Investors Embrace Psychedelic Biotechs

MindMed raises institutional capital, nears FDA clinical testing

Institutional investors are becoming more involved in the evolving psychedelic biotech industry, helping companies in the new sector raise more capital and move closer to regulatory approval for their innovative therapies.

“I think 2020 was the year of the psychedelic unicorn, but 2021 is the year that real institutional capital comes into this space,” J.R. Rahn, co-founder and CEO of psychedelic medicine biotech Mind Medicine Inc. (MindMed), said in an interview with Advisors Magazine. “As the space starts getting indexed by biotech funds and other institutional investments, it’s going to separate the leaders of the pack from the folks who are just jumping in.”

MindMed (NEO: MMED), which went public in early 2020 on the NEO Exchange in Toronto, raised another $72.7 million this winter through an upsized short form offering. The underwriters were Canaccord Genuity, Eight Capital and CIBC.

Rahn611x419“For the first time ever in the psychedelic medicine industry, we were able to get a commercial bank to come into our syndicate,” Rahn said. “CIBC is one of the Big Five banks in Canada. Also, if you look at Compass Pathways {another psychedelic biotech}, they also had investment banks sponsoring their NASDAQ listing. So this is a big moment for us all.”

Rahn added institutional investors are favoring companies that seek a federally-regulated approach to psychedelic therapies through the FDA and other regulators. He said companies pursuing state-by-state legalizations are not drawing institutional backing. Companies like MindMed and Compass are following a federal approach that will ultimately provide a more scalable solution.

“I think we are proving that model is the right way forward,” he added. “We are really creating a new asset class here. When you create a new asset class and a new treatment paradigm, the financial backers will be there.”

Another indicator of the sector’s investor appeal, Rahn said, was the introduction of the world’s first psychedelics-focused exchange traded fund. In January 2021, Horizon ETFs Management launched its Psychedelic Stock Index ETF (NEO.PSYK). The fund includes MindMed and 16 other listed North American life sciences companies.

Seeking FDA-Approved Clinical Trials
Alongside its financial success, MindMed’s efforts to introduce new therapies are also progressing. Rahn said MindMed’s most significant development recently was its productive pre-IND (Investigational New Drug) meeting with the FDA on Project Lucy, one of the company’s lead candidates. MindMed is now preparing for a Phase 2b clinical trial program to develop an LSD-assisted therapy for anxiety disorders. (Project Lucy is named for the Beatles song, “Lucy in the Sky with Diamonds”)

“What we are seeing in the midst of COVID-19 is a large increase of the use of antidepressants such as benzos (benzodiazepines) and Xanax, at the beginning of the crisis,” Rahn said. “Globally but especially in America, anxiety has become a very big problem. We’re all in isolation.”

Rahn said the FDA agreed with the criteria MindMed plans to review in Phase 2b, setting the stage for the company to file an IND (investigational new drug). The IND would lead to a multi-center clinical trial in the United States with LSD-assisted therapy. MindMed expects to receive approval this spring. By August, it would open the IND with the FDA for the first Phase 2b clinical trials to evaluate experiential low-dosage psychedelic assisted therapy with anxiety patients.

To help drive regulatory approval, MindMed recently hired Robert Barrow as chief development officer. A veteran pharmaceutical executive, Barrow has more than a decade of experience leading drug development programs for novel treatments before FDA and EMA (European) regulators.

“In our little space, this is a big move,” Rahn noted. “Robert has particular experience with psilocybin, getting its Phase 2B trial breakthrough therapy designation with the FDA.”
Several MindMed studies are already underway. The company published one study on LSD doses conducted in collaboration with the University Hospital Basel in Switzerland. Rahn said the study found that the higher the dose of LSD, the more easily patients achieve “ego dissolution,” an important milestone in helping people reflect on their lives in different ways. Also in Switzerland, MindMed has launched the first-ever clinic trial combining MDMA and LSD. The Phase 1 trial is studying whether the combination of those two substances can offset some of the potential unpleasant effects of taking LSD alone.

“What's most interesting about psychedelic assisted therapy is that psychedelics aren't going to solve everything,” Rahn explained, “but they do offer a catalyst for a patient and mental health. When you're treating a mental health disorder or an addiction, it's about creating the right behavior right. We believe that psychedelics are that catalyst.”

Building a Telemedicine Platform
MindMed also foresees auxiliary opportunities in the pre-care and after-care markets. While Project Lucy addresses the drug component, Project Albert focuses on the after-care aspects of psychedelic assisted therapy. Project Albert, MindMed’s new digital medicine division, is named for Swiss chemist and psychedelics pioneer Albert Hoffman. The initiative will develop an integrated technical platform to support experimental treatments through digital therapeutics, such as wearables and machine learning systems.

“We have begun looking at after-care: the integration after a treatment happens to ensure that there is long lasting impact and change,” Rahn said. “We believe digital therapeutics will provide an incredible opportunity to foster the relationship between the care provider and the patient. Albert is looking for better ways we can monitor patients. For example, can we determine when you're going to have a relapse from a drug addiction or a drinking problem? If we can add visual therapeutics – for monitoring and for the connection between you and your therapist – it can provide better understanding of how to correct your mental health issues.”

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Rahn noted that 80 percent of the antidepressant prescriptions in the United States are written by general practitioners, and that 60 percent of U.S. counties do not have a psychiatrist.
People who would benefit from the LSD-assisted therapies that MindMed is developing also typically need psychiatric care. Project Albert seeks to create a platform allowing psychiatrists to monitor and treat patients from the comfort of their own home. Eventually, people could be treated remotely by specialists across the country.

“There are multiple components of digital therapeutic that could be developed,” he added. “You could have remote administration of psychedelics at home. Telemedicine is growing rapidly (including for psychiatric care), so we need to learn how to adapt to that as a company. People aren't going to the psychiatrist's office as much anymore. We believe psychiatric care can become more scalable online.”

The Albert platform is also connected to MindMed’s new microdosing division. A study launched in January 2021, in conjunction with Maastricht University in the Netherlands, is evaluating the effects of micro doses of LSD on next-generation digital clinical markers such as sleep, mood, cognitive performance, and immune system response. Project Albert would build tracking devices and software to monitor those markers.

“We want to have the largest microdosing division in our space because we do see its promise and its opportunity,” Rahn said. “We also recognize there has not been a lot of research to understand the mechanisms. So we’re doing another Phase 1 study on LSD with Dr. Kim Kuypers, the world’s leading expert on micro-dosing of psychedelics. We’re also doing a Phase 2A this year on using LSD micro-dosing with adult ADHD (attention deficit hyperactivity disorder).”

As the psychedelics medicine industry continues to expand, MindMed is positioning itself for long-term growth from both a medical and investor perspective. Rahn said, “We’re just going to continue marching on.”

For more information on MindMed, visit


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