Compass Pathways, the London-based start-up developing an experimental treatment for depression based synthetic psilocybin, the active ingredient found in magic mushrooms, has seen its share price rise by a third over its first month as a public company. Compass Pathways floated on the Nasdaq last month, raising $147 million in capital to continue its research clinical trials. The medical psychedelics company has since captured Wall Street’s interest to hit a valuation of $1.3 billion.
Compass Pathways’ two co-founders, husband and wife team George Goldsmith and Ekaterina Malievskaia, both now sit on shares worth $170 million each. The pair started to investigate the medical properties of psychedelics around eight years ago after Ms Malievskaia’s son suffered from depression during his first term at university in the USA.
Having not responded to currently prescribed therapies and drugs, Ms Malievskaia, a physician, began researching historical findings on the use of psychedelics in the treatment of clinical depression. His mother encouraged an alternative, experimental course of treatment that combined the use of psychedelics and ketamine with therapy. He recovered.
That encouraged Ms Malievskaia and her husband Mr Goldsmith to pursue further research into the medical properties of psychedelics as a treatment of mental illness. The theory is that those suffering clinical depression find themselves locked into a loop of negative thoughts their mind is unable to break free of. Psychedelics help break the loop, opening up the mind to change. It’s been described as helping return the brain to its ‘factory settings’.
Initially, the couple intended to continue to research synthetic psilocybin’s properties as a treatment for unresponsive depression as a non-profit organisation. However, by 2016 the amount of funding that would be required to fulfil their ambitions became apparent and they founded Compass Pathways as a private company, attracting investors such as controversial PayPal billionaire and tech investor Peter Thiel, who owns 6% of the company. The other investors who put in the $117 million Compass Pathways raised ahead of last month’s IPO include German mental health investment fund Atai Life Sciences, which is the start-ups single biggest shareholder. The two co-founders own 13% of the company each.
Compass Pathways has developed a synthetic version of psilocybin, which its founders and backers are convinced can, when combined with extensive therapy, alleviate the symptoms of currently untreatable forms of clinical depression. However, the company believes it will be 2025 before it will realistically start generating revenues.
Currently, Compass Pathways is running phase II clinical trials of its psychedelics-based treatment, which involves patients ingesting psilocybin and ‘tripping’ for 6 to 8 hours under the supervision of a trained therapist. Follow-up sessions are then conducted. Filings submitted to the US financial regulator, the SEC, ahead of the IPO, state that the company believes the process could produce “rapid reductions in depression symptoms and effects lasting up to six months”.
If data due to be reported over the second half of next year supports the early evidence, phase III trials will begin. If those also prove successful, approval from European and US regulators could mean Compass Pathways is able to start offering the treatment from 2025.
Currently, the company, which employs only 48 people, is small fry in the context of the pharmaceuticals industry. Especially against the backdrop that revenues are not expected for around another half decade. Which has seen sceptics attribute its early stock market success to an irrational buoyance currently sweeping Wall Street investors along.
However, the potential market for Compass Pathways’ treatment is huge. As is, believes Mr Goldsmith, the need for alternative treatments for mental illnesses including clinical depression. He told The Times newspaper:
“The mission is huge and the need is huge. The times that we are in demand that we take a good fresh look at this and really step up to the plate.”
Mr Goldsmith says that around 320 million people globally suffer from serious depression-related mental illness. 100 million of those do not respond to the treatments of therapy and medication currently prescribed. The cost of clinical depression to the U.S. economy alone is, calculates Mr Goldsmith, more than $200 billion a year.
Being able to bring its psilocybin treatment to market to help tackle that will prove expensive. Which is why the company chose to go public. The funds will, believes Mr Goldsmith put the “right amount of fuel in the tank to go on this journey, and to bring investors along. Sadly, this [depression] is a very common and large problem.”
As well as funding the clinical trials aiming to confirm the efficacy of psilocybin as a treatment of clinical depression, some of the $114 million raised by last month’s IPO will go towards researching alternative applications. One other mental illness Compass Pathways believes may benefit from its treatment is anorexia. Mr Goldsmith also comments:
“There’s a very interesting group we’re looking at — patients suffering with anxiety and depression after a cancer diagnosis.”
Compass Pathways may be leading the new vanguard of medical research into the potential mental health benefits of psychedelics but they are far from the first to explore the space. Swiss chemist Albert Hofmann was the first researcher to synthesise psychedelics when he created lysergic acid diethylamide, better known as LSD, back in 1938. Researching hallucinogenic Mexican mushrooms in the 1950s, he was also the first to isolate, or ‘discover’, psilocybin as their active ingredient.
However, much like medical research into cannabis, studies on psychedelics stopped in the 1960s as they were categorised as Class A drugs alongside heroin and cocaine, having been associated with the ‘Flower Power’ counterculture movement of the era. Several decades then past before the current wave of new research into medical benefits of both cannabis and psychedelics began.
The Medical Psychedelics Start-Ups Leading A New Wave Of Research
Compass Pathways is not the only start-up leading new research into the potential medical application of psychedelics. Canadian company Mind Med is conducting clinical trials on the use of LSD to treat anxiety disorder. It has also recently applied to list on the Nasdaq exchange in New York, which is gaining a reputation as the market for companies developing experimental treatments based on biotech and formerly banned drugs like cannabis and LSD.
Numinus Wellness is another start-up in the space that is quickly rising to prominence. The company is “advancing psychedelic laboratory testing, therapy, and research, and hope to create a lifelong relationship between the Company and its clients…a journey to heal and be well.”NUMI, as the company goes by, is developing an ‘ecosystem’ of health solutions based on
“developing and supporting the safe, evidence-based, accessible use of psychedelic-assisted therapies to treat a myriad of mental health ailments, primarily depression and drug & alcohol addiction”.
Unlike Compass Pathways, NUMI is not going down the synthetic psilocybin route, and has started to cultivate organic magic mushrooms rich in the compound at a 7000 sq. ft. facility licensed by Health Canada.
Another company in the psychedelics space is Red Light Holland Corp., listed on the Canadian Securities Exchange since summer of this year (2020). It has a different market to the other start-ups, and will “engage in the production, growth and sale of a premium brand of magic truffles to the legal, recreational market within the Netherlands,” where psychedelic truffles are legal.