Debra Borchardt
Roth Capital Partners analyst Elemer Piros has issued an industry note covering six psychedelic drug companies. All have received buy ratings and Piros has assigned price targets for each stock.
Cancer Therapy Similarities
The main premise for the buy rating is the analyst’s analogy between cancer immunotherapy and psychedelic-assisted psychotherapy. He notes, that while the comparison isn’t perfect, there are many similarities. For example, in cancer immunotherapy once or infrequently to a cancer patient to fight tumors. That is then followed by weeks of supportive care. Remissions can sometimes last for 10years. While it doesn’t work for every patient, it has revolutionized cancer treatments. Piros compares that to psychedelic treatments for patients with various mental health issues. These patients have a handful of treatment sessions that are followed up by psychotherapy sessions. It isn’t a perfect solution, but for many the response rate is remarkable. He writes, “A quarter to two-thirds of patients treated in controlled clinical trials achieve durable remission of treatment-resistant depression (TRD) and PTSD, respectively.”
Market Size
Piros believes the market for psychedelic medicine could exceed $500 billion, which is five times the oncology market or the size of the entire U.S. pharmaceutical market in 2020. The immunotherapy treatments that the analyst uses as a comparison is a $100 billion market, so it is dwarfed by the potential of psychedelic treatments. There are 80 million patients that suffer from mental health issues that aren’t addressed in the U.S. and the numbers worldwide are even higher. Beyond mental health, the analyst thinks treatments could be expanded to eating disorders, chronic pain, ADHD, and general anxiety disorders.
Price Targets
Roth lists the following companies under coverage and the price targets for each. The analyst also thinks there is an average upside potential of 11x ranging from 5.6x to 22.7x.
- Atai Life Sciences (ATAI) $32
- Compass Pathways (CMPS) $117
- Field Trip Health (FTRP) $15
- Cybin (CYBN) $10
- Small Pharma (DMT.V) C$5
- Mydecine (MYCOF) C$3
Buy Rating Reasons
Piros outlined the reasons why each of these companies deserved buy ratings as follows:
Compass Pathways – The company observed a 27% remission rate in treatment-resistant depression during a randomized trial. “We expect Compass o initiate the pivotal program in 2H22. The company could announce results from half a dozen investigator-initiated trials with psilocybin (COMP360) throughout 2022.”
Small Pharma – “Small Pharma is anticipated to announce results from the first-ever short-acting psychedelic drug trial in 2Q22 (IV formulation of DMT (SPL026), duration: ~30 minutes) a major driver.
Atai Life Sciences – Atai plans to initiate enrollment in a DMT clinical trial by mid-2022 and by year-end announce results from its ketamine phase 2 program.
Field Trip – Field Trip is breaking ground with new chemical entities that should enter the clinic by mid-2022. The use of a diluted psilocybin product has a faster onset and shorter duration while maintaining the intensity of the experience. It will evaluate FT-104 in post-partum depression and TRD.
Cybin – This company also has a psilocybin light product named CYB003. The company will test this product on major depressive disorder and alcohol use disorders.
Mydecine – This company is addressing smoking cessation. It plans to initiate a Phase 2B clinical trial in 2Q22 with MYCO – 001.
Outlook
Overall, there are 38 psychedelic clinical programs underway or planned. Many of these studies either get underway or will report some sort of progress in 2022. Most of the current treatments on the market, most of which are prescription drugs like Zoloft haven’t been particularly effective. So the promise and hope for these outcomes are great.
