What Should Investors Know About Psychedelics Clinical Trials?

Clinical trials demand excellence to confirm medical plans

Justin Kirkland, chief science officer at Optimi Health (CSE:OPTI,OTCQB:OPTHF), said that in his experience, clinical trials offer ongoing challenges as new facets or speed bumps appear just as it seems everything is covered.

“The reality is there's just layers and layers and layers,” Kirkland explained in a conversation with INN. “It's not just giving the drug to a patient going, ‘Hey, did it work?’”

Optimi Health is pursuing a study with humans where psilocybin microdoses are used to help treat patients with depression. The company differentiates its study by using a smaller dose on its test subjects.

“We're pretty confident that these are efficacious products,” Kirkland said. “But we intend to go through rigorous double-blinded clinical trials, because really, that is the gold standard in pharmaceutical development and approval to prove your thesis.”

Trials on the rise as psychedelics opportunity receives validation

Andrew Charrette, director of regulatory affairs and psychedelic advisor with KGK Science, previously told INN he saw a monumental number of psychedelics-focused studies launched in 2021.

“From my perspective, 2021 was a big year for a lot of the companies coming in and declaring their intent to conduct research ... I think (2022) is going to be the year that we start to see those companies weed out those who pursue research and those who don't,” Charrette said.

KGK Science is an advisory firm providing services for the set up of clinical research trials.

“There's a lot of responsible players in the industry, and that's what I think you need to look for in investing in any psychedelic companies,” Charrette said.

Clinical trial costs a major barrier to entry

It's a big financial commitment to conduct a trial at the magnitude needed to get a drug candidate to real-world patients. This is an important reality for investors to know about, but it's a hurdle that can be surmounted.

“People make it seem like it's impossible,” Sabrina Ramkellawan, chief operating officer with Knowde Group, told INN. “It's not impossible to do clinical trials.”

The costs, however, can be a harsh reality check for the market and its players.

Knowde Group is an advisory firm for companies in this space, and Ramkellawan said she has sometimes seen company executives who “don't even know how much money it'll take to do a clinical trial.” The expert told INN that clinical trials are an effective way for investors to measure a company's scope of understanding.

According to a study examining the costs of clinical trials for new therapeutic agents in the US between 2015 and 2017, there is an estimated median cost of US$48 million for new entities.

“The largest single factor driving cost was the number of patients required to establish the treatment effects and varied from 4 patients to 8442,” the study indicates.

On the high end of the pharmaceutical spectrum, some of the biggest drug companies in the world are spending hundreds of millions of dollars per year, and billions for entire trial program durations.

A report from Evaluate Vantage on the biotech and pharma markets shows that spending on clinical research was in the US$1.8 billion range in 2021 for Merck & Co. (NYSE:MRK). Other high-end lifetime studies include those from Bristol-Myers Squibb (NYSE:BMY) and AstraZeneca (NASDAQ:AZN).

Investor takeaway

Leading companies in the psychedelics industry have signaled that the world of pharmaceuticals is their closest point of comparison when it comes to the ultimate business model for the industry.

Clinical trials are at the core of this endeavor, and as these studies progress to success or failure investors will be capable of identifying the true winners and losers in the market.