Another PSY portfolio company is MindMed, a developer of psychedelic-based therapies involving LSD, psilocybin, MDMA and DMT. DMT, or N,N-dimethyltryptamine, is a hallucinogenic substance found in certain trees that has long been a mainstay used by shamans in indigenous religious ceremonies in South America. MindMed is involved in Phase 1 clinical trials to test the potential therapeutic benefits of DMT. In a press release, it noted that non-clinical, anecdotal evidence suggests DMT could help address addiction disorders.
The New York City-based biotech company began trading on the Nasdaq in late-April.
“The reality is that psychedelic companies are a lot easier [for fund providers to invest in] than cannabis companies because many of the latter do both medicinal and recreational, which is where you get the hang up with the federal government,” said Paul Dellaquila, president of Defiance ETFs. He added that products created by psychedelic therapy companies are used in strictly controlled environments for medicinal purposes only.
Legend Of A Mind
Timothy Leary, the famed LSD and counterculture proselytizer, initially deployed the use of psychedelics as part of his early-1960s research at Harvard University’s psychology department. He and his associate were later fired after university officials questioned the rigor of their research and their methods for getting test subjects. The reputation of psychedelics has been tainted by their use—or misuse—for recreational purposes, part of which was fueled by Leary's advocation in the '60s to take psychedelics and "tune in, turn on and drop out." Nonetheless, the therapeutic potential to treat mental illness with psychedelics has been known for decades. And the clinical evidence for their efficacy has been gaining momentum, as a greater number of medical professionals, including researchers at Johns Hopkins University, have become big boosters of the use of psychedelics to remediate mental health conditions.
Meanwhile, some big pharma companies have hopped on the psychedelics train. Johnson & Johnson, for example, won approval two years ago to sell Spravato, a ketamine-derived nasal spray for depression. And there are several Phase 3 clinical trials being conducted under the FDA’s scrutiny involving psychedelic treatments for mental disorders.
Dellaquila said J&J isn’t in the PSY fund’s portfolio because the company's psychedelic therapy-related work is a drop in its overall revenue bucket. “We’re trying to create a more pure portfolio containing companies that are truly developing and benefitting from treatments in this space,” he noted.
But J&J is a holding in the Horizons Psychedelic Stock Index ETF (PSYK), a product that launched earlier this year and trades on the NEO Exchange in Canada. It tracks the North American Psychedelics Index containing U.S. or Canadian publicly listed life sciences companies that conduct research and make psychedelic medicines, or are part of the supply chain for psychedelic medicines.
It has roughly $62 million in assets, and its net expense ratio of 0.85% is 10 basis points more than the fee on the Defiance Next Gen Altered Experience ETF. The share price of the Horizons product is down 19% since it debuted in January.
The psychedelics therapy market is in the early stages, and that puts it in Defiance ETFs proverbial wheelhouse because the company tends to gravitate toward early-in-the-game opportunities. The New York City-based ETF provider introduced its first product in 2018, and now offers seven funds—some of them in intriguing, cutting-edge fields such as quantum computing and hydrogen energy that offer potentially big payoffs.
But Dellaquila believes that J&J’s existing psychedelic therapy for depression, combined with the Phase 3 trials currently involving various treatments from different companies, indicates the future is now, or at least in the very near-future, and that psychedelic pay dirt will come sooner than later.
“It might be a little early, but we think it’s something with massive upside,” he said.