Why the Stock Market Is a Terrible Thermometer of Biotech Success

2022-02-17 05:00:00

In this Backstage Pass segment, recorded on Feb. 4, Motley Fool contributor Rachel Warren discusses the psychedelic therapeutics market with Tim Schlidt, co-founder and partner at Palo Santo, a psychedelic investment fund. Schlidt explains that clinical milestones are the best way to gauge the health of this market going forward.

Rachel Warren: What is one thing that we can all be watching to gauge the health of the psychedelic therapeutics market going forward? Is it more open regulatory pathways? Is it more products being closer to being brought to market? What target should we be looking out for in the years ahead?

Tim Schlidt: Yeah. I think biggest thing more than, I don’t pay too much attention to public markets. I think public markets move a lot, there’s a lot of noise in that data. We know biotech has a much higher beta than the market and most other industries. Psychedelics can get swept up there. I don’t think the market is a good thermometer or good gauge of the viability of these.

I think it really is clinical milestones. Once more of these start getting into the clinic and are achieving their milestones, I have pretty high confidence for most of these they’ll get through phase 1 with flying colors. That really is just safety studies in humans, and for most of these, we know they’re safe. The real milestone will be phase 2. Compass Pathways had a positive phase 2 readout on psilocybin for treatment-resistant depression. I think that was a real big breakthrough in the industry. MDMA, having a successful phase 3 trial, that’s huge. Perception neuro, one of a tie subsidiaries. They’ll have a phase 2 readout in the coming years, those will be some near term catalysts, and we’ll continue to see more of these medications getting into the clinic and hitting those milestones.

GH Research and Beckley as well are taking 5-MeO-DMT through the clinic. GH is now in phase 2 trials, so you’re going to continue to see catalysts. I think that’s the best gauge of the health of this industry, is seeing how efficacious these really do come out to be an FDA grade clinical trials.

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