 13 clinics.
It’s often forgotten that much of the growth in psychedelic medicine will come from patients who are psychedelically naive. Nyquvest added that 80 percent of the ketamine-assisted therapy treatments Numinus provides in the U.S. are covered by insurance, which he credits to carefully building rapport with insurance companies. This is what psychedelic mainstreaming looks like on the ground.
30,000 foot view. It was sobering to speak through these issues with the psychedelics crowd at SXSW, an environment that screams corporate sellout. But as the easy money evaporates from the mind-manifesting medicine scene, at least some of the companies and initiatives that remain standing seem intent on fulfilling the potential that drew many of us to the psychedelics field in the first place.
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Image: Nicki Adams