Big money pouring into psychedelics, research and development, possible legalization in California (Patreon)

Something significant happened today, a company called atai Life Sciences went public, raising over $250 million in new funds (in addition to over $360 million previously raised) that will go toward clinical trials and all aspects of the investigation and commercialization of numerous psychedelic compounds. The total valuation of the company is currently over $3 billion after its very successful first day of trading, making it the largest psychedelic related public company to date - this is twice the size of Compass Pathways for comparison purposes. This company is backed by Peter Thiel (billionaire cofounder of paypal).  Initially they were only planning to raise $100 million but apparently there was so much interest that they were able to raise far more money.

Of note is that atai was initially just a holding company investing in other companies in the space of psychedelic (and conventional) medicines until it later became more directly involved.  For that reason, they actually consist of 16 separately run entities, each focused on something different and spread out over Europe and the United States.  They are doing trials with DMT, psilocybin, Salvinorin A, and ketamine (all to treat depression), a proprietary compound RL-007 for schizophrenia, ibogaine, noribogain, and Deuterated Mitragynine to treat opioid addiction, deuterated etifoxine for anxiety, N-acetylcysteine to treat brain injuries, and MDMA to treat PTSD.

The advantage of this arrangement is that atai can leverage what each company is doing or has learned to help the other companies under its umbrella.  They can also help each company design proper clinical trials and assist in navigating all of the regulatory hurdles which can be considerable.  In theory this should help ensure that safe and effective treatments make it to people who need them, but only time will tell how effective this strategy will be.

Even though I am an enthusiast for this field, from an investment standpoint, I remain a bit skeptical.  These valuations are very high, they have nothing in phase 3 trials yet, and  phase 3 trails theselves can take 1 to 4 years to complete and only have about a 35% chance of achieving FDA approval.  In the meantime, the company has no income and they will continue burning through cash.  Early results are so promising however, that I believe FDA approval is inevitable.  Still, the profitability aspect of some of these treatments looks challenging.  For example requiring trained medical professionals to "trip sit" patients for many hours could be prohibitively expensive.  We also learned from Compass Pathways that there are certain safety issues that may not have been adequately addressed or that could result in significant liability.  

I am very happy to see that public markets are enthusiastic about psychedelic medicine though, we are in the midst of an amazing revival of research in this field and I eagerly anticipate the results.

In other news:  I am also keeping an eye on a bill that seems to be making some progress in California that would decriminalize psychedelics there statewide.    On June 1, California passed Senate Bill 519, a bill that legalizes the personal possession (but not sales) of certain psychedelic substances including psilocybin, DMT, ibogaine, mescaline, LSD, ketamine, and MDMA (peyote is excluded to protect the nearly endangered existing plants).  To be signed into law, the bill still has to be passed by the House and signed by the governor.  The next deadline is July 15th for further action to move the bill forward.