IPO Beckons for Magic Mushroom Research Into Depression

(Bloomberg) -- A health-care investment firm that’s backing studies of magic mushrooms to treat depression raised $25 million of capital and may consider an initial public offering next year, according to people familiar with the matter.

Atai Life Sciences AG is close to announcing the fundraising with lead backers Christian Angermayer, a German investor, as well as billionaire investor Mike Novogratz and Icelandic entrepreneur Thor Bjorgolfsson, said the people, who asked not to be named because the matter isn’t public yet.

Atai owns a substantial stake in U.K. startup Compass Pathways, which is conducting clinical trials of psilocybin, a psychedelic compound in magic mushrooms, as a treatment for depression. Atai also is the largest shareholder of Innoplexus AG, which operates a technology platform that uses artificial intelligence to identify tailored treatments for diseases.

Atai is already in talks with banks about a potential listing in Canada next year, a step for which it seeks a valuation of $800 million or more, according to one of the people familiar with the matter.

After being shunned for decades, psilocybin as a possible medical treatment has seen a revival in the past couple of years.

Studies published in 2012 by David Nutt and Robin Carhart-Harris of Imperial College London found that the psychedelic reduced activity in the medial prefrontal cortex, which is hyperactive in depression, and also enhanced volunteers’ recollections of positive personal memories. Nutt is chair of Compass’s scientific advisory board.

Research in 2016 found that cancer patients experienced immediate, significant, and long-lasting relief from their existential anxiety and depression when they’re treated with psilocybin.

A study in the Journal of Psychopharmacology said that just two or three experiences with the hallucinogenic drug helped a dozen long-term smokers quit, succeeding in a study where numerous other approaches failed.

Psilocybin isn’t the only recreational drug that’s now eliciting medical and financial interest. Investors have been piling an increasing amount of funds into companies that sell cannabis both as a consumer product and a drug.

Coca-Cola Co. last month said it’s monitoring the nascent cannabis industry and is interested in drinks infused with CBD -- the non-psychoactive ingredient in marijuana that treats pain but doesn’t get you high.

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