How do investors choose winners in the psychedelic space?


Simeon Schnapper, Managing Partner at JLS Fund, took 30 minutes of her busy schedule to share her thoughts on what makes a winner in the psychedelic space.

“I don’t think a lot of people fully understand what psychedelics are, I know there are companies going public right now, there is a great investment opportunity, but also a great opportunity to fold. the arc of history, ”said Schnapper, in his presentation to the Benzinga Global Small Cap Conference Thursday.

JLS Fund, an investment firm located at the intersection of psychedelics and tech, owns shares of companies such as MindMed (NASDAQ: MNMD), Atai Life Sciences and Wesana Health (CSE: WESA), which went public earlier this week.

New trends in psychedelics: Schnapper sees a few trends picking up in the industry. The first concerns mergers and acquisitions, as small companies are acquired by larger state-owned companies or soon to be opened. Another trend is the integration of digital therapeutics into business models.

Electronic devices that can amplify or emulate psychedelic experiences are also something to watch out for, Schnapper said.

“On the virtual reality side, we are following 38 pieces that are part of a psychedelic psychotherapy modality. As for portable devices, it’s in the thousands. “

But when choosing investments, Schnapper said JLS Fund sees gray markets as a window to the future.

“Decriminalization is one of those signals that we are looking at. We say, “Well, what’s going on on this side, how is it between the black market and the regulated market?” It really makes the needle move.

Over the past year and a half, a number of jurisdictions in the United States have approved decriminalization measures for natural psychedelics, including Oakland, Denver, Ann Arbor and three suburbs of Detroit. Oregon was the first state to remove sanctions against the use of all drugs and launched a licensed psilocybin therapy program at the end of 2020.

Patents in the psychedelic space: Schnapper raised the issue of intellectual property, a subject that has become a bone of contention in the sector in recent months.

The investor finds it useful to divide the space in half, in order to address the issue of patents.

In a category, Schnapper places classic psychedelics like LSD and psilocybin because they don’t have IP protection because they’re either natural molecules or synthetic compounds discovered decades ago, with patents expired.

“Right now the mindset is ‘we have to have intellectual property to attract investors,’” Schnapper explained, although he did not fully agree.

In order to obtain IP for classic psychedelics, companies are developing protocols around the therapeutic application of a particular molecule.

This is used to create “either a competitive advantage or a flaw, some might even speculate a monopoly”.

On the other hand, there are new molecules, which are newly discovered compounds created by biotechnology companies working in research today.

It is about “developing entirely new compound entities”, which may offer greater safety, better dosage or better shelf life.

“This is debate, and the jury is out right now … not just figuratively,” Schnapper said.

“When you step into any emerging area of ​​intellectual property, you get into litigation. At the moment, this is controversial, nothing is public, but it is something that investors should consider very carefully. “

Schnapper recommends that investors examine which companies have made patent claims and which players in the space might be suing those claims.

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