The psychedelic therapy market is an emerging industry that is not even in the first inning of a major growth cycle and there are several companies already working to bring breakthrough therapies for a range of mental health conditions to market.
2020 has been a banner year for the psychedelic therapy market and several companies have completed go-public transactions. Although we are favorable on the trend, most of the companies that have gone public are what we would consider less than quality opportunities.
In the near future, we expect to see higher quality psychedelic therapy companies go public and want to highlight two businesses that we are excited about. The companies, COMPASS Pathways and Wake Network, represent more advanced opportunities and we want to issue an update on these companies.
COMPASS: A Pre-IPO Company that is Backed by Smart Money
COMPASS Pathways is backed by Peter Thiel and is a mental health care company that is dedicated to accelerating patient access to evidence-based innovation in mental health. Currently, the company is developing psilocybin therapy for treatment-resistant depression and we are favorable on the total addressable market (TAM) that is associated with this indication.
In 2018, COMPASS received a breakthrough therapy designation from the US Food and Drug Administration (FDA) for its psilocybin therapy for treatment-resistant depression. The company has been focused on the psychedelic market for several years and represents a more advanced opportunity.
From a balance sheet standpoint, the company has the strongest balance sheet in the sector and is well positioned to execute on clinical trials following the completion of an $80 million Series B financing. This funding will play a key role in the company’s ability to execute and expand upon COMPASS’s lead program in psilocybin therapy for treatment-resistant depression.
COMPASS also plans to use the capital to support research into additional indications for psilocybin therapy, to advance the company’s preclinical pipeline, to develop digital technologies, and to establish new academic and clinical research partnerships. We are favorable on the company’s ability to raise capital and find this to be a major differentiator when compared to other psychedelic therapy businesses.
When it comes to COMPASS, we are most excited about the work that it has completed as it relates to clinical trials. In 2019, the company completed a Phase 1 study on COMP360 (psilocybin). There were 89 participants in the study and COMPASS reported that the treatment was well tolerated. The company did not report any serious adverse effects from the clinical trial and we found this to be of importance.
Another exciting opportunity for COMPASS is related to the work that it is doing to complete the world’s largest Phase 2b psilocybin study (216 participants). The company is conducting a dose ranging study in the United States, in Canada, and in Europe and a successful outcome could prove to be a catalyst for the entire sector.
From the balance sheet to the management team, COMPASS possesses the traits that we are looking for in a psychedelic company. We believe that COMPASS represents an advanced play on the psychedelic therapy market and will monitor how the management team is able to get through the clinical trial process. We believe that the business has substantial potential catalysts for growth and believe that it is an opportunity to be aware of.
WAKE Network: A Differentiated Growth Story
WAKE Network is a multi-faceted psychedelic therapy company that plans to complete a go-public transaction in the near future. The emerging opportunity is focused on advancing fungi and plant-based medicine by leveraging clinical research, wellness professionals, and technology.
One of the ways that Wake Network has been able to differentiate itself from its peers is through the development of a regenerative feedback loop that allows it to research, monitor and incorporate results from clinical studies so as to personalize medicine and reduce the level of ambiguous results from traditional medicine.
We believe that WAKE Network has an attractive operating structure and are favorable on the amount of value that can be created between its divisions. The company operates an integrated business model that provides it with multiple revenue streams and we believe that the management team will be able to find synergies between the following divisions:
- Clinics: Has clinical immersion platforms in Jamaica, the Netherlands, California, the British Virgin Islands, and Brazil.
- Research: Formed strategic partnerships that are focused on R&D and technology
- Products: Develops and sells functional mushroom supplements through a direct-to-consumer model. The company plans to expand to plant medicine and psilocybin derived treatments
- Intellectual Property (IP): The company is working on being granted patents for proprietary formulations, strains, dosing, therapy protocols, and delivery methods
From a human capital standpoint, WAKE Network has been ahead of the curve has attracted some of the smartest psychedelic therapy focused scientists and is led by a team that has diverse expertise in a variety of industries. Dr. Olga Chernoloz is one of the most important members of the Wake Network team and is the director of the psychedelic research at Wake Network. Dr. Chernoloz serves as a scientific advisor to The Toronto Centre for Psychedelic Science and has extensive experience providing scientific advisory services to cannabis and psychedelic companies.
Over the next year, we expect WAKE Network to record major milestones and notable advancements as it relates to its assets in Jamaica as well as its clinics in the Netherlands, in the British Virgin Islands, in Brazil and in California. The company represents a differentiated opportunity that has significant potential catalysts for growth. We consider WAKE Network to be one of the higher quality plays on the psychedelic therapy company and is an opportunity that we are closely following.