How Capital Markets Are Fueling Psychedelic Medicine Growth

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The psychedelic medicine industry is growing. 2011 was a seminal year for the space, with advancements in a variety of sectors. There was a wave of new psychedelic firms going public, with big names like MindMed and Atai Life Sciences listing on major stock exchanges like the NASDAQ, and increased acceptance of psychedelics by institutional investors.

As 2022 gets rolling, I expect the upcoming year to continue to add to the evolution of the industry. But what will catalyze this continued growth? From my perspective, a variety of forces. I’ve handled PR for the largest publicly traded companies in psychedelics for two years now and own a business publication that focuses on psychedelics. We’re seeing a seismic shift in the sector, from grassroots advocacy for decriminalization to media outlets educating the public and destigmatizing psychedelics. And then, of course, there’s capital.

In our capitalist world, few things open doors like access to funds. It’s the fuel that lights the way, allowing scientists and researchers and entrepreneurs to build an entirely new industry.

Investors Are Driving the ‘Shroom Boom.’

A recent market research report published by CB Insights showed that funding for psychedelic medicine companies was on track to surpass $700 million in 2021, more than eight times higher than 2019’s numbers and getting close to doubling 2020’s figures.

Here are some major 2021 financing deals from top public companies:

• Atai Life Sciences raised $225 million with its $2.3 billion IPO this summer.

• MindMed has raised a total of approximately $202.7 million.

• Compass Pathways raised an additional $144 million in 2021, adding to its already healthy bank account.

Private Firms Are Also Raising Capital.

While most industry news and market headlines are dominated by publicly-traded companies, they’re not the only source of capital investment. Private psychedelic medicine companies are also garnering a lot of attention from investors.

• In August 2021, Beckley Psytech, a private company “dedicated to addressing neurological and psychiatric disorders through the novel application of psychedelic medicines,” announced an $80 million Series B financing from venture capital (VC) investors.

• In September 2021, Delix Therapeutics closed a $70 million Series A financing round. Delix is a private neuroscience company focused on “psychoplastogens,” or neuroplasticity therapeutics.

• In April 2021, GH Research announced the closing of $125 million in financing, an impressive number for a private preclinical firm. GH has since gone public on the NASDAQ.

These are just some recent capital raises by private firms (not forgetting that Atai Life Sciences raised approximately $360 million from private investors before going public). This funding is being driven by innovative and forward-thinking investors and VCs like the Founders Fund, Negev Capital and Mayfield. So we’re seeing major developments happening on the capital side of things.

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What Does All This Capital Mean For the Industry?

These capital raises give companies the necessary funds to continue the costly work of drug development. It also has a snowball effect, giving investors faith that firms will have enough cash on hand to get the job done, which further boosts confidence and invites more investment.

The psychedelics industry is focused on getting new drugs approved by regulatory agencies like the FDA, which is a time-consuming and costly process. Getting a candidate compound through clinical trials can cost tens of millions of dollars, and that’s usually to get a single product to market. Without these major capital investments, there would likely be no future for the industry, and thus less hope for developing alternative treatments.

A recent industry transaction brings this to light. MagicMed Industries, a private Canadian-based drug development company, was purchased by Enveric Biosciences, a firm focused on alleviating the mental and physical health issues of patients suffering from cancer and other conditions. (Full disclosure: Author previously did PR work for Enveric.) MagicMed was a smaller firm and Enveric was already listed on the prestigious NASDAQ exchange, giving it access to a base of international and institutional investors.

This influx of capital is not only helping individual firms expand but is catalyzing growth for the entire industry. In November 2021, the psychedelic medicine space had one of its first major in-person events with Wonderland, produced by Microdose Psychedelic Insights. (Full disclosure: Author helps Microdose with events.) With industry leaders from business and research (including a headline appearance by boxing champ and psychedelics advocate Mike Tyson), this conference was a major milestone for the industry. Dozens of psychedelic medicine companies were there as sponsors and speakers, a real-world example of the industry’s impressive growth.

The more investment and progress that happens in the space, the more motivation there will be for others to join and push things forward. These are just some of the examples of how capital is fueling innovation in this new industry. 2022 should give us even more examples. Stay tuned.

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