Cathie Wood's Psychedelics Fund ARK Analyzes The Sector's Present & Future And Likes What It Sees

Cathie Wood’s ARK Genomic Revolution EFT has been making big investments in the psychedelics sector since February 2022, most notably in Atai Life Sciences ATAI. The fund has now gone deeper and released an extensive report exploring “the therapeutic merits” and what the sector's investment prospects look like.

Written by research associate Pierce Jamieson, ARK’s “How ‘Far Out’ Are Psychedelic Therapeutics?” joins similar analyses by KPMG and Morgan Stanley. Together, they certainly weigh on what retail investors who are still unaware of the sector might consider a fairly good-looking market to get involved in.

The piece walks the reader through a small intro on the history of psychedelic substances then moves to a scientific review of eight related compounds and their current clinical status. It then dives into which investments pose risks and which hold opportunities in the sector. 

The information published includes average trial costs, average time span for drug development and approval, market size forecast (practitioners’ adoption, patients, sales), and further provides a comparison between estimated prices of future treatment options.

For instance, ARK estimates that for 2022 in the U.S. alone, the cumulative economic burden associated with major depressive disorder (MDD), opioid use disorder (OUD) and post-traumatic stress disorder (PTSD) together total ~$1.4 trillion per year, with direct healthcare costs at ~$270 billion. 

In view of these numbers, the fund assesses the annual pharmaceutical sales opportunity associated with these indications for 2022 in the U.S. at $44 billion or ~3.1% of the total economic liability.

Within the potential options to be available for the treatment of these conditions, data collected and analyzed suggests that psilocybin holds advantages in durability, safety and efficacy while potentially alleviating costs to the healthcare system. 

The total number of projected sales for magic mushrooms' psychoactive component is up to nearly $1.4 billion per year at a price of $4,300 per dose, considering conventional assumptions on patient eligibility and psychiatrist acceptance.

And that number could rise if psilocybin expands to treatments of moderate forms of depression currently treated with SSRIs - a $15 billion market in the United States.

As the report states, available clinical data suggests that psilocybin is more effective than SSRIs, while advancing the potential neurophysiological overlapping of many common mental health conditions.

ARK provides an interesting overview of the sector while noting that there are “economic, regulatory, and health risks that should be considered carefully by investors, drug developers, and patients.”

There is also a bullish side to ARK's analysis. “Forthcoming breakthroughs should reveal more about the nature of psychedelic experience and allow clinicians to diagnose mood disorders more effectively while developing more effective and safe therapeutic agents.

“Through this lens, the psychedelic movement might be less a triumph against cultural stigma than a revolution in neuropharmacology." ARK points out.

"We believe psychedelics could usher in a new era of neuroscience in which the insights gleaned through functional neuroimaging over the last twenty years will be leveraged to solve some of the long-standing public health issues associated with mental illness.”