Psychedelic Funding in 2022
While analysis of publicly-traded psychedelics companies can give us a good idea of the overall downward pressure on stock prices and thus valuations1, a look at the broader fundraising environment provides a more holistic view of the financial health of psychedelic endeavours. Here, we use in-house data to analyse funding activity throughout 2022.
Part of our Year in Review series
Funding Activity
In 2022, we tracked seventy financing events2 with an aggregate value of just over $520 million. This is down significantly from 2021, when we tracked nearly $2bn worth of financing events across the sector.
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in funding for psychedelics companies in 2022.
Nonetheless, this is still a significant sum for a nascent industry navigating both macro- and industry-specific financial headwinds. Here, we present four charts that contextualise and analyse this fundraising activity.
This first chart is the most straightforward: we present deal count and aggregate deal value for psychedelic financing events since 2017.
The chart suggests what many know to be true: 2021 was a bumper year for psychedelic financings, with 2022 failing to keep pace. Deal count was down by one third, with total dollars raised down over 70%.
Further analysis of the data reveals that mean average deal value has returned to 2020 levels, with the average financing event generating gross proceeds of $7.5m in 2022 (vs. $7.3m in 2020). In 2021, the average deal was worth $18.4m.
Honing in on the period from 2020 onwards, and presenting the data on a quarterly basis, shows that psychedelic funding has been cooling off since mid 2021. As discussed in the next section, where we introduce some notable entrants to the psychedelic drug development landscape, the latter half of 2022 saw a mild uptick in aggregate deal value.
Looking only at venture rounds (i.e., investments in private companies), we see that around $336m was allocated in 2022, with the majority of financing activity at the Series A stage.
Interestingly, despite the broader downturn in funding seen in 2022, aggregate Seed financing remained somewhat consistent, down around 16% in 2022 vs. 2021. Similarly, Series A financings generated $165m in 2022, which is very similar to the $179m generated in 2021.
The most substantial haircut is seen at Series B and beyond, down nearly 80% from 2021 levels and over 60% from 2020 levels. This significant trend might be explained by the large number of psychedelics companies that went public in 2020 and 2021.
Finally, we look at where funding is accruing across the psychedelic value chain.
Unsurprisingly, drug discovery and development received the lion’s share of dollars from both VC and public financings. Aside from this segment, companies developing technologies in the field received a not-insignificant amount of funding from VCs, with just over $70m invested in the segment during 2022.
A key limitation of this visualisation is that it only captures the primary value chain segment within which a company operates. This belies the fact that many psychedelics companies are involved in multiple segments: as such, funding would flow through to those ancillary segments. For example, a number of psychedelic drug developers have in-house technology divisions or projects.
Notable Entrants
Despite this difficult fundraising environment there have been a number of notable new entrants to the psychedelics drug development market in 2022. The last quarter of the year, in particular, was punctuated by a handful of significant rounds.
Below are five examples of companies that emerged from stealth in 2022 with significant seed or Series A rounds.
Lusaris Therapeutics | $60m Series A
At the beginning of November, Lusaris Therapeutics emerged from stealth by announcing a $60m Series A round led by RA Capital, which incubated the company. Lusaris’ lead candidate, LSR-1019, is a sublingual formulation of 5-MeO-DMT for treatment-resistant depression (TRD).
This was a surprising development, given that RA Capital co-led the $125m Series B financing of another 5-MeO-DMT drug developer–Dublin-based GH Research–in April 2021.
One piece of context that may be important to understanding this decision is the drug delivery mechanisms each company is pursuing. GH Research’s GH001 candidate employs an individualised dosing regimen, with doses delivered via a Volcano vaporiser and balloon. Lusaris, meanwhile, is developing a single-dose delivered via an orally disintegrating tablet.
Presumably, then, RA Capital thought a less convoluted dosing regimen would have such drastic clinical and commercial benefits that it was worth incubating in-house3.
Lusaris and GH aren’t the only companies developing 5-MeO-DMT, with Beckley Psytech and Alvarius Pharmaceuticals also investigating the short-acting drug, among others. Regardless, Lusaris’ significant Series B round makes it one to watch.
Empyrean Neuroscience | $22m Series A
In October, another psychedelic drug developer emerged from stealth with a $22m Series A led by a private investment group dubbed ‘Spore Partners’.
Empyrean Neuroscience describes itself as “a genetic engineering company dedicated to developing neuroactive compounds to treat neuropsychiatric and neurological disorders”. Put simply, the company hopes to identify drug candidates by making genomic modifications to known species of fungi and plants such as Psilocybe cubensis, Tabernanthe iboga, and Cannabis sativa.
In contrast to many other drug developers working with synthetic or isolated formulations of pure psilocybin, Empyrean intends to develop treatments using entire psilocybin-containing mushrooms. The company has suggested that this approach may allow it to leverage an entourage effect resulting from synergies with other constituents naturally produced by the fungus. However, it remains unclear whether these resulting effects could produce a superior therapeutic benefit compared to isolated forms of psilocybin4.
Mindstate Design Labs | $11.5m Seed
In February, Mindstate Design Labs announced its $11.5m seed round, led by Initialized Capital. The company hopes to map the biological basis of various psychedelic experiences and develop drug candidates that consist of both “primer” and “probe” compounds, whereby a “probe” compound would modulate the altered state of consciousness occasioned by the “primer”.
In a forthcoming section, we interview CEO Dillan DiNardo.
Freedom Biosciences | $10.5m Seed
In August, Freedom Biosciences emerged from stealth with a $10.5m seed financing round led by MBX Capital. The company’s lead development program is a combination therapy with ketamine to treat major depressive disorder (MDD). The company hopes its candidate will extend the antidepressant effects of ketamine.
As we mentioned in our coverage at the time5 we don’t always cover ketamine companies, but this one is quite interesting given its focus on drug development (as opposed to being a ketamine clinic, for example) and esteemed co-founders, one of which is Yale Psychiatry chair John Krystal.
Sensorium Therapeutics | $30m Series A
Sensorium announced its $30m Series A early in November, shortly after Empyrean and Lusaris’.
Sensorium, which counts Dr. Jerry Rosenbaum, Dr. Jacob Hooker and Dr. Stephen Haggarty as scientific co-founders, is looking to better understand how psychoactive molecules impact the brain. The company hopes to leverage machine learning to build on “evidence of efficacy and safety based on extensive long-term human use of plants and fungi”, touting a ‘Biodynamic Discovery Platform’ which serves as a drug discovery engine.
The company’s initial candidate, SENS-01, targets anxiety and depression. The company expects to begin IND-enabling studies next year, with human studies to commence by early 2024.
In a forthcoming section, we interview CEO Dick Simon.
We provide further analysis of psychedelic fundraising later in our Year in Review via our psychedelic VC panel, interviews with companies that raised in 2022, and the results of our second psychedelic investor survey.
Part of our Year in Review series
This content is part of our 2022 Year in Review, which looks back at the past year through commentary and analysis, interviews and guest contributions.
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- This also has repercussions for private companies, which are often valued based on a blend of private and public comps.
- Notably, this dataset excludes a loan facility for up to $175m secured by atai Life Sciences.
- We speculated on the reasons for RA’s second big bet on 5-MeO-DMT in more detail in a recent Bulletin.
- As we discussed in a more detailed write-up of Empyrean, at the very least its work might help to shed light on these unresolved–and intensely debated–questions.
- Our Advisor, Michael Haichin, also identified rapamycin as the combination drug under investigation.
