Consolidation Continues in the Psychedelic Industry

Many experts have been predicting some big mergers and acquisitions in the psychedelic industry. Well, it looks like they were spot on. 

This week has brought with it announcements of the two biggest acquisitions in the history of this emerging industry. On Monday, Cybin announced that it would be acquiring Small Pharma. Both are clinical-stage biotech companies with a focus on novel psychedelic drugs.

The news of this acquisition was major but was quickly overshadowed by even bigger news. Just a few days later, the industry’s first big pharma acquisition was announced. Otsuka Pharmaceuticals plans to further its interests in the psychedelic industry by acquiring MindSet Pharma. 

On a smaller note, PSYC Corporation also announced yesterday that they were acquiring stock day media to help grow revenue. But, everyone has been too interested in the Cybin and Otsuka deals to pay it much attention. 

These acquisitions say a lot about the individual companies involved and the industry as a whole. Let’s break down these two business transactions and what they mean for the industry. 

Cybin Creates DMT Powerhouse with Acquisition of Small Pharma

We wrote, earlier this month, that Cybin needed to make a big move if the company wanted to earn a spot at the top of the industry. It looks like they were already planning to do just that. 

Cybin’s acquisition of Small Pharma gives the combined entity the industry’s largest deuterated DMT program in the industry. Small Pharma has four DMT drugs in its clinical pipeline. Cybin will now have 5 clinical DMT programs underway, out of the total of 8 drugs in its pipeline. 

This means that Cybin is betting big on DMT, which will likely be one of the first short-duration psychedelics to hit the market. This acquisition also makes the company’s IP Portfolio the largest in the industry, with 28 patents granted and another 158 pending.

Both of these companies have been seen as good prospects in the industry, and the combination of the two only strengthens their position. 

Under the terms of the Transaction, Small Pharma shareholders will receive 0.2409 common shares in the capital of Cybin (“Cybin Shares”) for each common share of Small Pharma (“Small Pharma Share”) held.

Cybin’s CEO, Dough Drysdale, said in the press release, “Our combined portfolios, having an increased number of potential value-catalysts, also create added opportunities to support future funding activities with no added debt. We look forward to welcoming our Small Pharma colleagues into the Cybin team.”

This is major news within the industry. However, its time in the spotlight was shortened by the announcement that Otsuka Pharmaceutical would be acquiring Mindset Pharma. 

Major Pharmaceutical Company to Aquire Mindset Pharma

This is not the first news there has been about global pharmaceutical company Otsuka taking an interest in psychedelics, but it is certainly their biggest move. 

Otsuka is a global healthcare company. One of its three main focuses is in creating new mental health treatments, and they believe psychedelics could play a pivotal role in doing that. In 2022, Otsuka invested $5 million into Mindset Pharma. Though Mindset Pharma’s entire pipeline is still in pre-clinical stages, Otsuka saw enough there to take the plunge into psychedelics. 

Otsuka also has a licencing agreement with Atai Life Science’s company Perception Neuroscience. The agreement is for the company’s R-ketamine drug, PCN-101. Otsuka has exclusive rights to commercialize the drug as an anti-depressant in Japan. However, Otsuka has taken its interest in psychedelics a step further with this acquisition.  

The Transaction is expected to close on or about October 19, 2023, subject to the satisfaction (or waiver) of a number of conditions precedent, including approval by the Supreme Court of British Columbia. Mindset Pharma’s board also needs to vote to approve the transaction.

James Lanthier, CEO of Mindset, said, “We are thrilled to announce this all-cash transaction with Otsuka as we believe it maximizes value and is a great outcome for all Mindset stakeholders. We believe Otsuka is ideally positioned to maximize the value of the Mindset assets and IP portfolio to the future benefit of patients.”

What Does This Mean for the Industry?

It is no secret that many people have been expecting some big announcements like this, but no one knew who they would come from. These are the two biggest acquisitions in the industry to date. This is the first big pharma acquisition in the psychedelic industry, but it likely won’t be the last. 

Based on the current information available, we can say that MAPS and Compass Pathways will very likely be the first two programs to bring a psychedelic drug to market. Beyond that, it is difficult to say which companies are set up for success. You can look at the financial positions and speculate on the strength of a company’s pipeline. However, at this point, it is just speculation.

The potential of psychedelic pharmaceutical drugs cannot truly be judged until the completion of clinical trials. Of course, there is a great deal of personal testimonies about the incredible healing power of psychedelics. However, that doesn’t mean anything to the pharmaceutical industry, which runs on double-blind, placebo-controlled trials and concrete data. 

At this point in the development of the psychedelic industry— when there is little phase 3 data to go off of— the strength of a company is largely judged on announcements like the ones made this week. 

Despite the lack of government-approved data, the fact that Otsuka is confident in the potential of psychedelics says a lot. Big Pharma is not known for shelling out large sums of cash without the promise of big returns. 

Otsuka isn’t the first major pharmaceutical company that has confidence in psychedelics. Johnson & Johnson bet big on its esketamine drug Spravato, and it’s paying off. Spravato is well on its way to being a blockbuster drug.

This confidence in the industry and acknowledgment of its validity goes a long way in bringing psychedelics into the mainstream. The recent groundbreaking acquisitions in the psychedelic industry mark a significant turning point, confirming the industry’s growing legitimacy and attracting major players from both the biotech and pharmaceutical sectors. 

Cybin’s acquisition of Small Pharma not only solidifies its position but highlights its commitment to playing the field with an extensive DMT program and a robust intellectual property portfolio.

Similarly, Otsuka Pharmaceutica’s acquisition of Mindset Pharma demonstrates the company’s serious interest in harnessing the potential of psychedelics for mental health treatments, expanding their prior investments in the sector. 

These acquisitions shed light on the industry’s potential and hint at a promising future, although the true impact remains to be seen. It is clear that confidence from big pharma reflects a growing acknowledgment of the therapeutic value of psychedelics. 

With more consolidation expected in the industry, these strategic mergers and acquisitions will continue to shape the landscape as companies compete for top positions, ultimately pushing the psychedelic sector further into the mainstream. As research and development efforts progress, the potential for groundbreaking treatments and innovative therapies in mental health holds tremendous promise.