PsiloThera is currently raising at a $50 million pre-money valuation. Although psychedelics are an increasingly popular industry, PsiloThera does not have the traction to justify such a high valuation. The average revenue of growth-stage companies in our database is $1.9 million, but PsiloThera is still too early in development to have much revenue. As such, PsiloThera receives a very low price score.

This year, the US psychedelic drugs market was valued at more than $2.7 billion. Compared to other therapies, this is a niche market. When compared to other companies at a similar stage, PsiloThera has a below-average addressable market score. Additionally, as psilocybin and other similar drugs are considered a Schedule I narcotic, there is considerable market adoption risk because of the regulatory hurdles any drug would have to overcome. Lastly, even if psychedelic drugs like psilocybin are decriminalized and legalized in states like Oregon and others, it’s still not very widely accepted. 

However, psilocybin’s decriminalization and legalization in the U.S. does present a large growth opportunity. The psychedelic drugs market is growing at more than 11.5%, which is an above average rate. The small but fast-growing market led to a slightly above-average market score.

PsiloThera CEO and co-founder John Atanasio is a serial entrepreneur with a degree from the University of Maryland. Atanasio’s StartEngine description indicates he’s had experience developing “next generation web-based platforms & technologies for Healthcare & Medical Industries,” but his LinkedIn and other searches indicate no such experience. Additionally, Atanasio seems to be the CEO of a tequila brand and is involved in several media companies. The combination of running multiple unrelated businesses and the conflicting work history are concerning. A company developing controversial drugs in a highly regulated space like healthcare should ideally have a dedicated founder with relevant experience.

Co-founder Jacquelyn Wright-Minogue has more than 30 years of experience in the pharmaceutical industry. Wright-Minogue started her career at Schering-Plough as a research scientist, moving on to Merck where she was a clinical trial specialist. Wright-Minogue then moved on to Novartis as an expert clinical manager and finally ended up at Amicus Therapeutics, where she still works as the senior director of clinical operations. Wright-Minogue has extensive experience in clinical trials, which will prove invaluable to PsiloThera. But her full-time role at Amicus means her attention is divided, which doesn’t bode well for PsiloThera.

Overall, the PsiloThera team scores below average. Neither founder seems fully dedicated, and the primary founder, John Atanasio, has little experience in the psychedelics industry.

There is little to differentiate the quality and price of PsiloThera’s product. Although controlled use of psychedelic drugs may help treat mental illnesses, PsiloThera has nothing to show for it so far. The company does not describe its drugs or therapies — or their effectiveness — in any detail. There is also no indication of what their pricing may be. The company’s microdosing method isn’t unique, either. MindMed is a notable competitor using the same approach.

PsiloThera plans to distribute its treatments via what seems to be a business-to-consumer model. However, even parts of its business model appear suspect. The company allegedly intends to use quantum technology to help develop drugs, yet quantum computing has shown to be at least a decade away from feasibility. PsiloThera claims to have struck a partnership with a quantum technology company, but the partner in question is unnamed. 

The psychedelic therapeutics space has increasingly grown in popularity as high-profile companies like MindMed and Cybin have gone public in Canada. Others like Beckley Psytech and Compass Pathways (both based in the UK) have raised millions in funding from prominent investors like Peter Thiel. While no company has truly become a leader in the space, these startups undoubtedly have a headstart in the race to bring psychedelics to market. Much of these startups are well-funded and have similar business models. 

Lastly, PsiloThera won’t be able to defend itself from the competition as it lacks patents and protections for novel drugs and therapies. As such, there’s nothing truly differentiated or defensible about PsiloThera. Altogether, this results in a below average differentiator score.

PsiloThera’s Form C is barren, so it’s hard to judge the company financially. Aside from that, the company has not raised money previously and has only two partnerships. PsiloThera has managed to partner with Zoom in Zoom’s Healthcare ISV Program, which allows PsiloThera to build a more integrated telehealth solution using Zoom’s software. And PsiloThera has also partnered with an unnamed quantum technology company that will allow PsiloThera to more effectively develop drugs and nutraceuticals. However, this second partnership poses questions, as quantum technology is considered decades away from being feasible. The lack of any real traction gives PsiloThera the lowest possible performance score.

An investment in PsiloThera is among the riskiest investments an investor can make. There is significant product risk associated with PsiloThera, as it is in the very early stages of development as a whole and hasn’t even started product development. As such, the efficacy of its future therapies and the price of its treatments are uncertain. 

Additionally, the company faces some team risks as the founders listed aren’t fully dedicated to developing PsiloThera. CEO John Atanasio is running numerous businesses concurrently and doesn’t have a significant background regarding healthcare and psilocybin. Co-founder Jacquelyn Wright-Minogue is more accomplished in the pharmaceutical field, especially around clinical trials, but is also not fully dedicated to PsiloThera. Neither founder lists the company on their LinkedIn profiles. This is concerning because it could suggest that neither founder is willing to disclose their affiliation with PsiloThera.

PsiloThera also faces significant regulatory risks. Although psychedelics have been decriminalized in some parts of the US, psychedelic drugs are still considered a Schedule I drug, which makes the manufacturing and distribution of such treatments incredibly difficult. Along the same lines, the company faces several legal risks related to regulation as well as legal risks associated with any bad trips or side effects because of its drugs or therapies. 

The company faces significant time risks as well. Although attitudes toward psychedelic drugs are relaxing, psychedelic drugs are not commercially available anywhere in the U.S., even in Oregon where psilocybin is decriminalized and legal. It will take a significant amount of time before psychedelic drugs like psilocybin become commercially available and as such, it’s unlikely PsiloThera will see commercialization anytime soon. 

Lastly, there is significant financial risk, as the company’s $50 million pre-money valuation is excessively high given the lack of traction, other risks, and no differentiation. Taken all together, investors should consider carefully before investing in a startup as risky as PsiloThera.

PsiloThera has little product development and differentiation for an industry that requires novel drugs, therapies, and treatments. The presence of numerous large and well-funded competitors with distinct drugs and therapies also doesn’t bode well for PsiloThera. Psychedelics, while beneficial, are controlled substances that are banned federally. In addition, neither of the co-founders seem to be giving PsiloThera the dedication it needs in order to navigate the regulatory, legal and adoption challenges it will undoubtedly face. Putting these factors together with the company’s significant valuation, PsiloThera offers investors plenty of warning signs.

Attitudes and regulations surrounding psychedelics are relaxing in some parts of the US. The mental health benefits of psychedelics and the increased focus on mental health treatments both mean PsiloThera is targeting a fast-growing and increasingly popular market. If the company is able to handle the challenges it faces, it could reach success with the right customer base.

PsiloThera is a pre-money mental healthcare company developing psychedelic treatments for various mental illnesses. The psychedelic drugs and mental health markets are large and popular markets that have ample space for multiple companies to succeed. 

However, there are a number of concerns to keep in mind before investing in this company. PsiloThera’s current valuation is excessive for such an early-stage company without much traction. The company does not seem far along in developing its products, let alone the prices of its treatments. Both of the founders have obligations at other companies, and CEO John Atanasio does not seem to have relevant experience. The company offers little to stand out among its more developed and well-funded competitors. There are also many risks, including legal and regulatory risks, that could thwart PsiloThera’s success. Overall, PsiloThera has many obstacles to overcome in order to achieve success. Therefore, PsiloThera has been rated an Underweight Deal.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out at support@kingscrowd.com. 

Analysis written by Francis Vu.