Episode 78: Investing in Psychedelic Medicine with Brom

Ben Lakoff, CFA
July 11, 2022
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Today's interview is with Brom Rector of Empath Ventures.

The stats around the potential of psychedelic medicine are staggering. We’re moving towards legalization of psychedelics for medicinal purposes and there are many ways to invest in this trend in both public and private markets.

Brom is a VC in the space and talks about the history of psychedelics, the types of companies operating in the space, how to potentially get exposure to them and some of the potential pitfalls of these companies going forward.

Enjoy this conversation with Brom

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Show Notes

0:00:00 Welcome and context

0:00:17 What is your background?

0:07:37 How are psychedelics currently regulated?

0:13:00 Where can people learn more about psychedelics?

0:17:00 The history of psychedelics studies

0:26:00 What are the market valuations right now?

0:29:35 What are your investment strategies for biotech, drug, and infra markets?

0:35:35 Impacts of decriminalization on investing?

0:38:30 What areas of focus are important for the individual investor?

0:40:15 What regulatory risks can impact the market?

Show Links

Empath Ventures

Brom on Twitter

Helpful other Alt Asset Articles

Episode Transcript

[00:00:00] Ben: Welcome to the alt asset allocationpodcast, exploring alternative investment opportunities available to theeveryday investor. Here's your host Ben Lakoff.

Hello and welcome to the alt asset allocation podcast. Today'sinterview is with Brom of empath ventures. The stats around the potential ofpsychedelic medicine are staggering.

We're moving toward the legalization of psychedelics formedicinal purposes, and there are many ways to invest in this trend in bothpublic and private markets. Bram is a VC in the space and talks about thehistory of psychedelics, the types of companies operating in the space and howto potentially get exposure to them.

And some of the potential pitfalls of these companies goingforward. Enjoy this conversation with Bram on all things, psychedelicmedicines, Bram. Welcome to the podcast. Excited to have you on.

[00:00:55] Brom: Thanks, Ben. I appreciate it.

[00:00:56] Ben: And actually both of us are in LA, so,you know, we gotta do this next one in person, but yeah.

Yes. With, with COVID it's always easier just to set it up anddo it like this, but next one that's we'll we'll make it happen. Hell yeah.Cool. I wanted to have you on today and talk about psychedelic medicineinvesting. It's a hot topic coming up more often than you'd think at least inmy circles.

And I guess. It probably stemmed from like me following TimFerris quite a bit. He's been a big proponent investing a lot of his time andenergy into it. Ended up meeting you in real life. You have a fund, you'redoing a lot of investing in the space, so I thought you'd be a perfect personto come in and kind of paint the overview of investing in psychedelicmedicines.

Yeah, we've got a lot to cover. It's extremely exci excitingspace. Let's start off just with a little background of who you are and how yougot into doing what you're doing.

[00:01:50] Brom: Yeah. So let's see. My background in thepsychedelic space is that I have been a. Consumer of psychedelics for about adecade.

I had my first LSD experience, not too long after college. Andit really felt like one of those sort of you know, there's the life before thismoment and the life after this moment, kind of thing. I know that's a bit of acliche, a lot of people that do psychedelics feel that way. But, you know, Iwas raised in a military family, knew lots of people that had had, you know,PTSD and everything and lots of unresolved mental health issues.

And the reason that I. Looked to psychedelics in the firstplace was mostly as like a tool for spiritual exploration, but I quickly sortof realized the kind of mental health potential that psychedelics had afterexperiencing that for the first time. And I continued using psychedelics mostlyin like a macro dose way, not in a microdose way, a couple of times a year forthe past decade as sort of part of my mental hygiene arsenal, I guess youcould.

Professionally, I worked as a quantitative researcher and aportfolio manager at a couple of different hedge funds. Like you Ben C charterholder, you know, went through that exercise in masochism and got the threeletters. And you know, have a academic background in computer science, machinelearning.

So I was doing a lot of like quantitative work at a fund calledCBLE here in LA that manages about $9 billion. And, you know, I, it wasinteresting. I was making good money, but I wasn't really. Feeling like I wasmaking a big impact on the world. I felt like if I left my job at that hedgefund or really just left the hedge fund space in general, there would be plentyof people that would be willing to do the exact same thing that I was doing.

There wasn't anything unique about what I was doing. And it wasreally just, you know, making rich people, richer trading derivatives on deriv.On derivatives of things. And I kind of had this unease that had been sittingwith me about it for a couple of years, and it really sort of came to a headduring COVID.

And so in 2020, I decided to leave my job at that hedge fundand also decided to like, not look for another job in the hedge fund space. Ididn't really have a plan besides that, but I decided that I was gonna do that.And for those that have followed the psychedelic space you'll know that 2020also happened to be the year that there was an IPO of a company.

That was related to psychedelics. It was the first likepublicly traded psychedelics company ever. And shortly after that first oneIPOed, there were a few others and. For someone like me who had been doingpsychedelics for like a decade and was also in finance. I remember seeing thesenews articles about IPOs of companies doing psychedelics.

And I was like, there's no way. This is real. Like, what isthis? This is crazy. Cause I, despite being someone who was very interested inpsychedelics, I never really thought there was gonna be an industry or alegitimate route to access these things. I would've assumed it was gonna stayunderground forever.

So I saw that. All of these companies were starting to raisecapital and start running clinical trials in psychedelics. And I had a lot offree time cause I had left my job. And so I just started digging into this likefull force. And I started a podcast where I interviewed a lot of the foundersand CEOs in the psychedelic space.

And. I was just running this podcast for fun, you know, tryingto find like, what was real, what was legit? What was bullshit in thepsychedelics industry started getting a lot of followers on the internet. And Istarted getting emails from people that had listened to my podcast that werelike, Hey, you know, I've got a hundred grand.

I wanna invest in psychedelics. What do you think I should dowith it? And I also had a lot of companies reach out to me and ask if I coulduse my platform to promote their company or help them raise money. And Irealized that. Without intending to, I had built a stream of potentialinvestors and also potential investment opportunities.

So in order to kind of capitalize on that after talking to, youknow, some of my friends that worked in venture capital and realizing that mostof the opportunities were on the venture side, not the public market side, Idecided to sort of leverage my finance background, plus my newfound as silly asit is to say like psychedelic business influencer internet.

Personality that I had like created and turn it into a fund.And so fast forward to September 20, 21 set up the structure for a fund. Thefund is called empath ventures and it focuses exclusively on early stagepsychedelic medicine startups have invested in 10 companies so far. I'm stillin the process of raising money.

So the fund is still open and yeah, I'd be more than happy totalk about like the specific types of companies that we're investing in the waythat I see the landscape, but that's sort of. Personal psychedelic backgroundplus sort of the professional route that got me to where I am now.

[00:06:04] Ben: Awesome. Good for you.

Like doing a little bit of deep reflection and actually beingintentional about a pause in your career and kind of like, Hey, you know, Idon't know what is next, but I know that this wasn't the path for me and I'mgonna. Give myself the, the space to figure those things out. There's a lot ofpeople that just head down and you know, bash their head up against the wall,through their entire life without taking that pause.

[00:06:28] Brom: Yeah. And I, I, fortunately I was luckyenough to have had a good job, which allow me to save money so that I couldactually take a break, you know, but I was a big part of, it was I was comingup on my 30th birthday and, you know, I was thinking like, what is the nextdecade gonna look like? And I was like, do I want to bring this thing that I'mnot feeling good about into the next decade?

And I was like there may or may not have been psych tripsinvolved in that decision.

[00:06:48] Ben: Yeah. That's part of waking up, right? Ihad a very transformational time period as well, right around that 30thbirthday. And I think it's like a time of reflecting of like, Where I'm going.

It's pretty easy to know the future of where you're going professionally.You just kind of look at the colleagues around and that's probably what yourlife will look like if you don't make a drastic change.

[00:07:10] Brom: So and it's tough cuz sometimes thelives of your colleagues around you are not necessarily bad lives.

Like they're making good money. They're great. They've got asweet house. Yeah. They have like security and it's it end it it's likeactually tough to make the decision to like uncouple from that security. So,yeah. Yeah.

[00:07:28] Ben: Joseph Campbell, the secure way is theinsecure way, right? I want to talk About the landscape.

I think perhaps a helpful first way of going path would betalking about this IPO for a, a now public traded, publicly traded company,dealing with psychedelics. Do we have any precedent for how this would workwith cannabis companies before it was legal? I mean this whole like federallyillegal state legal that cannabis has, and then psychedelics is further in thisgray area.

How does all of that work? From like a regulation standpoint.

[00:08:06] Brom: Okay. There are many answers to all thedifferent questions that were buried under that. But I think a good place tostart would be maybe just an overview of, like you said, the regulatorylandscape. So first of all, no matter what the guy selling you, the chocolatebar in Venice says psychedelics are illegal.

even in LA. Even though people wanna pretend that they're notthere is not a single jurisdiction at the moment where it is legal to produceand sell any form of psychedelic. And that would include psilocybin, the activeingredient mushrooms that would include LSD that include MDMA the one exceptionto this.

Is ketamine, which the purists would say is not a psychedelic,but it is similar in many ways, ketamine, because it is a FDA approvedanesthetic that is used in humans all the time. In medical context, doctors areable to prescribe it off label for mental health treatments. So ketamine iskinda the one thing that we have that doctors can actually give you legally.

But none of that other stuff, even in the cities where it'sbeen decriminalized, it is not legal. Produce sell a purchase, right? It's justa de possession has been decriminalized. So what the industry is doing ingeneral, when you hear about like a publicly traded company that is working onpsychedelics, what that means is that they're a publicly traded company that isvery similar to a biotech drug development pharma company that is taking.

Some psychedelic, whether it's an existing one or whetherthey're trying to engineer a new novel psychedelic and they are runningclinical trials on it, just like you would run clinical trials on any otherpharmaceutical drug, hoping that it will be approved by the FDA as amedication. And they are doing this with.

DEA permission. And so it is, you know, fully legal to investin a company that is doing the research with the goal that when the researchgets, provide the FDA it will be something that doctors can prescribe and theycan make money selling. So that's sort of like the first big category. Then, ofcourse there are these questions around state, by state level changes.

So many people may be familiar with the fact that in 2020Oregon passed a law called measure 1 0 9 and measure 1 0 9 basically said thatstarting in 2023 therapists, and they're using the term therapists veryloosely. It's not like the real, like legal definition of therapists, buttherapists care providers, cetera will be able to use psilocybin mushrooms aspart of.

Therapeutic practices in the state of Oregon, regardless ofwhat the FDA has to say about psilocybin. So they're kind of going around theFDA and creating the sort of medical path for psilocybin therapy. And it sortof remains to be seen what sort of issues that will bring up. In terms ofinvesting so many people are familiar with the fact that cannabis companieshave a notoriously difficult time getting banking services because they'redealing with a substance that's federally illegal.

When you're talking about a state like Oregon, that is kind ofjust saying, you know, we don't give a fuck what the FDA says. We're gonnaallow people to use mushrooms as part of therapy. Presumably those mushroomsare going to be produced and sold by companies that are, you know, operat.Illegally in terms of, as far as federal law is concerned.

So they may have issues with begging services. But when you'retalking about these publicly traded companies, I mean, the NASDAQ is allowingthem to list, which it doesn't allow cannabis companies to list. And that'sbecause they're basically pharmaceutical companies that are operating fullywithin the realm of law.

So that is sort of an overview of like, The regulatorylandscape in terms of the different types of businesses within the space, Isort of mentioned already that there are these biotech companies that aretrying to get psychedelics approved by the FDA. There are also drug discoverycompanies that are trying to.

Engineer new psychedelics to actually invent new things, ratherthan just take existing things and try and get them approved. And if you thinkthat sounds crazy, by the way, keep in mind that many of the most popularpsychedelic drugs of all time, LSD, ketamine, and MDMA were invented by humans.There's no naturally occurring version of LSD and they were invented by humansbefore we had computers before we had the modern understanding of neurosciencethat we have today, their basic LSD was embedded in 1938.

This is. Ford model T era stuff. And there are companies outthere that are basically like, we're gonna invent the, you know, the Teslamodel S of psychedelics and like get rid of this old, like Ford model T ofpsychedelics. And then sort of the final category is sort of the infrastructureand accessories.

So this could be software to help manage a psychedelic clinic.This could be a psychedelic clinic itself. This could be a telehealth app thatprovides ketamine, you know, I've invested in a few of those. But basicallyanything that maybe doesn't touch the drug itself, but is an accessory to theuse.

So that that's sort of my broad overview of the businesslandscape.

[00:12:30] Ben: That's super, super helpful. Andactually, I mean, we could talk about the history and the importance ofpsychedelics, but instead of, I mean, that's a whole conversation, if not,yeah. You know, an entire book, so. To, to keep us like on topic withspecifically investing, how would you recommend, well, before going into that,how, how would you recommend people that are interested in learning more aboutthe history of psychedelics or, or why they could be super important?

In addition to like just investing or like Michael polls, howto change your mind book comes to mind that that's like, for me, a very likeoutside person

[00:13:05] Brom: that, that. It's like 50% of all peoplethat I meet that have gotten into psychedelics in the past five years havegotten into it because of that book.

So I, and I actually haven't read it. So I don't know, but justbased on the amount of people that love it, I would say that's probably a goodplace to start. One thing that is important to emphasize here, and I. Kind offeel silly for not mention this before, is that the problem that thesepsychedelic companies are trying to solve in general is usually some sort ofmental health issue.

So when I say these companies are running clinical trials ofpsychedelics, usually it's clinical trials of psychedelics. In conjunction withtherapy to treat some sort of mental health issue, whether that be depression,anxiety, post traumatic stress disorder, et cetera. There are some other usecases that, you know, fall outside of that mental health arena.

But the vast majority of psyche companies are working on mentalhealth issues. And as I kind of jokingly like to say the statistics aroundmental health are very depressing and they keep getting worse especiallythrough COVID. So just some quick numbers. 50% of people at some point in theirlife will be diagnosed with some sort of mental health issue.

At some point in your life. 20% of people are currentlydiagnosed with some sort of mental health issue and about 17% of people arecurrently taking some sort of medication for a mental health issue, whetherthat be an antidepressant or something like Xanax for anxiety. And it would beone thing if those treatments worked and they do sometimes to some extent andfor some people, but a lot of them, even when they work have.

Negative side effects, SSRIs and antidepressants are famous forcausing sexual dysfunction in men, in weight gain, which, you know, for mewould make me more depressed. Anti-anxiety drugs, like Xanax have a highpotential for abuse. People like start doing Xanax recreationally and can OD onit. And.

Just in terms of raw effectiveness, they oftentimes are notsuper effective. So antidepressants for about one third of people that try themhave like no response and end up being what they call treatment resistant andpsychedelics seem to offer a better way to treat those mental health conditionswith fewer side effects and oftentimes in a sort of.

Curative way where you're like fixing the root cause ratherthan a palliative way, meaning like a daily pill to kind of keep the symptomsunder control. So these clinical trials are often designed around two, maybethree large doses of psilocybin or something in conjunction with therapy. Andwe see these symptoms of depression disappear for like 12 months after the lastdose of psilocybin, which is very different than, you know, taking an SSRIevery day for you.

Who knows how long God,

[00:15:30] Ben: that's kind of what we're those numbersare, are, are shockingly high. And I, I just did like some quick Googling, butlike one those numbers. Just in the us, correct. Or is that kind

[00:15:42] Brom: of those, those are specific to the us,but they're approximately the same kind of, no matter where you look

[00:15:48] Ben: most developed countries, I wouldimagine.

Yeah. Yeah. But the us alone spins close to 250. Billiondollars on treating depression and anxiety. Yep.

[00:15:57] Brom: Holy and you know, one other numberthat's pretty crazy is this is this one I always think about it's this termthat the CDC has called uh, deaths of despair. And it includes things likesuicide intentional overdoses, accidental overdoses deaths from things likecirrhosis of the liver associated with, you know, alcohol consumption andthings like that.

Basically deaths that happen. Your life isn't going so great.Right? The number of deaths of despair has doubled over the past 20 years,which is really crazy in the us specifically. Yeah. And you know, most of thosedeaths of despair are linked heavily to some sort of underlying you know,mental health issue.

[00:16:36] Ben: Geez, just staggering. Psychedelicmedicines show promise in treating a lot of these that are very difficulttreatment resistant. Sort of conditions, but like I would think that the existingdrug companies that, that are, are making a lot of money from, you know, the,the, the, the daily pill.

That's maybe not that effective really, really don't wantpsychedelics to come. To work if they work that well. I guess psychedelics,like you said, LSD was found in the thirties, but I know that there were tonsof like clinical tri trials in the fifties. What, what happened? Why did, didit just kind of stopped for a 30, 40 year period or kind of went moreunderground?

What, what happened

[00:17:20] Brom: there? I'll answer that, but I want togo back to the thing you said about the existing drug companies, not wanting tobring psychedelics to the market. I think. That's true in a sense, but I don'tknow. I don't know that that captures the whole picture. And I think it's kindof a common misconception that like big pharma is anti psychedelic medicine.

One of the truths is that a lot of the classic psyched or likeSSRI and antidepressants, like Prozac They have been around for longer thantheir patent exclusivity period. So when you invent a new drug and you get itapproved by the FDA, you basically have a 20 year period of exclusivity beforegeneric companies are allowed to compete with it.

Mo a lot of the SSRI that are popular now have passed that 20year. Line and can be offered as a generic, which means that the companies thatinvented them are not really making that much money off of them. And they areactually like pretty hungry for new psychiatric medications. And if they can,you know, get patents on psychedelics or invent new psychedelics, they couldpotentially make a ton of money off of those.

Another thing to note is that, you know, psychedelics plustherapy is going to be an expensive thing. But if it is shown to actually bemore effective, Traditional mental health drugs. I think insurance companieswill cover it. And insurance companies will oftentimes pay lots and lots ofmoney for certain treatments.

So I think that there is an appetite from big pharma for thisstuff. And a as a lot of these clinical trials approach phase two, it wouldn'tsurprise me. If we start seeing some acquisitions of these small psychedelicstartups by big pharma companies. So there's, that's my answer on that. But toanswer your question about this sort of like psychedelic dark age, it'sinteresting, you pointed out that there were a ton of clinical trials on LSD,specifically back in the fifties.

And this is something that a lot of people don't know. So a lotof people think that like psyche, that LSD somehow just. Spontaneously came outof like Timothy leery and the hippie movement, but it was actually around for alot longer before that it was invented in 1938 by this guy, Albert Hoffman inSwitzerland.

And he was working for a pharmaceutical company called Sandos.He invented it accidentally. He wasn't trying to create a hallucinogen and heaccidentally consumed it. And he was like, this is nuts. I can't like, what isthis? And he started sending it around to psychiatrists and psychologists, andthey started using it in clinical practice.

And I believe this, I might be wrong about this, but I think inthe 1950s specifically, there were over a thousand. Like clinical paperswritten on the use of LSD as a tool for psychotherapy. The, I is it billWilson, one of the founders of alcoholics anonymous was convinced that LSD wasthe key to getting people off of alcohol and all this stuff happened before thehippie movement in the sixties.

And the early sixties LSD was being. Experimented with, atuniversities like Stanford and Harvard on students. And a lot of the studentswere like, man, this stuff is really cool. We should maybe just like use itoutside of the context of studies. And it started exploding and popularity asmore of a recreational or thing to take at a festival.

And then there were a couple, there were a lot of thingshappening in the sixties. One, the Vietnam war was happening. And there were alot of troops that were coming home from Vietnam that were hooked onpainkillers because they had been like blown up by landmines and had been shot.And, you know, there were, there were all these like veterans that werebasically, you know, junkies that were you shooting heroin because they hadlike this crazy chronic pain.

It was a bad look to have this war that was already unpopularto begin. Creating, you know, this homeless population of people that were, youknow, using drugs. And then you had this psychedelic fueled anti-war river.That was you, you know, sort of manifesting all these big cultural events like Woodstockand everything.

And so Richard Nixon basically created the DEA. The DEA didn'teven exist before this and declared that there was a war on. Basically lumpingall drugs into the same category. And it's very interesting. You can actuallygo back to the Senate hearings when they were passing these laws. And therewere some senators that you can actually hear audio recordings of them saying,I agree with this war on drugs, but I think we should exclude psychedelicsbecause like a lot of us know that psychedelics are very helpful for all sortsof things, but they were kind of ignored and At that point, it became illegalto possess psychedelics.

You probably could have still studied them if you had gottenthe proper authorizations, but because there was such a cultural stigma aroundit, it would've been career suicide for any serious academic to Do this sort ofthing. So it basically went into a dark age and people just stopped studyingit, stopped using it in clinical contexts.

And then I believe in 1986, which is a year after MDM a wasmade illegal Richard. Sorry, Rick Dolan almost said Richard Dawkins, Rick Dolanstarted maps, which is one of the leading psychedelic nonprofits kind of inresponse to MDMA being made illegal and slowly, but sure started repopularizing academic research and psychedelics.

And that really kind of led to where we are today. I think.

[00:22:16] Ben: Wild that's wild. And then the rebirth in2020 was driven by this IPO, but like people have been investing in the spaceand kind of laying down the grain groundworks obviously for these things to behappening. Right?

[00:22:31] Brom: Yeah. So, I mean, The IPO caught a lotof retail investors' attention, right.

And retail investors don't care about the private markets cuzthey can't participate in it. So it's like until you have an IPO, a lot of thestuff stays underground. But I think there were a few things that happened. Somaps. Was running as a nonprofit running clinical trials on MDMA to treatpost-traumatic stress disorder and the FDA granted one of those trials,something called breakthrough therapy designation, which is kind of like a fasttrack designation that the FDA can give out to clinical trials that it thinksare doing a exponentially better job of solving a problem than the current bestpractices.

So they did that. That was very newsworthy. And then Some biginvestors, including Peter teal funded, a few pharma startups that were workingon psilocybin that also got breakthrough therapy designation. I think theystarted those companies around 20 17, 20 18. And that's when like real privateinvestments started coming into the scene.

Prior to that, there were nonprofits like maps, but you know,it's hard to raise money as a nonprofit and drug development costs a ton ofmoney. So once I think these big investors started pouring money in. You know,people's attention was captured and yeah, the whole thing was just kind ofsnowballed.

Yeah. I have a chart of the private in my pitch deck. There's achart of like that dollars of private investment going into psychedelics yearover year. And I think in 2017 it was like 10 million. And in 2021, it was 595million. Insane. It was invested by private investors in the psychedelics. Sothe charge just grows like, you know, exponential,

[00:24:03] Ben: well like many, many startup categories,right.

As like the abundance of money and speculation kind of chases alot of these, but it has very good long term. Benefits to society, kind ofhaving an influx of speculative capital rushing into these

[00:24:22] Brom: spaces, you would hope, right? I mean,there's always just like crypto and other things. There's always a little bitof hype that is probably, you know, excessive and CRI psychedelics have alreadyhad sort of their first hype cycle.

I think in November of 2021. The psychedelic stock index kindof like hit its peak and things have been kind of seriously tapering off sincethen only exacerbated by the global financial meltdown that we're currently in.But the underlying technology of psychedelic medicine is strong and doesn'tchange depending on the markets.

Yeah, but I would say that overall, this whole thing is stillvery much in its infancy as much growth as has happened. The total sort ofmarket cap of the psychedelics industry is maybe around 20 to 30 billion. Youcompare that to something like crypto, which you know, is like in thetrillions, right?

Yeah. So got a long, just add

[00:25:09] Ben: 1 trillion now was it was well over. Andthen, you know, it goes down by 80% that that takes like a haircut, butNovember of 20, 21 was kind of like peak for all risk assets. I would imaginethey all kind of pulled down. Based off of like the public end indices, but likewith you, you're seeing a lot of private market deals.

So have you seen private market valuations? Coming back down tolike reality in these past six, seven months? Or are they still yes, a littleovervalued?

[00:25:40] Brom: No, I I've definitely seen privatemarket valuations decrease. There was a company that we just invested in and Ifirst saw their. you know, investment opportunity probably like in February orso.

And they were raising on a convertible note and the cap wasjust astronomical, even though like their team was super solid. And what theywere working on was very reasonable. The cap on their note was absurd and theyrecently came back and they said, you know, we're actually raising with a cap.That's half of what we initially, you know, we're looking.

I was like, okay,

[00:26:09] Ben: well now, I mean, this is the realitythat that founders are gonna have to start realizing. Right.

[00:26:15] Brom: And, and this is, I've seen this happenin other cases that one of, you know, one of my portfolio companies you know,they were looking to raise sort of like a priced series a and then they'relike, you know, maybe we will actually just do sort of like a bridge round onlike a convertible debt instead.

And, you know, I think that that is happening all over theplace. Yeah. Even to good companies, unfortunately,

[00:26:36] Ben: The three categories of companies thatyou mentioned earlier, biotech drug, drug, tech, and infra. Are, are those kindof those are the

[00:26:43] Brom: three. Yeah, I would maybe refine alittle bit and say the first one is the people that are trying to get theexisting psychedelics approved.

Okay. As pharmaceuticals, the next category is sort of thepeople that are trying to invent new drugs. That's sort of like a verydifferent business. And then there's the infrastructure and accessories, whichis the third category. And then, you know, down the road, there will be afourth category called you know, recreation, which already exists, but is notsomething that you can legally invest

[00:27:11] Ben: in.

Gotcha. So recreation would be like the, the weed shop. That'sjust like, you know, B 21 and you can. Order, whatever you want sort of thing.Right?

[00:27:23] Brom: Right. Yeah. Consumer brands. And ofcourse this is going to require some sort of, you know, changes to laws forthis to happen legally. But I mean, it's only a matter of time before, like youknow, Gweneth Paltro has her own line of mushrooms and like that sort of thing.

Right. It's gonna happen at some point I, I mean, it

[00:27:39] Ben: will, right. Well, like I'm, I'm a bigfan of Portugal for a number of reasons, but they decriminalize. Personal useand possession of illegal all drugs in 2001, 2001. So for 21 years, they'vebeen, they've been operating like this. So pretty, pretty good foresight there,but.

So I, I, when, when investing about these like four categories,which one of which is a non category yet, but how do you, how do you split yourallocation across these three categories now? Or how do you, how do you thinkabout kind of allocating

[00:28:17] Brom: here? So I am very much interested inhaving sort of balanced exposure.

The idea of inventing new psychedelic molecules is veryinteresting to me for a lot of different reasons. One, I think that it is maybemore ethical to do that than to try and get FDA approval for an existingmolecule. Part of the reason for this is that if you spend a ton of money,trying to get something like psilocybin approved by the FDA, well, now you haveyour special FDA approved version of psilocybin and.

Decriminalization happens or God forbid, recreationallegalization. You're gonna have to compete with people selling for much lowerprices with you than you, because they didn't have to spend all this money toget FDA approval. So we, and we've actually seen by the way, some companiesthat are trying to get.

Psychedelics like LSD approved by the FDA, speak out againstrecreational legalization or decriminalization saying that it's dangerous andthat it's bad. And that we don't support that, which I think is kind of messedup. It's much more ethically cleaner to invent a new molecule and then worry aboutselling that and not competing with, you know, things like Occi and LSD.

You also get patent protection when you invent something new,you get 20 years of exclusivity. So there's a lot more like upside in terms of,you know, how long you have the exclusive rights to sell. The thing for thedownside of course, is that inventing a new drug is like really, really hard.And the risk of failure is very, very high, but if you do succeed, you.

You know, can make and ask nine amount of money. And there areactual reasons for inventing new psychedelic molecules that do benefit patientslike you know, there are certain populations for which classic psychedelics arenot. Very good. Like classic psychedelics are relatively safe, but they docause your blood pressure to rise and they cause your heart to beat faster.

And for this reason, the FDA excludes people that have likepreexisting heart conditions from clinical trials of psychedelics. And funnyenough, most people with preexisting heart conditions are older and older.People suffer from mental health issues at much higher rates than youngerpeople do. So this is like a core audience that actually needs the stuff morethan anyone that's being excluded.

So maybe you can invent a psychedelic. Easier on the heart, easieron the blood pressure. Maybe doesn't have as much hallucinogenic activity maybegives you the psychedelic therapeutic benefit without actually having thestrong hallucinations that SIL has. There are all sorts of interesting reasonswhy you might want to create a new psychedelic molecule, but as I said, Thosecompanies are super high risk of failure.

And the payoffs are like many years down the road. So very muchinvested in those, but also very much invested in the infrastructure andaccessories, which can make money much more quickly than a lot of these likenovel drug development companies can. In many cases, these infrastructure andaccessories companies are already making money legally.

One of the companies I invested in is called new life. And it'sa telehealth platform. So you just download the app and you talk to a doctor onthere and they can prescribe you ketamine off-label for depression, anxiety,whatever. They then mail the ketamine to your house fully. Legally, you get theketamine shows up in your mailbox, you do the ketamine, the comfort of your ownhome, and then you do the follow of therapy and integration care over thetelehealth app again.

And that's a company that is. You know, they launched inSeptember of last year and are making, you know, significant amounts of money.They've facilitated 35,000 ketamine experiences to date and you know, averageprice of. Between two to $400 per ketamine session. So, you know, you do themath not, not insignificant.

We've also invested in like some software companies that domusic for psychedelic therapy. We invested in a company that is operating outof Mexico. They're a high end retreat center that specializes in giving peoplethat are struggling with opiate addiction, IGA, which is, I dunno if you knowanything about I BGA, have you heard of it?

[00:31:58] Ben: Heard of it?

[00:31:59] Brom: I've heard of. Yeah. So for, for thosewho don't know, it's I began as this crazy psychedelic drug that is naturallyoccurring. It comes from the, a Boga tree, which is native to Africa, and it'sa very intense trip. It feels like a combination of psilocybin ketamines andcocaine. It's like this crazy multi receptor drug.

And. It has this very interesting side effect of interruptingopiate withdrawal symptoms. So if you're addicted to heroin or something andyou are trying to get off and you do IGA, it seems to totally eliminate thecravings that you have to go and do heroin again. There's tons of anecdotalevidence.

Of this stuff being an effective tool for, you know,rehabilitation, and it turns out that it's unscheduled in Mexico. So you canlegally give it to patients. So invested in a company, that's basically a, Ibegan assisted rehab facility down there in Mexico. All of those differentthings sort of fall into that infrastructure and accessories category.

So in the long run, I think the portfolio will be split kind of50, 50 drug discovery and then infrastructure and accessories.

[00:33:03] Ben: And, and then staying away from like theworking to get the existing psychedelics approved. Right

[00:33:09] Brom: in general. I mean, so we did invest inmaps. The maps is the nonprofit. That's running MDMA for post traumatic stressdisorder.

They started a public benefit corporation and we invested inthat, but in general, I think the challenge with the companies that are gettingthe existing stuff approved is that one, they don't have much intellectualproperty because they didn't invent the molecule. So they have to do all theseother weird things and play all these weird games with patenting, like.

Weird little like crystalline structures that happen to show upin the molecule when they make it in a certain way. It's a whole thing that Icould get into, but in general is not very defensible. Yeah. It's, it's maybenot very defensible. It's also possibly unethical. And a lot of these companiesare very much threatened by the prospect of decriminalization or recreationallegalization, which is what I personally would like to see in the long run.

So I think it's just like ethically cleaner to stay away fromthose in general.

[00:34:04] Ben: That makes sense. I mean, is by investingin this space. Well, your, your thought is that they will be decriminalized atsome point and then they will be recreational at some point. Yeah. Andtimeline. Do, do you think for something like that?

[00:34:23] Brom: So Oregon, I talked about the The organmeasure 1 0 9, which is like a therapy law. They also passed organ measure one10, which basically does what Portugal did like it decriminalizes all drugs. Soin the state of Oregon starting in 2023, like they're gonna be decriminalizedalready. They're already psilocybin mushroom specifically, or decriminalized inseveral cities around the us, Oakland, California being won.

I think Santa Cruz, I believe Denver, Colorado. Sodecriminalization is happening already. And like, assuming there isn't somemassive. Screw up or some crazy adverse event that happens. I don't see why thatwould that trend would reverse. Now the gap between decriminalization andrecreational legalization is like another question entirely, but you just lookat like, How long it took California to go from medicalization, which I thinkwas in 1990 of cannabis to recreational legalization, which was what, 2018.

It took like 18, it took like 28 years for California to gofrom like medical to recreational. And now we see states like, you know, kindof the holdout states in the Midwest. They, they go medical and then like threeyears later, they do recreational. It's like the time is, you know, shrinkingdown, cuz once people start consuming this stuff, medically, they realize like,I could just do this.

There's no reason why I need to like do this through a doctor.It's like the same thing, you know? So I, I think it might have 'em faster thana lot of people think.

[00:35:44] Ben: Yeah. That's, that's just absolutelycrazy. I didn't realize it was that big of a lag for California. I mean, I knewit, it was like medically available for a long period of time, but 28 years isa very

[00:35:56] Brom: long period of time.

Yeah, I should double check. I know, I know it was 2018 is whenit became recreationally available. Let's see California medical marijuana. I'mpretty sure it was like quite a long time, but Yeah, I feel like it wassometime in the early nineties when they passed that medical education. Well,a, a

[00:36:12] Ben: long period of time and that time it wasa long, it was a long period time.

I was getting shorter and shorter, which is the key part. I, I,so with these, like I'm just thinking from the individual investor like theaverage investor it's okay. This thing, it's gonna be a thing. I get it. Thesepublicly traded companies that are yeah. Down significantly since November 20,21, but.

What areas of focus are they are these all like drug tech wherethey're inventing their own versions or, or something different?

[00:36:45] Brom: The public educated companies span the,the full spectrum. So some of the most well known publicly traded companies andthe highest. By market cap, public security companies are a Thai life sciencesand compass pathways, both of which were funded by Peter teal and Christiananger Meyer, who is sort of the German version of Peter teal, much more heavilyinvolved in crypto.

I think a lot of the crypto people will know that name. They,so compass pathways specifically is trying to get. Psilocybin approved by theFDA as a treatment or a therapy for depression and a Thai life. Science is asort of a portfolio company that has like seven or eight different programs.Most of them are involved in creating novel drugs.

Both of those companies will likely do well financially.Although many people have some like ethical concerns about them. I think thatthey probably are reasonable buys. I think that compass pathways will probablysucceed at getting their psilocybin program approved by the FDA. And then thereare other companies out there, like field trip health, which is a network of20, I think ketamine clinics all across the us.

They also have a clinic in Amsterdam where they do psilocybintherapy, cuz it's legal there. And yeah, you can find lots of other types ofpublic companies that are doing different things, but you know, the, the, thehonest truth is, is that a lot of these companies that I POed very quickly inthe period of time from 2020 to 2021 a lot of them were pretty low quality.

A lot of them were kind of, you know, like the psychedelicversion of shit coins. And there were a lot of rug poles, and lots of peoplejust really ride in the hype train. People that didn't really care aboutpsychedelics in any like meaningful, personal way that just wanted to use thatword and to to raise some money and pay themselves, you know, a big salary.

So a lot of, I think the real opportunities are on the privatemarket side and, you know, that's why I started AMPATH venture. Take advantageof those.

[00:38:30] Ben: Yeah, that makes sense. I mean, itcertainly was a buzzword, right. Read that train which, which, you know, ithappens in terms of like regulatory risk.

Like we talked quite a bit about drug tech with the specifics,like it's, it's very difficult time and money mm-hmm , but. What sort of likeregulatory risks, do you see overall to all of these? Yeah, just generally.

[00:38:58] Brom: Well, so you regulatory specificallywould be like the FDA refusing to approve a clinical trial.

And that certainly could happen and it certainly will happenfor some of the clinical trials, but. The nice thing about this whole universeof psychedelic clinical trials is that one we're not just looking at a singledrug. We we're looking at like this whole universe of different psychedelicdrugs, including the whole universe of yet to be discovered psychedelic drugs.

And we're looking at applying them across all sorts ofdifferent mental health issues. So trial one drug might fail for depression,but succeed for anxiety, for example. So I think that there will be a number ofpsychedelics that do get approved by the. Treatments. And then in terms of morecomplicated regulatory matters, this is the step that shows up.

When you start looking at investing in businesses that areoperating, let's say legally under Oregon law, but illegally as it relates tofederal law. So far, I have yet to invest in any companies that are breakingfederal law. And until someone gives me a good reason not to, that's probablywhat I'm gonna keep doing.

[00:40:00] Ben: Yeah, no, it's it's a fascinating space.Bro really appreciate you coming on, talking about a lot of this. Is thereanything else that we missed that we should touch on in terms of like getting.Knowing more for the individual investor about this space.

[00:40:16] Brom: Yeah. Well, I think that pretty muchcovers it. I mean, we talked about the importance of the problem, how serious,like the mental health crisis is.

We talked about how psychedelics are, you know, potentially thesolution to many of these mental health problems. And you know, I think onething that I would probably leave the listeners with is I personally care a lotabout sort of, you know, impact and. You know, sort of double bottom lineinvesting.

And one of the things that I care about a lot is like endingthe war on drugs. And one of the ways that I see investing in the psychedelicspace being as like a form of activism, is this idea that like every dollarthat you invest into the psychedelics industry is sort of like a vote against thewar on drugs, you know?

And so it's. That's kind of, one of the things that makes meexcited to be operating in this space is that there is like a real potentialsocial impact in addition to just a financial impact. So I think it's aninteresting area to start following and potentially investing in. I have apodcast that you can find if you go to my website, it's empath.vc, and you canclick the podcast button.

And I interview a lot of interesting, you know, entrepreneursand CEOs in the space. And we talk about all of this stuff and you know, muchmore depth and Yeah. And of course, if you know, you're interested in investingand are an accredited investor, the fund is still raising, so feel free toreach out and we can talk about that.

And I think that that is pretty much covers it.

[00:41:32] Ben: Yeah. That's great. And I'll, I'll, I'lllink all of those things in the show notes. You wanna just say maybe yourTwitter impact.vc. Is that the best place for people to find it? Yeah.

[00:41:42] Brom: Empath, empath DOTC is the website. Andmy Twitter is the real Bram, the rom, so the real Bram on Twitter and yeah,those are the best places to follow me.

[00:41:51] Ben: Awesome. Bram really appreciate youcoming on super excited space and excited for all that you're you're doing init.

[00:41:58] Brom: Thanks so much, Ben. Appreciate it.There you have it. Thank you for listening. I really appreciate your support.Show notes, transcript links, and more can be found on [email protected].

[00:42:11] Ben: If you'd be so kind,

[00:42:12] Brom: please share this with anyone you thinkmight be interested or get some value from this conversation. If you have anyquestions or comments, please reach

[00:42:19] Ben: out. I'm always happy to hear. Lastly,

[00:42:22] Brom: if you're on YouTube, please like the

[00:42:24] Ben: video or subscribe to the channel. Ifyou're listening to the audio version of this, please subscribe to the podcastand, or

[00:42:31] Brom: leave a review.

This really helps more people find the podcast.

[00:42:35] Ben: And I really appreciate it. Thanks again,and hope you have a fantastic day. Happy investing.

Ben Lakoff is an entrepreneur and finance professional. He has developed strong global finance experience through 10 years of international assignments in the US, Brazil, Afghanistan, Southeast Asia, Czech Republic and through the award of his Chartered Financial Analyst (CFA) certification.