The Smart Way to Play Psychedelics
A Passion to Succeed
Where Legacy Drugs Have Failed
DMT, A Savvy Choice
An entheogen (hence the company’s name), DMT is a hallucinogenic tryptamine drug that produces effects similar to LSD and psilocybin. It is derived from a number of plant species and can be synthetically produced in laboratories. DMT is endogenous to humans, produced throughout the brain and related to the neurotransmitter serotonin and the pineal hormone melatonin.
A serotonin receptor agonist, DMT is a compound that is close to Ko's heart, who became attune to its therapeutic benefits by using it in a healing journey himself to address the underlying cause, rather than using conventional drugs to mitigate symptoms.
From pharmacokinetic and safety perspectives, DMT has an advantage over other psychedelics because it is a small molecule that has been used in humans, studied for decades and shown to be safe with a potent, yet short, duration of effect.
Much of the discovery work of DMT was pioneered by Rick Strassman, clinical associate professor of psychiatry at the University of New Mexico School of Medicine, in the 1990s via government-sponsored clinical research. Over the course of five years, Strassman built a profile for DMT by administering hundreds of doses of intravenous DMT to 60 volunteers. Effectively, Strassman’s team was able to validate safety and characterize a dose-dependent response consistent with activation of central and/or peripheral serotonin receptors.
Strassman is widely acknowledged for revitalizing psychedelics after President Richard Nixon stymied promising research in psychedelics in 1970 with The Controlled Substances Act. Simmering for decades, research is expanding quickly today, bringing with it big corporate valuations on promises of new classes of drugs coming through pipelines.
In line with Ko’s reports of deep introspection, Strassman dubbed DMT the “spirit molecule” because of its many effects, including inciting powerful emotions, feelings of overwhelming significance and religious experiences. These are qualities integral to overcoming addiction through improvements in psychological-related variables.
Importantly, a short duration owing to rapid metabolization is a key component in developing new generation therapeutics. Understand that with drugs like psilocybin and LSD, there is no stopping the experience should the patient have what is often referred to as “a bad trip,” which can last hours before the drug wears off unless strong sedatives or anxiolytics are administered.
In stark contrast, DMT therapy can be controlled to short 30-60 minute sessions where the patient is “brought down” by stopping the IV delivery system in the event of an adverse reaction.
That means that even though psilocybin represents a transformational change in medicine, DMT could be far more preferable to patients and physicians.
Developing Trials & Clinal Pathways
Entheon is focused on nicotine, alcohol and opioid addiction by way of DMT treatments. All of these represent massive markets with high remission rates and a dearth of effective therapies. After all, these products are abused by some 65 million people in the U.S. Nearly 500,000 American die annually from smoking-related disease, 88,000 die from alcohol-related disease and a whopping 2.1 million perish from opioids amid an accelerating trend in opioid dependence.
Importantly, Entheon is aiming to re-shape the standard of care for addiction through its understanding that simply removing the physical source is rarely effective in a durable response. Rather, the modality to recovery is underscored by a growing body of experts strongly believing the root of substance use disorder is psychological and emotional in nature. Supportive psychological therapies and other behavior modification therapies will be combined with the DMT protocol before and/or after the psychedelic session to maximize effectiveness and patient comfort.
The company is clearly differentiated from peers with this model.
Owing to the methodology of addressing the underlying cause to help a person overcome an addiction and reclaim their life, cocaine, amphetamines and behavioral addictions (gambling, sex, etc.) are addressable markets in the future the dovetail perfectly with Entheon’s technology. It is also easy to speculate that depression will enter the equation one day, either for off-label prescriptions or as a primary indication for Entheon.
To that end, management is in the preparatory stage to initiate a proof-of-concept clinical trial, anticipated for the summer of 2021. Ahead of the public listing, Entheon has been quietly positioning for the trial while still disclosing plenty to keep investors closely on the lookout for milestones and developments.
When it comes to regulators, Entheon gets to benefit from work already completed in the Netherlands that provides translatable safety data the FDA want to see for clinical studies.
The Phase I portion of the trial will be a quick, double-blind study (2-3 months) with safety as a primary endpoint, while the mid-stage research dials-in dosing and efficacy. Provided the (what appears to be conservative) timeline is kept, investors should see their first batch of clinical data from Entheon in about one year from now, a significant milestone and value builder for any company.
The Value of Trials
Compass Pathways has rightly so captured the attention of investors because it is the leader in psilocybin clinical research with its mid-stage trial. The trajectory of the company certainly is reminiscent of fellow Englander GW Pharma, a global leader in development of cannabis-derived drugs for treatment-resistant diseases. Ultimately, GW Pharma progressed to garner FDA approval of its Epidiolex for rare forms of seizures and a market capitalization of $3.0 billion.
Compass Pathways enjoys a valuation of $1.3 billion with its Phase II trial. Mind Med, which is in early-stage clinical studies, currently has a market cap nearing $300 million.
When the merger with MPV is completed, Entheon Biomedical will have 40.4 million shares outstanding and 11.4 million warrants exercisable fully-diluted shares. Based on the outstanding shares and the current MPV share price of $0.16, Entheon will become public with a market capitalization of just C$6.46 million (US$4.93 million).
Entheon will have about C$3.0 million in working capital upon completion of the amalgamation, which is plenty to move forward with the clinical trial. Potential cash from the exercise of warrants is approximately C$7.0 million.
Some simple math shows a fully diluted market cap of C$8.29 million (US$6.32 million), while the company could have about C$11.0 million in cash, arguably creating a disconnect in fundamentals and valuation with consideration for comparables. Investors have a way of sniffing out disconnects and correcting them quite quickly, which likely will happen as more people learn about Entheon, the public entity, in the coming weeks.
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