Wonderland Debrief: The coming psychedelics industry shake out

The industry’s latest event is over, and the hype machine was on full display. Worryingly, some industry segments seem to have turned into a happy talk echo chamber around sector prospects and psychedelics cure-all properties.

I am bullish on psychedelics.  However, there is economic reality.  An industry culling is around the corner. Here are but three reasons why: 

1.     Too many companies focused on the same compounds and patent landscape.  For example, at least 17 companies are researching psilocybin for treatment resistant depression.   If you are not first or best to market with a new medicine, you will fail;

2.     Unfocused strategies.  Many companies span different compounds, patient services, and therapeutic areas.  This is a recipe for disaster as complexity kills and you can't be all things to all people;
 
3.     Underestimated capital needs.  Psychedelics hoover up capital with its complex R&D requirements. It is not clear what will be legalized and when, especially when you depend on an overtaxed FDA in a C19 environment.  The funding runway won’t be long enough for many firms; 

The above challenges need not be fatal. In psychedelics, one business model won’t fit all and there are a plethora of molecules (beyond Psilocybin, MDMA etc) and therapeutic niches. Strong strategic and scientific leadership coupled with operational agility can give at-risk companies another lease on life - but they better act fast.

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