Psychedelic Medicine, Lecture notes of Medicine

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Psychedelic

Medicine

Amy Kruse, PhD

November 2021

A Brief History and Current Progress

Table of Contents

Introduction

The Science of Psychedelic Medicine

Psychedelic Therapies - Investing Landscape

Mental Health - Market

Selected References

The full story of psychedelics’ transformation from nascent therapeutic treatments to Schedule I classification is too long for this format. Still, it is told with typical storytelling prowess by Michael Pollan in his 2018 book, “How to Change Your Mind.” Shared in his thoughtful, always inquisitive style, it was a bestseller and a wake-up call for many around the world on the potential impact of these compounds. For some, though, who had been “keeping the lights on” in hopes of returning these compounds to therapeutic practice, this Renaissance could not come soon enough. The tireless efforts of the Multidisciplinary Association for Psychedelic Studies (MAPS Foundation), the Beckley Foundation, and researchers like Dr. Roland Griffiths, among many others, never gave up the quest to have these compounds restored to use for their therapeutic potential.

Perhaps you might be wondering, what’s the big deal? We have antidepressants and anti-anxiety medications. Isn’t this a solved problem? Some current estimates suggest 10 percent of the global population face mental health issues (~800 million), and ~ million of those specifically face depression. Thirty three percent of those individuals will be treatment-resistant, meaning no treatment for depression currently on the market alleviates their suffering. That’s 100 million people.

Additionally, the global numbers for post-traumatic stress disorder PTSD) are staggering and include another 300 million individuals. PTSD isn’t just about war; it’s about survivors of many kinds of trauma — refugee camps, political persecution, sex trafficking — sadly the list goes on and on.

Here’s the big deal: What clinicians and researchers are finding (again) is that psychedelic substances are not just treatments; they have the potential to be cures. Let’s breathe that in. Individuals, who have been facing a lifetime of suffering from anxiety, depression, and trauma, might be cured. This is the part of the story that makes my hair stand on end and brings tears to my eyes. This is precisely why the psychedelic renaissance is so exciting. It gives hope to a hopeless field.

It’s been almost a decade since a new antidepressant was approved in the U.S., and while these drugs were well tolerated, most were no more effective than treatments introduced in the 1980s. Current antidepressants don’t work for a sizable population of those suffering from depression. Additionally, individuals may need to remain on those treatments for life.

In a sign of hope and of this new Renaissance, ketamine was recently approved for the treatment of depression in 2019. This is arguably a huge step forward in its therapeutic potential, but the drug itself has been around since 1970, primarily used as an anesthetic. While it’s exciting that it is approved, it’s not “new.” I will quickly insert the caveat that these compounds are not a DIY cure. We are not talking (yet) about sending individuals home with a prescription! Clinicians and practitioners in this field will assert that the medicine with the right “set and setting” are currently the only way to assure the

therapeutic efficacy of these compounds and ensure that the patient has a safe and transformative experience. This in itself is exciting because it reconnects the therapeutic medicine to the therapeutic experience. Something that had been sadly separated, at least in the U.S., for a long time.

The psychedelic Renaissance is not limited to previously identified compounds. It has caused a resurgence and renewed excitement around medicinal chemistry and neuropharmacology. Perhaps we can use some of these ancient and synthetic compounds to further unlock the brain’s workings and “unknot” the troublesome states of anxiety, addiction, and depression.

The Science of Psychedelic Medicine

Now that we’ve covered a little of the history and context setting, we will dive into the science a bit more and uncover why these compounds have the impact that has been described. It’s worth taking a moment to understand a revolution that is happening within the field of neuroscience as well.

For a long time, neuroscience was split between two scales. On one hand, were the molecular neurobiologists — really digging in and understanding the composition and chemistry of the synapse, which is the major communication unit of neurons in the brain. They went to work cataloging each protein, receptor, and neurotransmitter that entered the synapse and did its work exciting, inhibiting, or modulating the firing of neurons. This was amazing work, no question. On the other hand, were the cognitive neuroscientists who were less concerned with the firing of individual neurons and more interested in the areas of the brain that “light up” during specific tasks and thought processes. They used tools like PET scans and fMRI to see which regions of the brain were specifically activated or deactivated during tasks. I have, at times in a humorous tone, called this “blob-ology” — because it really was focused on regional activation rather than the brain in concert, as a whole.

More recently, neuroscientists have been taking a more holistic view of the brain’s activity, spurred in part by research on the connectome. This concept builds upon the idea that while individual regions of the brain are certainly associated with aspects or behaviors, it is really the brain as a highly interconnected network that drives our experience.

It is here where we link back up with the story of psychedelic medicines. Originally, when subjects were placed in cognitive task environments and had their brains scanned, researchers assumed that the brain was resting — or not engaged in meaningful activity when not otherwise tasked. This was proven wrong in the 2000s when it was shown that

approved as a nasal spray for treatment-resistant depression. Note again: ketamine is the only currently approved treatment that is available outside of a clinical trial (e.g., by prescription in a clinic) in the U.S. The compounds, while at times causing similar effects, can demonstrate different mechanisms of action and may be useful in different therapeutic conditions. After the tireless efforts of researchers, MDMA received breakthrough therapy designation by the FDA in 2017 for PTSD and psilocybin received the same designation for major depressive disorder starting in 2018. While these designations won’t change the current scheduling status of the drugs, it opens up the pathway for their eventual approval and use in the clinic. Currently, all of the compounds mentioned above are in clinical trials for addiction, anorexia, anxiety, migraines, depression, PTSD, and OCD.

In addition to the core compounds themselves, a Renaissance in medicinal chemistry now flourishes to help find either novel agonists, enantiomers, or even entirely NEW chemical entities with similar medicinal properties with a wider range of potential applications. For example, while an 8-hour psilocybin trip may be transformative, it may not be for everyone! It is important to explore shorter-acting compounds. Clinical studies currently involving microdoses of the current tryptamines are studying if the entire psychedelic “trip” is necessary to reap the resetting benefits. Can a psychedelic become ‘merely’ psychoactive and have the same effect? This point is particularly important because patients who have been on long-term therapies for treatment-resistant depression may need to consider other pharmacological targets, as long-term use of antidepressants makes them poor candidates for the mechanism of action utilized by psilocybin. Additionally, with the staggering numbers of individuals facing mental health conditions, there will need to be a revolution in treatment delivery that accompanies the Renaissance. Hundreds of millions of individuals would be candidates for this life-changing treatment. Some clinicians are currently contemplating a “deep experience + maintenance” combination. This means a patient would have a longer transformative experience to “reset” the brain and then a lower dose of continued treatment to ensure the brain pathways are completely rewired.

Currently, an ‘in clinic’ approach is advocated for the delivery of these medicines. While the treatment space is evolving, those like Field Trip Health and others are focusing on ketamine treatments for now — while paving the way for integrating other current compounds whose status may transition from illegal to prescription. The clinicians in the field are quick to remind that the “set and setting” and integration post-therapy are as important as the medicines themselves in realizing the transformative results. Outside of the U.S., retreat centers are offering similar experiences for those willing, as individuals have been for decades, to travel for access to these medicines.

I would be remiss if I didn’t mention the excitement around the new companies appearing on the scene to address multiple aspects of this psychedelic Renaissance. In particular, the number of companies developing new compounds is exploding. Some companies like

ATAI Life Sciences focus on a combined approach, building a portfolio of companies to address various clinical targets. Others like CaaM Tech, Delix, Tactogen, Gilgamesh Pharmaceuticals, and Beckley Psytech (among many) target new compounds to help increase the toolkit of available compounds for clinical use. Psilocybin alpha is one of the most up-to-date sources of information on all of these companies. The most prominent psychedelic IPO this year, so far, was atai Life Sciences, entering the public markets at a

$2B valuation. Certainly a high watermark for this space.

To anchor our discussion back in reality, the most important thing is that these transformative medicines make it into the lives of the people who need them most. That is true science in the service of humankind.

In 2021, Prime Movers Lab led the Series A of Gilgamesh Pharmaceuticals, a $27mm round, and participated in the latest round from Beckley Psytech through an SPV. The Prime Movers Lab team remains deeply engaged in this area and continues to look for investments that have the potential for the most significant impact.

Psychedelic Therapies

- Investing Landscape

As part of the Psychedelic Renaissance now occurring, companies both new and old are emerging onto the landscape. In addition, universities and research centers are beginning to address the clinical implications of this work. It is an exciting, emergent, and highly chaotic ecosystem at the moment. Lots of resources and capital are flowing in all directions.

The current work is informed and inspired by the research from many decades ago, on the use of psychedelic substances to treat a variety of mental health disorders ranging from depression, anxiety, and addiction, to trauma and other behavioral disorders like OCD. With the criminalization of these substances in the 60s and 70s, research ground to a halt. Meanwhile, the mental health landscape was dominated by a few pharmaceuticals, with varying success. There has been VERY little innovation in this arena in the last 30 years. In fact, many of the large pharmaceutical companies killed off their neuropsychiatry divisions to the detriment of mental health globally. Fortunately, they are starting to wake up again and pay attention. With the looming mental health crises - work began anew, taking a more modern look at these compounds. Sadly, the MAPS clinical trials did not restart until 2017 - a 46-year gap.

Due to FDA regulations that have been in place since the 1970s, all psychedelics in the U.S. are Schedule 1 drugs. Exemptions refer to specific use in religious ceremonies for those medicines.

Source: Blossom & PSYCH - The Psychedelics as Medicine Report: Third Edition; https://psych.global/report

Of the drugs listed above, only ketamine was approved by the FDA in 2019 (drug: Spravato. made by Janssen, nasal inhalation, practitioner administered) for severe depression. “Traditional” racemic ketamine (injected) is also used off-label for depression and other disorders. Ketamine clinics are now dotting the globe taking advantage of this opportunity. We will discuss the clinic environment later. There are individual FDA approvals for specific clinical trials, as approved for a specific topic and indication.

Because of the overwhelming clinical reports of the efficacy of the compounds, very high profile institutions have begun work and are starting centers to address this topic, including Johns Hopkins University, Imperial College London, UW-Madison, NYU Langone, Yale, and UC Berkeley. These institutions are not just participating in the research but have initiated Centers of Excellence to attract and retain talent and attract donation dollars to these extremely important topics. This research is far from fringe.

Dedicated centers for the study of psychedelic medicine research, Source: Blossom & PSYCH - The Psychedelics as Medicine Report: Third Edition; https://psych.global/report

The ongoing clinical research does NOT mean the compounds are widely available. They are just available through the auspices of clinical trials. Canada has started to approve compassionate use for some compounds (e.g. psilocybin) for individuals with terminal cancer. The Netherlands has some of the most permissive laws for using these compounds, but their use is restricted to the Netherlands.

Location of ongoing clinical trials in psychedelic research. Source: Blossom & PSYCH - The Psychedelics as Medicine Report: Third Edition; https://psych.global/report

there is tension. From the venture investing side, the emphasis has been on novel chemical entities and newly protectable IP. However, given the vigorous activity in this space, it remains to be seen how it will shake out in the end.

With the absence of the typical big pharma players in the ecosystem, emerging “new pharma” companies have moved in to take up that interest, and frankly, languishing intellectual resources available on the market. ATAI Life Sciences is one of the most notable players on the stage right now, a German company founded by Christian Angermeyer in 2018. ATAI has a holding company approach, where they either start or take controlling positions in other psychedelic startups. They have been scooping up talent, companies through M&A, joint ventures, etc. The table below is a current listing of their company holdings. Note: Perception (Arketamine) was the previous company of the current CEO of Gilgamesh Pharmaceuticals, a Fund 2 company for Prime Movers Lab. In addition, Kures was founded by Gilgamesh Co-founder and medicinal chemist Andrew Krugel.

ATAI Life Sciences (ATAI), a German company, went public in June 2021 through a traditional IPO. Their current market capitalization is ~$2.1B. ATAI is also a majority shareholder in COMPASS Pathways (CMPS), which also publicly trades on the NASDAQ, with a $1.2B market cap as of Oct 2021. COMPASS, a U.K. company, was founded in 2016, and seed-funded by Christian Angermeyer in 2017, and eventually rolled into the ATAI portfolio. It went public prior to, and separate from, the ATAI IPO.

ATAI is a powerhouse! Other companies that are late-stage and nearing a go-public status include Eleusis, founded in 2013 (one of the oldest), and Beckley Psytech, founded in 2019 and associated with the Beckley Foundation, one of the most esteemed foundations in the psychedelic medicine space. Prime Movers Lab participated in Beckley Psytech’s most recent round through an SPV. We expect there to be more IPO and SPAC activity in this domain in the next two to three years. This year the Conscious Fund did announce the Conscious Acquisition Company for the explicit purpose of taking companies in the psychedelic medicine domain public. A first acquisition target has not yet been announced.

Although no “big pharma” companies have yet made acquisitions in this space, there are some interesting signs. Jazz Pharmaceuticals acquired a cannabinoid molecule drug company, GW Pharma, for $7.2B in May of 2021. This indicates interest in using these types of plant-derived drugs for critical neurological conditions, in this case, epilepsy. Timing-wise, the cannabinoid drug development market is ahead of psychedelics but proves a useful benchmark. Similarly, ATAI portfolio company, Perception Neurosciences, has recently struck a deal with Japan-based Otsuka Pharmaceuticals for a $20mm upfront payment and licensing in Japan to bring a next-generation ketamine treatment to Japan. We expect the “acquisitiveness” of big pharma to heat up considerably as the new novel drug compounds begin Phase 1 trials and show efficacy. By all accounts, these are the data they are waiting for to make moves in this domain.

Because of the energy, investment, and moves in this space, smaller companies have gone public quickly (whether or not they are ready.) This is particularly prevalent in Canada, where many of the traditional compounds are Schedule 3 (vs. Schedule 1 in the U.S.), and so the regulatory environment is more favorable. Unfortunately, predatory investment banking practices also seem rampant. This appears to be related to how the cannabis industry rolled out in Canada, as many are the same players. These companies are not seen as good targets for venture investing, as their exit profiles are modest. However, they may be downstream targets for relatively inexpensive acquisitions if their compounds and clinical results look promising.

The following companies have gone public within the last few years and make up the publicly traded element of the psychedelic investing ecosystem. Many of these have gone public through the Canadian exchanges, but several are available through U.S. trading providers. More recently, companies have been uplisting to the U.S. exchanges to get better coverage and trading volume. Most remain in the sub $5/share category, with a few exceptions. AdvisorShares has recently launched a Psychedelics ETF (PSIL), an actively managed fund, covering some of these companies. PSYK from Horizons (CAN) is an index fund of popular North American listings, and PSY Defiance is an ETF that holds psychedelics and cannabis companies. PSY Defiance has a minimum market cap of $75mm, so many smaller players are excluded.

“Vanilla” ketamine clinics, with less of a focus on the “set and setting,” are numerous. At last count, there were over 350 ketamine clinics in the U.S., and growing. There is a lot of concern among practitioners with this rapid uptick. But the availability to administer ketamine “off label” in health and wellness clinics has prevailed. Many of the clinics are more similar to a dentist’s office than centers of healing. The companies mentioned above are working to integrate healing into healing environments, but there is a LOT of work to do here. These are complicated questions and must be taken seriously, both in investing and execution. And although ketamine is legal, it is currently one of the most deadly. It is a powerful anesthetic and, if mishandled, can result in death. Issues with ketamine clinics have the potential to set the field back if there are incidents.

Ketamine Clinics in the US, map from askp.org/directory

Mental Health

- Market

Sadly, mental health conditions are on the rise globally, and many issues, including major depressive disorder and addiction, are recalcitrant to pharmaceutical interventions. The market for these therapies and solutions will only increase in the future. The numbers are stunning and require urgent attention. The cost of these illnesses is in the hundreds of billions for treatment, which only increases with the cost of time and productivity lost.

Cost and benefit of treatment for common mental health conditions in the U.S. and Europe. Source: Blossom & PSYCH - The Psychedelics as Medicine Report: Third Edition; https://psych.global/report

The number of individuals suffering from mental health conditions is staggering. Since many are untreated or treatment-resistant, novel therapies are a welcome addition to this situation.

As “big pharma” moved out of neuropsychiatry in the 2000s, it left a big gap in the market. The development in psychedelics and related compounds are addressing that gap. Simply put, the goal of the work with psychedelics is to cure mental health disorders. And that is what the founders, companies, practitioners, and clinicians are working towards every day.

Selected References

Comprehensive report, published Oct 2021 Blossom & PSYCH - The Psychedelics as Medicine Report: Third Edition; https://psych.global/report

Comprehensive listing of academic citations on psychedelics: https://maps.org/resources/papers

Akiki, et al “Default Mode Network Abnormalities in Posttraumatic Stress Disorder: A Novel Network-Restricted Topology Approach” Neuroimage, 2018

Andrews-Hanna, et al “The default network and self-generated thought: component processes, dynamic control, and clinical relevance” Annals of the New York Academy of Sciences, 2014

Brewer, et al “Meditation experience is associated with differences in default mode network activity and connectivity” Proceedings of the National Academy of Sciences, 2011

Carhart-Harris, et al “Neural correlates of the psychedelic state as determined by fMRI studies with psilocybin” Proceedings of the National Academy of Sciences, 2012

Carhart-Harris * Goodwin “The Therapeutic Potential of Psychedelic Drugs: Past, Present, and Future” Nature, 2017

Holtzheimer and Mayberg, “Stuck in a Rut: Rethinking Depression and its Treatment” Trends in Neuroscience, 2011

Inserra et al, “Psychedelics in Psychiatry: Neuroplastic, Immunomodulatory, and Neurotransmitter Mechanisms” Pharmacological Reviews, 2020

Pollan, Michael “How to Change your Mind,” Penguin Press, 2018