The data supporting the potential benefit of psychedelics in the management of psychiatric disorders continues to grow after Monday’s news from GH Research (Nasdaq: GHRS) that GH001, their inhaled formulation of mebufotenin (5-MeO-DMT), demonstrated a benefit in patients with treatment-resistant depression (TRD). Mebufotenin is a naturally occurring and fast-acting psychedelic found in certain plants and in the gland secretions of the Colorado River toad, hence the colloquialism “toad venom.” GH reported rapid and robust efficacy with GH001, with patients experiencing benefit within two hours of the initial dose and an impressive and statistically significant 15.5 reduction in Montgomery-Asberg Depression Rating Scale (MADRS) scores versus placebo at day eight. GH’s stock jumped 70% off the data, and at the Monday close, the company announced a $150mm financing to support a GH001 pivotal program in TRD.
Tailwinds
Favorable tailwinds are building for the psychedelic sector. With RFK Jr’s nomination as the head of Health and Human Services a fait accompli, psychedelics could benefit from a more accommodating regulatory environment. Commercially, Johnson & Johnson (NYSE: JNJ) has demonstrated there is a market for psychedelics, with Spravato (esketamine nasal spray) sales reaching $1.08b for 2024, a >50% increase over the prior year. Since the U.S. launch of Spravato in 2019, an extensive network of interventional psychiatric clinics has been built, providing an infrastructure that development-stage psychedelic companies hope to leverage.
Finally, there’s data, investor interest, and cash. GH’s data in TRD are highly encouraging. Cybin (NYSE: CYBN) recently reported positive 12-month data in major depressive disorder (MDD). Cybin, Compass Pathways (Nasdaq: CMPS), and Mind Medicine (Nasdaq: MNMD) all have psychedelic pivotal programs underway in MDD, TRD, and generalized anxiety disorder (GAD), respectfully. At the top of institutional ownership lists for the above-mentioned psychedelic companies are dedicated life science funds such as RA Capital, Deep Track Capital, and Commodore Capital, among others. Since the beginning of the year, GH and Compass have each raised $150mm. With pivotal data on the horizon, significant investor interest, and access to cash, it appears all the pieces are in place for psychedelics to be one of the better-performing therapeutics areas within the life sciences over the coming years.
The Next “Trip”
The next data release investors will likely see from a psychedelic company will be Cybin’s Phase 2 results with CYB004, deuterated DMT, in patients with GAD in 1H2025. DMT is the active ingredient in ayahuasca, a psychedelic drink historically used by indigenous people in South America but made famous by American athletes and podcasters.
In Cybin’s Phase 2 study, 36 GAD patients will be randomized 2:1 to receive CYB004 or a control (sub-therapeutic dose of CYB004). Patients will receive two intramuscular doses of CYB004 (or control), the first on day one and the second on their week three visit. The study’s primary endpoint is the change in the Hamilton Anxiety Rating Scale (HAM-A) at week six.
Afterthought
Although Cybin’s next data catalyst comes from CYB004, most investors are interested in the company’s lead asset, CYB003, a deuterated psilocybin analog. The company has reported strong data with CYB003 in MDD and has recently launched an extensive Phase 3 pivotal program. Investors are rightfully focused on CYB003 and MDD; however, the opportunity in GAD with CYB004 shouldn’t be dismissed. GAD is a large and growing market in need of new innovative treatments. The most commonly prescribed drugs for GAD are serotonin reuptake inhibitors (SRIs) that have a slow onset of action and tolerability and remission concerns. Although the benefits of psychedelics in GAD are still to be fully validated, based on the data available thus far in GAD, TRD, and MDD, these drugs, with their rapid onset of action and efficacy and safety advantages, could be highly disruptive.
The only psychedelic company ahead of Cybin in development for GAD is Mind Medicine (MindMed), with its oral disintegrating LSD tablet (MM120). In December 2023, Mindmed reported positive Phase 2 GAD data with MM120 (100µg), demonstrating a statistically significant 7.6-point improvement in HAM-A versus placebo. These data were well received by investors, allowing MindMed to raise $175mm in the following months. However, MM120 has an eight-hour trip time, which could be commercially challenging. On the other hand, CYB004, with a trip time of only 90 minutes, is more closely aligned with the current interventional psychiatry model built around Spravato, where treatment sessions are approximately two hours. This could be an advantage for CYB004 with patients, providers, and payors.
We are getting ahead of ourselves in discussing the commercial advantages and disadvantages of two development-stage assets. First, Cybin must deliver competitive Phase 2 data with CYB004 in GAD. If that happens, perhaps Cybin will get a GH-like jump in its valuation, and CYB004 will cease to be an afterthought for investors.
The Waiting (Is The Hardest Party)
Early last month, we wrote a note on FDA’s imminent decision regarding the qualification of bone mineral density (BMD) as an approvable endpoint for osteoporosis and its implications for Entera Bio (Nasdaq: ENTX), who we believe has the most advanced, Phase 3-ready osteoporosis asset in development Based on the American Society for Bone and Mineral Research (ASBMR) communication in March of 2024, FDA’s decision was expected to occur this January. With the calendar turning to February, we can now label this decision as being delayed. The big unknown is the length of this delay and whether there is anything to be read into it.
In our earlier note, we speculated that the U.S. administration change, including leadership changes at the FDA, could delay the BMD qualification decision. We wrote, “…if there is a risk around the FDA decision, it is more of a delay than a rejection risk, in our opinion. The qualification decision is expected shortly before an administration change, and the outgoing FDA leadership could push this decision onto the new leadership.” Unfortunately, there is no PDUFA date equivalent under the Biomarker Qualification Program, and FDA isn’t under any statutory obligation to respond to the “sponsor” (in the BMD case, FNIH/SABRE is the equivalent of a sponsor) within a predetermined timeframe. Nevertheless, the expectation that a BMD qualification decision would be made by January was set by FDA. We still expect FDA to make its decision imminently or, if not a decision, communicate a revised timeline.
No Precedence
BMD stands to be the first surrogate biomarker qualified under the Biomarker Qualification Program. There are no previous qualification precedence for investors to reference to interpret what, if anything, FDA’s delay means regarding the probability of a positive or negative decision on BMD. For PDUFA delays, some investors subscribe to the theory that, although disappointing, delays more often than not result in approvals. Could the same be valid for a qualification delay?
Some investors in our network have suggested that FDA and FNIH/SABRE could be in the PDUFA equivalent of “label discussions” around the BMD endpoint. Perhaps ironing out post-marketing clinical obligations/expectations for future osteoporosis approvals based on a BMD surrogate endpoint. Sounds plausible, but what prevented these discussions from occurring within the timeframe guided initially by FDA?
Patience Required
The delay is befuddling, and we can understand why investors may be nervous. Still, we see no reason to deviate from our January statement, “FDA commended the FNIH when it launched its BMD project in 2013. FDA has regularly interacted with the FNIH/SABRE team during the multi-year qualification process. FDA shared a podium with the principal investigator of the SABRE project as recently as three months ago. FDA has directly or indirectly been encouraging this project since its inception. Either FDA has been toying with FNIH/SABRE for the past eleven years, or BMD is getting qualified.” If the delay persists late into the quarter, we may need to re-evaluate our thinking, but we expect to hear from the FDA before that.
Implications For Entera
This delay shouldn’t have any impact on Entera at this stage. The company has indicated that it plans to start its Phase 3 osteoporosis study in 2H2025. We would estimate that as long as the BMD decision comes in 1Q2025, the company should comfortably meet its 2H2025 Phase 3 study start guidance. Entera remains poised to be the first company to run a pivotal program in osteoporosis using BMD as the primary endpoint.
As of its latest corporate presentation, Entera guided it has a cash runway into 2H2026 (excluding the Phase 3 osteoporosis program). In January, the prominent hedge fund Point72 purchased ~$6mm of Entera stock off the company’s at-the-market (ATM) facility, further bolstering its balance sheet. We can safely assume that this purchase was made off Entera’s ATM, given that a few days after Point72’s 13G filing, the company filed a new base shelf prospectus because the old shelf had been exhausted.
Entera’s CEO Miranda Toledano is scheduled to present at the Oppenheimer Healthcare Conference on Tuesday, February 11th. If FDA still hasn’t made its BMD decision by then, investors will undoubtedly be curious about how she addresses the delay. But for now, we wait.