Just How Big is the Psychedelics Opportunity?
October 27th, 2020
App, Exclusive, Psychedelics, Top Story
The North American market for psychedelic drugs is projected to reach $6.85 billion by 2027, according to Data Bridge Market Research, which represents a 16.3% compound annual growth rate. After the approval of Johnson & Johnson’s (NYSE: JNJ) SPRAVATO nasal spray for treatment-resistant depression and two Breakthrough Therapy designations, there has been an explosion of companies raising capital to revolutionize multi-billion-dollar mental health markets.
Let’s take a look at the rise of psychedelic therapies, their potential to treat massive mental health markets and why MagicMed Industries Inc. is well-positioned to capitalize on the nascent market with its unique business model.
Psychedelics Go Mainstream
Psychedelics have rapidly emerged from fringe to mainstream research and development. The Imperial College of London, University of California-Berkeley and Johns Hopkins have all established psychedelic research centers while the Food and Drug Administration (FDA) designated Breakthrough Therapy status to two psychedelics in active clinical trials.
In addition to research and development, the capital markets have shown an insatiable appetite for psychedelic opportunities. Compass Pathways Inc. (NASDAQ: CMPS) roughly doubled following its initial public offering on the NASDAQ, reaching a market capitalization of more than one billion dollars despite its development-stage efforts.
The combination of research interest and capital has created a perfect storm that could help millions of people suffering from mental health conditions and transform the market for mental health treatments. These markets are worth billions of dollars per year and are underserved by conventional pharmaceuticals and other treatment options.
Massive Mental Health Markets
More than one-quarter of Americans over 18 suffer from a diagnosable mental health disorder in a given year and roughly 17.3 million adults have experienced at least one major depressive episode, according to Johns Hopkins. In fact, mental health disorders account for several of the top causes of disability in established economies worldwide.
Psychedelics have a unique mechanism of action that could play an important role in treating a wide range of these mental health disorders. While antidepressants and other mental health medications have been around for a long time, generating billions of dollars’ worth of sales each year, they have questionable efficacy for a majority of patients.
The biggest potential markets for psychedelics include:
|Mental Health Disorder||Market Size|
|Attention Deficit Hyperactivity Disorder||$9.1 Billion|
|Substance Abuse Treatments||$42 Billion|
|Generalized Anxiety Disorder||$4.5 Billion|
Beyond these markets, there are a host of medical indications that are underserved by conventional therapeutics where psychedelics could play an important role. Emerging research suggests that psychedelics provide a unique mechanism of action that differs from conventional mental health treatments, providing safer and more permanent alternatives.
How to Invest in Psychedelics
There are a growing number of public and private companies targeting the psychedelics space, ranging from Compass Pathways Inc. (NASDAQ: CMPS) to Red Light Holland Corp. (CSE: TRIP). While many of these companies are conducting clinical trials with the goal of an approved pharmaceutical, others are taking a more unique approach to the market.
MagicMed Industries aims to become a leader in the development of new psychedelic molecular derivatives. While psilocybin and other naturally occurring psychedelic molecules aren’t patentable, derivatives can be fine-tuned to meet specific goals (e.g. less psychoactive effects) and enable pharmaceuticals companies to better commercialize.
The company is building the Psybrary™ to house a range of psychedelic molecules that it plans to license to pharmaceutical or biotechnology drug development partners. By licensing the molecules, the company plans to generate payments based on clinical milestones and ongoing royalties on any approved pharmaceutical product—creating high-margin recurring revenue.
In addition to the attractive revenue stream, shareholders have access to a diverse range of partners that provide diversified exposure to the industry. Management hopes to onboard its first partner in 2020, become cash flow positive during 2021, and potentially even diversify into consumer goods in 2022.
The psychedelics industry could disrupt multiple segments of the mental health market with billions of dollars in annual sales. While many companies are pursuing a clinical approach to the market, MagicMed Industries aims to become a leader in developing psychedelic derivative molecules that it licenses to pharmaceutical companies.
Investors may want to keep an eye on the company as its gears up to become a publicly-traded company during the first or second quarter of next year.
MagicMed Company Contact:
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