Money is continuing to flow towards the psychedelic sector as the group has become the hot spot for investors. Despite the issue that any payoff in this industry could be years away, companies are easily raising capital and deals are quickly oversubscribed. The capital raises of 2020 could continue into 2021. Here's an example of some of the deals that have happened in just the past few months.
-- In November, ATAI Life Sciences announced the successful closing of its $125 million Series C financing round, including $32 million of its 2020 convertible debt that converted in connection with the Series C.
-- COMPASS Pathways (CMPS) closed on an $80 million capital raise in April 2020. Then the company upsized its initial public offering in of 7,500,000 American Depositary Shares at an initial public offering price of $17.00 per ADS for total gross proceeds of $127.5 million.
-- MindMed Inc. (MMEDF) just increased the size of its previously announced bought deal from C$50 million to C$80 million.
-- Field Trip Health (FTRPF) entered into an agreement with Stifel Nicolaus Canada for a purchase, on a "bought deal" basis 3,333,333 units at a price of $4.50 per unit bringing in roughly $15 million.
--Seelos Therapeutics (SEEL) sold $12 million in senior secured convertible notes and shares of Seelos common stock to investors, including Lind Global Asset Management II, an investment fund managed by The Lind Partners, a New York-based institutional fund manager and an existing investor in Seelos. Seelos received $10 million in gross proceeds.
-- Numinus had announced announce that it entered into an agreement with Canaccord Genuity and Eight Capital for a bought deal basis that delivered approximately $10 million.
These deals show no signs of slowing down -- and that is setting up 2021 to be even bigger for the industry.
Ronan Levy, founder and executive chairman of Field Trip Health, said, "It is still very early days in the psychedelic renaissance, and the best is yet to come from a research and investment perspective. Psychedelic therapies stand poised to completely revolutionize the $240 billion U.S. mental health industry and start to address the $8 trillion economic cost of depression and anxiety disorders. Legal access is emerging through a number of different pathways, from FDA approval to ballot initiatives in the U.S. to a legal framework for psilocybin likely to emerge in Canada in 2021, and the interest and potential of these therapies is massive. It is hard to find an industry or opportunity with greater potential economic and humanitarian impact."
Indeed, Oregon legalized psilocybin during the November election for use at licensed facilities. Also in November, Washington DC decriminalized psychedelic mushrooms, joining cities like Oakland CA, Santa Cruz CA, Denver CO and Ann Arbor MI.
A spokesperson from Cybin (CLXPF) noted, "While some industries are struggling with economic hardship during the COVID pandemic, investors are increasingly lining up to support organizations working with psychedelics. We are going to see more Grassroots movements for decriminalization in states looking to advance psychedelics and the role they may play in improving mental health. There is now a lot of positive momentum and sentiment around psychedelics and I don't expect that to change in 2021. As more companies are formed and as more companies attract funding, I do expect to see more competition but also more potential M&A opportunities and consolidation. On balance, a continued positive marketplace." Cybin just raised C$45 million in October ahead of its move to go public.
Yaron Conforti, CEO and Co-founder of Novamind, which operates four ketamine-assisted psychotherapy clinics in Utah added that a second wave of psychedelics companies will go public in Canada on its junior stock exchanges in 2021. "Both the Canadian Securities Exchange (CSE) and NEO have been accommodating to businesses focused on stigmatized compounds, psychedelics in particular. As capital continues to flow into the sector in 2021, leading companies will pursue dual listings on major American exchanges such as the NASDAQ," he added. "Mental health will be a major investment theme in 2021 given the impact of COVID-19 and psychedelic companies will be viewed as emerging healthcare and drug development companies. This will be validated in the capital markets by institutional capital moving into these stocks. Companies with sustainable medical business models or those doing real drug development will become must-own stocks for healthcare-focused institutional investors."
If the deal flow of 2020 in psychedelics is any indication of what investors will see in 2021, it will likely continue to be the hot industry. Covid hasn't hurt the deal making -- and as Conforti said, the after effects on Americans' mental health from months of social restrictions could certainly lead to a demand for relief.
