In a hot sector it’s tough to separate the winners and losers. The key is to look for the signals.
Is it an unseasonably hot January or is that just the psychedelic sector keeping me warm? Yes, psychedelics are off to a hot start in 2021, and whether you’re plugged in to industry everyday or you’re just a casual observer it can be tough to separate the fakers and the makers.
There are currently over 20 publicly traded psychedelic companies on the market, this number is going to continue to rise in the near term as research and capital make the industry more attractive. Some players are researching the efficacy of psychedelics on treating everything from mental health issues to obesity, others are looking at the same conditions but removing the psychedelic effects from the drugs. Another common business plan is to open clinics to administer psychoactive compounds in conjunction with psychotherapy. Some are pursuing recreational products either in anticipation of legal changes or marketing products that are psychedelic adjacent and perfectly legal. In many cases fledgling firms are pursuing all of the above.
Much like in the early days of the cannabis industry, there is a lot of hype surrounding psychedelics, and the noise it creates can drown out real information. How can Psychedelic investors avoid this same issue?
The answer is simple, look for signals. In this case where is the money flowing? For that lets take a look at ATAI Life Sciences, COMPASS Therapeutics (NASDAQ: CMPS), and MindMed (NEO: MMED). This small group alone has raised a combined total of approximately $456M, which represents nearly 63% of all investments made into psychedelic companies to date. What do these companies all have in common? Simply, they are all pure biotech plays. And why does biotech tend to attract investment? Because that’s where the true value of psychedelic medicine will be unlocked.
Another company that is quickly becoming considered alongside the psychedelic biotech’s named above is Tryp Therapeutics (CSE:TRYP), a pharmaceutical company currently pursuing FDA approval for use of Psilocybin for Neuropsychiatric Disorders. In layman’s terms, they are exploring the potential use of Psilocybin to treat a wide range of neuropsychiatric diseases, from fibromyalgia, to eating disorders and other chronic pain disorders. If their clinical trials can be effective, they will be in a great position to make a substantial impact not only on the market, but on the pharmaceutical industry as a whole. Putting psychedelics to work to create a difference in millions of peoples lives is not only a good business model, It is a way to reflect that they are using investments to make a legitimate positive impact.
Taking a deeper dive and looking at the makeup of the company itself, it would appear as though Tryp is following the right path for potential success based on the previously mentioned companies. Their executive team is composed of members with a substantial amount of experience in the pharmaceutical industry. They have a combined 120+ years of experience in drug development , clinical trials, and successfully bringing drugs to market through the FDA regulatory pathway(not to mention the experience in M&A, senior exchanges such as NASDAQ, NYSE and corporate finance). The establishment of a team with this sort of track record shows that Tryp is committed to doing things the right way. Their experience developing, protecting and creating value throughout their careers is an indication that they are serious about building long term shareholder value.
Additionally, Tryp is working with a very established and successful board of directors and scientific advisory board that boasts an array of high achieving professionals and doctors with big pharma and drug development experience. With the previous successes of the executive team and board of directors, two of the most important pieces of the puzzle are in place for a successful venture.
The biggest potential hurdle for biotech companies is that they can sometimes focus too much on building out a specific area of their teams, whether it is science or corporate, they do not perform the balancing act necessary to achieve success. To be successful, they need to ensure that they have experience in pharmaceuticals, drug approval, and a proven business track record. Companies that have set themselves up with this type of experience have a chance of being the leaders of tomorrow, not just a flash in the pan.
So how can you separate the signal from the noise? Simple, By doing your research and finding companies that have a senior leadership team that has a track record of success and established the necessary groundwork to set the company on a path for success.
This article was written in partnership Tryp Therapeutics. The content is promotional and does not necessarily reflect our opinions, however we only work with companies who we believe to be credible contributors to the psychedelic sector.
