VWV Volumes #14: Co-Director Olivia Tulkoff '21 on Psychedelics: A Trippy New Industry
The word “psychedelic”, for many people, invokes a few specific images or thoughts. Perhaps Woodstock comes to mind, free-loving hippies, maybe college students at music festivals, potentially the fear of “bad trips” and hallucinations. I am here to tell you that the tune has changed. In today’s landscape, the word “psychedelic” should conjure up thoughts of investment opportunities, ment1al health and wellness, and an exciting frontier of research.
I’ll start here with a very brief history on how psychedelics, like LSD, MDMA, or psilocybin (aka, ~magic mushrooms~) have re-entered the mainstream and are now being harnessed for health. Before the 60s, there was already an effort to research these drugs and understand their potential benefits. However, due to the government-induced panic of the mid- to late 60s, when psychedelics became the calling card of the counterculture movement, research into the benefits of the drugs was all but completely halted. Then, in the 90s, researchers from NYU and Johns Hopkins decided to pick back up where the others had left off. The studies they were conducting had astonishing results that showed how effective psychedelics could be in smoking cessation, dealing with PTSD, confronting depression and anxiety, and more. Since then, there have been millions of dollars and many researchers dedicated to unearthing more about the value of these compounds and how they can be used for good. Learn more here, or here, or here (Michael Pollan is sort of the reigning expert on this stuff).
The Market
A recent report from Market Bridge anticipates that the North American psychedelics market will continue to grow at an 11.5% CAGR between 2021-2028. The report also projects that the size of the market will exceed $6.4 billion by the end of 2028. Another report, from Research and Markets, is even more optimistic on its outlook for the market, with a projected $10.7 billion by 2027 at a CAGR of 12.7% between 2021-2027. Both reports highlight how important the increase in awareness around the benefits of these drugs has been. They also both emphasize the critical nature of focusing on research and development in the field.
Funding
While finding aggregate numbers on how many venture dollars have been invested in this space proved difficult, what is clear is that more and more venture capitalists are seeing psychedelics as an opportunity to make long term bets. Some of the most active firms in the space include the Noetic Fund, The Conscious Fund, Explorer Equity Group, Palo Santo, and Able Partners. These funds see psychedelics as the future of treatment for the ever-deteriorating state of mental health in this country and ultimately, around the world. There are also some high profile individuals with high conviction in the space of psychedelics who have thrown their money in the ring too. Some such people include Tim Ferriss, Peter Thiel, Kevin O’Leary, and Bruce Linton.
Ones to Watch
Along with the investors also come, of course, the investments. I want to highlight here some exciting private and public companies that are gaining traction and have emerged as leaders within the psychedelic space. The first I’ll mention is Compass Pathways (NASDAQ: CMPS), which is focused on harnessing psychedelics to help treat mental health challenges, namely depression and with an initial focus on psilocybin. Another is Field Trip Health (NASDAQ: FTRP) which is more focused on psychedelic-assisted therapy sessions. A third is Cybin, Inc. (NYSE: CYBN), which has seen really positive results from some preclinical trials with a number of psychedelic molecules. Finally, some exciting private companies include Gilgamesh Pharmaceuticals, Psygen, Osmind, and Delix Therapies. These are just a few of the biggest players in the space, but there are many more already out there and lots emerging all the time.
Concluding Thoughts
I really believe that psychedelics are the future of mental health. Their proven ability to essentially cure people of extremely painful mental health afflictions is astonishing and inspiring. Not only are they extremely effective, but the attitude change around them, both culturally and in the regulatory space (see: Oregon law changes), points to their reentry into the mainstream. I don’t think that investment in the space can be seen as a get-rich-quick strategy, but rather a long term play in a field that is going to see the same type of boom that the cannabis industry saw.