The early days feeling remains for psychedelics investing, but its momentum may be solidifying after industry stakeholders gathered at a first-of-its-kind extensive business conference.
Investors were given a glimpse of the current growth path for a drug market that is trying to revolutionize modern medicine as established players in other areas watch with interest.
Organized by Microdose, the Wonderland psychedelics event hosted a variety of investment experts who commented on the current landscape of the industry and the challenges present today.
Finance takeaways in early days of psychedelics business
Dina Burkitbayeva, founder and partner with psychedelics venture fund PsyMed Ventures, said during the Psychedelic Capital Live panel that she has noticed increasing attention from traditional biopharma investors.
Thanks to this rising interest, Burkitbayeva added, the amount of critical eyes evaluating the space is also increasing, which she described as a good maturation point.
“These are very serious investors who are not yet jumping to invest to support the industry with their money, but the interest is very, very strong because of the fundamentals,” Burkitbayeva said.
In a separate panel conversation, Charlie Finnie, a private investor with Ambria Capital, said the entry of pharmaceutical players will be key to elevating the industry from its current position to the next big stage, despite the reservations some stakeholders may have about big pharmaceutical practices.
“It’s very politically popular to say, you know, ‘Get rid of big pharma,’” Finnie said during a panel on finance and psychedelics. “I think that’s totally unrealistic and a pipe dream and what you have to do is … understand the good things they can bring to the party, which is a ton of capital.”
Finnie added that the shortcomings big pharmaceutical players have had in the mental health space represent an opportunity for psychedelics to fill a gap. “If they reach out with a lot of money, a lot of expertise, a lot of know-how that accelerates this stuff, I think you have to embrace that,” he said.
Cody Shandraw, director with Ambria Capital, backed up Finnie, saying pharmaceutical companies are the best entities available to take a drug candidate all the way to the finish line.
“They are going to be the only ones that are going to take (it) from discovery to commercialization and getting this into the hands of everybody,” said Shandraw, who was awarded a recognition as a significant investor in the community by Microdose. “They are a necessary evil.”
Valuation process takes center stage
During a talk on valuation, experts explained their thought process when evaluating psychedelics companies.
Patrick Trucchio, managing director and senior healthcare analyst with HC Wainwright & Co., said that typically his firm is not modeling revenue lines in this space until at least the year 2026 or beyond.
The expert said a key for his research involves determining the application of the drug in question and figuring out how big the indication would be, meaning how many people it would serve in a year’s time.
“From a bottom-up standpoint, how much would this treatment cost, how many would be administered a year and then kind of modeling that out into a revenue and full profit model,” Trucchio said.
At the same panel, Juan Pablo Cappello, CEO and co-founder of NUE Life Health, said he sees companies being valued on scarcity primarily. NUE Life is a startup working on digital health solutions with a psychedelic approach.
“The valuations for most of these companies aren’t really grounded in traditional valuations. I think we have to accept that, and that’s actually a huge danger to the industry,” Cappello said.
When asked about the issues present in the lineup of companies in the space, Burkitbayeva said there are still companies that are trying to do too much for their current resources.
Additionally, Burkitbayeva added, there’s a missing gap in appreciating just how much capital it will take for some of the names to arrive at their destination.
Looming concerns raise need for stronger community
A group of investment experts shared some of the present trials of trying to ascertain a solid bet in the psychedelics arena, particularly when it comes to the amount of hype this industry has attracted.
“There is so much hype, it’s undeniable,” said Brom Rector, founder of Empath Venture. The investment expert highlighted that psychedelics need to be understood as process drugs and not a one-time cure for everything.
Sylvia Benito, chief investment officer with the ASK Family Office, said there are concerns about the level of hype overtaking psychedelics in the private space, particularly when it comes to which investors are interested.
Benito pointed to the emergence of cryptocurrency-based investors dabbling in the psychedelics market and causing companies to rely on euphoria investments.
Amid the many takeaways was also an urgent sense of need for a strong business community looking over the position of the industry and shaping its future.
“As a community we’re going to have to really come together and understand what the responsible ways are for this to be legalized, so that it does have enough of a controlled setting around, so people end up having really positive experiences,” Benito, a self-described trained shaman, said during the panel.
At a time when COMPASS Pathways (NASDAQ:CMPS) has announced the primary endpoint for its Phase IIb clinical trial using psilocybin treatment for treatment-resistant depression, the entire psychedelics industry bet seems stronger than ever.
The mark of the first big conference welcoming people in the space also indicates the growing presence of the market and its stakeholders.
Investor may be seeing the birth of the annual meeting hub for all things psychedelic business.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
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