Psychedelic medicine start-ups vet ketamine, psilocybin for depression

Biotech investors believe that psychedelic medicine will experience a revival in the wake of recent research studies as well as some early signals of support from regulators.

Last year, for example, the U.S. Food and Drug Administration (FDA) gave Compass a “Breakthrough Therapy” designation for its research into psilocybin for depression, allowing legal clinical trials to start. The FDA also expedited the approval process for esketamine, which is derived from the anesthetic ketamine, because many patients with depression don’t respond to normal treatments.

Adding further legitimacy to the space, Johnson & Johnson, the pharma giant, puts years of investment into studying into the benefits and potential side effects of esketamine. Its approval by the FDA represented the first new drug for depression in decades, although the medical establishment has stressed that more research is needed to better understand the long-term use of ketamine.

“A decision (like that) by FDA is the ultimate signal for investors,” said Brad Loncar, a biotech investor with Loncar Investments, who specializes in cancer and rare disease. “It shows that there’s a regulatory path forward for this class of drugs, which typically causes a flood of investment in the area.”

Others say that private investment in the space needs to be coupled with research into their social impact, as well as programs to support and guide patients.

“People are getting behind psychedelic-assisted therapies because they are desperate for real solutions that actually work, and for many, this treatment does,” said Liana Gillooly, a development officer at MAPS, a non-profit investigating the therapeutic uses of psychedelics, with an early focus on MDMA as a potential treatment for PTSD. But Gillooly said that funding needs to be set aside for “safe contexts” for these treatments to be administered, and not just for-profit drug development.

ATAI’s funding, which totals $43 million, comes from Michael Auerbach’s New York-based Subversive Capital, but also includes investors ranging from Apeiron Investment Group, which is Angermayer’s family office; Bail Capital, a private equity firm; and Efrem Kamen, founder of the health care fund Pura Vida Investments. Prior investors include billionaire investor Mike Novogratz and the Icelandic businessman Thor Bjorgolfsson.

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