The Shifting Landscape of Psychedelic Biotechnology Investments

Biotechnology is a notoriously risky investment. Bringing a new medical treatment to market is a slow burn. It often takes years to turn a profit, but the reward can be substantial. The companies that are successful in bringing their products to market offer significant payouts. However, finding investors that understand the needs of biotechnology companies is not always easy.

Australian billionaire, Andrew Forrest, has taken an interest in psychedelics as a promising treatment for various mental health issues. The interest of big investors, like Forrest, in psychedelic biotech companies is a good sign for the growing industry.

The Forrest family’s private holding company, Tattarang, recently launched a substantial investment fund focused solely on biotechnology. The fund, named Tenmile, is focused on helping biotech startups develop new treatments for unmet medical needs. They have shown interest in psychedelics as part of the future landscape of medical treatment. 

Psychedelic biotechnology companies are new to the game, and it can be even more difficult for them to find funding than traditional biotech companies. The stigma surrounding psychedelics and regulatory hurdles make it difficult to get funding even from investors and funds that do focus on biotech companies.

There are a handful of new funds in the last few years that are focused on supporting psychedelic companies. Most of these funds, such as Noetic Fund, Palo Santo, and Iter Investments, have only been around for two or three years, so their assets under management are still relatively small compared to the bigger biotech-focused VC funds. 

The top Biotechnology funds have $500 million to over a billion in assets under management– more than five times what most of the psychedelic funds have. The psychedelic-focused funds do offer an important opportunity for psychedelic biotech companies to find investors that understand their needs, but tapping into the greater biotech investment space holds the opportunity to find significantly more funding. 

Though the risk of investing in biotech startups is high, so is the market size potential. Andrew Forrest sees this potential. He recently put $250 million Australian (about $172 million US) into a fund dedicated to biotech companies in the ideation to incubation stages. 

One of their first investments is in an Australian company, Emyria, developing cannabinoid and MDMA analogues. The company has access to over 100 MDMA analogues that show potential for treating Post-Traumatic Stress Disorder. They are using clinics and a new technology platform to gather real-world data to support their effort to create treatments for unmet medical needs– the goal of both Tenmile and many of the psychedelic companies working within the same landscape.

This investment is a good sign for other psychedelic biotech companies. There are a handful of psychedelic-focused venture capital funds, but more resources are needed to drive the shift towards psychedelic medicines. Though psychedelics are becoming more widely accepted in the medical field, they remain quite novel. Many companies are struggling to find the capital that they need to succeed. Tenmile’s investment in Emyria is a sign of growing interest in investing in psychedelic treatments. 

Tenmile is dedicated to helping companies get the funding and support that they need to bring new treatments to market. Their model emphasizes building resources beyond just capital so that companies have support throughout their process to bring new treatments to market. They have created a network of partners, including the Bill and Melinda Gates Foundation, Emerson Collective, and AUS Biotech, to help bring additional resources and value to the companies that they invest in. 

Though Tenmile has expressed interest in investing internationally, Andrew Forrest has said they are primarily focused on helping Australia become a global biotechnology leader.

Tenmile has said that they are expecting a return anywhere from a couple of years to a decade out. This mindset is crucial in building long-term success as an investor in the biotechnology field. The likelihood of seeing returns sooner than that is very slim. 

Before bringing a new treatment to market, companies have a long journey of drug/program research and development, patents, regulatory hurdles, and finally implementation of the product. Unlike tech startups who can have a product ready to launch in a matter of months, biotech companies need continuous funding throughout the lengthy process. 75% of venture-backed startups will fail, and the number for biotech companies is even higher.

Investors who don’t understand the timeframe that it takes to see returns on these types of investments can sometimes push companies to go public before they are ready, which can ultimately lead to the company failing. But when funds, like Tenmile, understand the slow process of getting a new medical treatment to market and they provide the resources needed for the company to succeed, both the company and investors see great results.

In addition to the difficulties that all biotech startups face, companies working with psychedelics must overcome challenges around the legality of the substances that they are working with. Most psychedelic compounds, including MDMA, are schedule 1 drugs in the US and have similar ratings in most other countries. Regulatory shifts over the next few years will have a huge say in the success of psychedelic biotech companies. There is interest at the highest levels of government to make MDMA and psilocybin accessible to people struggling with PTSD and depression, however, there is still a great deal of uncertainty about what the new laws will look like. This uncertainty is keeping many big venture capital funds at arm’s length for now. Seeing big, successful investors like Andrew Forrest showing confidence in the future of psychedelic medicines may be the push that other investors need to get on board. 

“Tenmile pool on the Ashburton River, in Western Australia, is a permanent and reliable source of clean water which has supported people and Wildlife for millennia. A fitting name for an organization supporting Australia’s most innovative entrepreneurs and impactful health ideas with reliable capital.” 

This perfectly reflects what drives investors, researchers, and everyone working in the psychedelic space– the goal of building healthcare that will support global health for decades to come. Psychedelic treatments, such as the use of psilocybin for depression and anxiety, promise a massive shift in how mental health care towards a more sustainable model.
The psychedelic renaissance is a purpose-based movement and finding funding that understands this goal is crucial for the growth of the industry. With a projected 14.2% compound annual growth rate in the psychedelic industry from 2022-2026, some major corporations are starting to consider psychedelics as part of the future medical landscape. However, it is those who are committed to the growth values that the psychedelic industry represents that will be the driving force in these companies succeeding. Finding large biotechnology investment funds, like Tenmile, that are committed to developing sustainable medical treatments is crucial in the effort to scale the psychedelic industry, and that is what we are starting to see.