Psychedelic Biotech Firms Record Major Fundraising Mark

The growing sector scored its second-highest month ever for total money-raising.

Image of a mushroom growing in the forrest.
Photo by Egor Kamelev via Pexels

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Funding for biotech firms focused on psychedelic treatments is sprouting like mushrooms again.

In January, the burgeoning sub-sector of mental health treatment scored its second-highest month for fundraising ever recorded, according to Pitchbook and company data compiled by the Financial Times this weekend. It may just pave the way for a far-out future.

Spore Round

There’s a reason the investor class has taken a particular interest in hallucinogenic drugs, and it has nothing to do with 1960s hippie nostalgia. According to one peer-reviewed study featuring multi-stage trials published in the Journal of Clinical Psychiatry, psilocybin — the naturally occurring psychedelic compound found in over 200 species of fungi — produces a sustained and significant effect treating patients suffering from depression who were unresponsive to at least four other antidepressant drugs. That group could be as high as one-third of patients seeking treatment for depression, or about 9 million Americans.

Investor interest peaked in March 2021, when eight deals generated nearly $190 million in VC fundraising. Investors turned on the money-hose again last month, with plenty of reason to believe the industry can only grow:

  • Psychedelic-focused biotech firms scored $163 million across five fundraising deals in January, according to PitchBook and the FT. Over 50 psychedelic biotech firms have already gone public in the US, with a combined value of $2 billion that some analysts predict could reach $12 billion by 2030.
  • That’s in part thanks to two ongoing landmark trials — one conducted by Nasdaq-listed Compass Pathways and another by Lykos Therapeutics — that are widely expected to publish results this year, which could lead the FDA to reclassify some substances for clinical treatments.

Around the World: As is typical in any trendy emerging industry these days, psychedelic firms have drawn the interest of sovereign wealth funds, including Singapore’s $300 billion Temasek fund and Abu Dhabi’s Mubadala fund, sources told the FT. What makes that weird is both countries boast some of the world’s most draconian anti-drug policies, with Singapore in the past two years alone executing at least 15 people for drug-related offenses.