The Psychedelic Therapy Company Treating Mental Health

The results of last month’s elections really got us excited. It will become one of those pivotal periods in history when we can precisely identify the moment that real change began. We’re talking, of course, about all of the drugs that were legalized and decriminalized in November across the United States. The news that states like Mississippi and South Dakota just legalized weed wasn’t even the biggest jaw-dropper. No doubt the real shocker of the night was the state of Oregon decriminalizing hard drugs like cocaine. That overshadowed the other big move in the Beaver state: The passage of Measure 109 gives legal status to the use of psilocybin, the main manna from heaven in magic mushrooms, for treating mental health. The Age of Psychedelic Therapy is upon us.

We made our first trip into the mushrooming psychedelic therapy market earlier this year with a list of companies representing the first wave of guinea pigs pioneers. Aside from Oregon, only five cities have decriminalized psychedelics like mushrooms and peyote. While there is still a healthy amount of regulatory risk in both the cannabis and CBD markets, that’s nothing compared to convincing the government and public to approve powerful drugs for day tripping into the ego for fun and profit. (Never mind that each half of both believe the other already lives in a fantasy world.)

The Psychedelic Therapy Market

Still, that hasn’t stopped the psychedelic market from rapidly taking shape against a vast backdrop painted in vast shades of grey. How do we know? Because there are already several psychedelic therapy market reports already hot off the presses telling us so. Take the press release on a report from Data Bridge Market Research, which projects the psychedelic drug market to grow at a compound annual growth rate of 16.3% to reach $6.85 billion by 2027.

Sign us up. Credit: Prohibition Partners

There’s certainly a huge potential market for using psychedelics to treat depression, anxiety, and addiction: About a quarter of all Americans are diagnosably crazy in any given year, according to the National Institute of Mental Health Disorders. Depression accounts for about 9.5% of mental health cases annually. Anxiety disorders, including post-traumatic stress disorder (PTSD), affect 18% of people ages 18-54 in a given year. You can read through a bunch more stats here on depression and anxiety. As far as addiction: In 2018, more than 20 million people had a substance use disorder, according to a report from the Substance Abuse and Mental Health Services Administration. People are having a particularly hard time coping with COVID-19: A government survey found anxiety had tripled and depression quadrupled compared to a 2019 baseline. 

Psychedelic Therapy Drugs

The days of therapy being all about Dr. Freud and mommy issues are long gone. Mental health has embraced everything from virtual reality to wearables to artificial intelligence, so why not party drugs and shaman spirit food? There’s already one such drug on the market from Johnson & Johnson (JNJ), which received approval last year in both the United States and Europe for a ketamine-like nasal spray for depression. An anesthetic that detaches the user from reality, special K (as ketamine is known on the streets) can cause dream-like states and hallucinations. However, in a controlled setting, ketamine-like drugs, as well as other psychedelics, can help produce almost immediate breakthroughs by disrupting ingrained patterns of thinking that affect depressed, anxious, or addicted brains. Our earlier article on psychedelic therapies for mental health goes deeper into the science.

List of drugs by level of addiction.
Psychedelic therapy is partly about swapping the most addictive drugs with kinder, gentler alternatives that take you to an alternative reality. Credit: ATAI Life Sciences

Other psychedelic therapy drugs include:

  • Psilocybin – The OG of psychedelics, found in more than 100 magic mushroom species around the world. 
  • N,N-dimethyltryptamine (DMT) – The active psychoactive substance behind the South American beverage ayahuasca.
  • 3,4-methylenedioxy-methamphetamine (MDMA) – Better known as ecstasy (if you’ve ever done it, you know why), MDMA could be the first psychedelic-like drug to be approved by the FDA to treat PTSD.
  • Arketamine and esketamine – Related to special K, both are being studied as powerful antidepressants.
  • Ibogaine – This natural psychoactive compound comes from the root bark of an African shrub, Tabernanthe iboga, with a focus on treating opioid addiction.
  • Kratom – Another plant-based compound for swapping a less addictive-drug (with the added bonus of also being a stimulant) for opioids.

Believe it or not, there’s actually one company that’s technically working on all of the above and more.

ATAI Life Sciences

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Founded in 2018, ATAI Life Sciences is a German biotech startup that acts more like a holding company in that it invests in or acquires businesses developing psychedelic therapies. It has already raised about $200 million, including a $125 million Series C round announced last month. The name most people talk about when it comes to the investors is Peter Thiel, the iconoclast billionaire who co-founded PayPal (PYPL) and big data firm Palantir (PLTR). Thiel has certainly embraced some of the edgier biotech themes like boosting longevity through blood transfusions, so you figure he’s already benefiting from micro-dosing.

The other name retail investors should know is Christian Angermayer, co-founder of ATAI Life Sciences, because it’s highly likely he would be the driving force behind the company eventually going public (more on that later). Angermayer’s biggest win to date was a merger of his pharmaceutical company Ribopharma with U.S.-based Alnylam Pharmaceuticals (ALNY), which today sports a $15 billion market cap. So he’s got some bonafides (and a net worth reportedly north of $700 million). In ATAI, Angermayer has rapidly built up a portfolio of about a dozen companies, most specifically developing psychedelic therapies. This guy is so committed to the cause of better mental health through chemistry that he got the molecular structure of psilocybin tattooed on his arm:

A tattoo of molecular structure of psilocybin.
Strange name for a girlfriend. Credit: Twitter

Now, let’s take a quick look at ATAI’s portfolio of companies for Psychedelic Therapy.

ATAI Life Sciences Portfolio

Portfolio of ATAI companies.
Credit: ATAI Life Sciences

Major Investments

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No doubt the tattoo is related to London-based Compass Pathways, a publicly traded company focused on synthesizing psilocybin. In 2018, the FDA gave the company’s drug candidate, COMP360, “breakthrough therapy” status for treating clinical depression. ATAI is among the nearly dozen investors, including Thiel’s Founders Fund, who sank more than $116 million in Compass Pathways (CMPS) before it went public on the NASDAQ in September. That raised another $127.5 million with a valuation just south of $600 million. Just three months later, the stock is still riding the 2020 market freak train, with a market cap barely south of $2 billion. Last we heard, Compass was in a phase IIb clinical trial for psilocybin therapy in 216 patients with treatment-resistant depression in 21 sites across Europe and North America. The main goal of the study is – as it always should be when you’re tripping – to figure out the optimal dose.

Joint Ventures

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Bloomberg noted that it certainly got Angermayer a higher net worth after netting about $300 million after the IPO as part of his 22% stake. We actually profiled Compass earlier this year before all that went down, as well as another ATAI-linked company in DemeRx, in our original coverage of psychedelic therapy companies. ATAI is supplying up to $22 million to help finance a joint venture to develop Ibogaine as a treatment for opioid addiction. The current drug pipeline is still in the early clinical testing stages, though ATAI said some of the money from the Series C will support work by DemeRx.

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Another company that we mentioned briefly in that article is Entheogenix Biosciences, another joint venture involving ATAI and an AI computational drug discovery company called Cyclica. The new company will leverage Cyclica’s AI-enabled computational biophysics platform to generate psychedelic-based drug candidates to treat mental health conditions such as schizophrenia and depression.

Acquisitions

ATAI acquired New Yawk-based Perception Neuroscience in early 2019 and has earmarked some of those Series C dollars for really kicking off the hard clinical work to prove that arketamine can be a gentler and kinder antidepressant than the current cocktails on the market. So far, it’s shown promise in cheering up depressed mice and rats. Considering the current rat race, maybe arketamine will cure what ails our addled brains, as a Phase 1 clinical trial gets underway.

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Speaking of cures: ATAI added another New York pre-clinical startup this year when it acquired Kures, which raised about $4.2 million in its brief three-year existence. The company’s CEO is also the chief science officer at ATAI, Dr. Srinivas Rao, and has both a Ph.D. in neurobiology from Yale Graduate School and an M.D. from Yale School of Medicine. So Kures has that going for it, along with a kratom-derived product, KUR-101, which has begun early clinical trials.

Launches

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ATAI has also launched its own homegrown companies, including Viridia Life Sciences in June. Viridia will focus on developing psychedelic therapies based on DMT, which has the advantage of lasting only about 15 minutes versus the standard six-hour hallucinatory trip from magic mushrooms or LSD. Part of the goal will also be to investigate other ways to administer DMT to patients other than the standard acrid drink in the middle of the South American jungle intravenous delivery form.

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In conjunction with Viridia, ATAI also launched IntroSpect Digital Therapeutics, a platform for creating various kinds of digital services and products, such as remote patient monitoring and precision medicine strategies for delivering optimal doses and formulations. One early indication of what IntroSpect might get into: The new CEO led the development of an artificial intelligence device at another biotech to help treat Alzheimer’s disease based on biofeedback from the patient. 

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A third launch this summer was the creation of EmpathBio, which will develop psychedelic therapies based on MDMA to treat PTSD, a condition that reportedly affects as many as 13 million people in the United States alone. A phase II clinical trial conducted by the Multidisciplinary Association of Psychedelic Research (MAPS) showed that 56% of participants no longer met the criteria for PTSD two months after the final MDMA-assisted psychotherapy session. Additionally, researchers followed up with 91 participants 12 months later and found that 67% still did not meet PTSD criteria.

Other companies in the ATAI fold also include:

  • A partnership with GABA Therapeutics, a Los Angeles startup that raised $15.5 million in a Series A last year to develop a non-psychedelic anti-anxiety medication similar to Xanax but without the side effects.
  • Angermayer is listed as an investor in a Series A for Innoplexus, a German startup that applies machine learning to analytics and other areas of health sciences.
  • ATAI has also invested in Neuronasal, a company developing a non-psychedelic nasal spray treatment for concussions and other brain injuries using a supplement called Nacetylcysteine (NAC).

Conclusion

Several sources that we consulted for this article have suggested ATAI is thinking about going public next year. Let’s hope that doesn’t come in the form of a special purpose acquisition company (SPAC). Psychedelic therapy is the sort of nascent, high-risk market that would only serve to increase the volatility seen in the roulette wheel-style investing that SPACs seem to specialize in. We’ve seen that pattern emerge in NewSpace companies like Virgin Galactic, a space tourism stock, and Momentus, which is doing last-mile delivery in space. SPACS have also become a magnet in the high-risk electric vehicle market, as exemplified by the Nikola Motor Company and its cars that work only especially well rolling downhill. 

While it’s easy to dismiss psychedelic therapy because it is a new and risky venture, there’s actually some reason to be bullish. Unlike cannabis or CBD, there’s actually quite a bit of real clinical evidence that shows many of these drugs work as advertised. Perhaps psychedelic medicine could turn out to be a better bet than cannabis in the long run. In part, that’s because psychedelic therapy will remain largely the realm of healthcare, meaning the pharmaceutical industry will control access (and prices) to these drugs. 

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