MindMed: Can the Former Darlings of the Psychedelic Biotech Sector Avoid Collapse? 

The year is 2020. Life for most of us is still in a very strange and unsettling place. The comfort many of us found in baking banana bread was fading quickly as anxiety induced by a mountain of uncertainty became harder and harder to downplay.  

Social tensions in the US are off the charts, a highly contentious presidential race is ramping up, and no one really knows if and when life will return to some semblance of normalcy ever again. Insert the Elmo in flames meme here. 

However, in what felt like the darkest of nights in society’s recent history, a resurgence in interest surrounding psychedelics and their potential as a treatment for a plethora of mental health conditions started emerging as a small glimmer of light far off in the horizon.

Helping generate some of that light out in the distance were a handful of brand new biotech and drug development companies focused on developing and bringing-to-market the world’s first medically approved psychedelic-based drugs and treatments.

Among the early biotech leaders in this space were companies like Compass Pathways, ATAI Life Sciences, Field Trip Health, and drum roll please… MindMed. 

Founded in May of 2019 by Jamon A. (“JR”) Rahn, an entrepreneur, Y-Combinator alumnus, and former Uber executive, and Stephen Hurst, a 35-year veteran of the pharmaceutical industry, MindMed quickly carved-out an identity for itself as one of the first “buzzworthy” psychedelic drug development companies starting in the second half of 2019, carrying over into 2020. 

Perhaps it was JR Rahn’s ties to Silicon Valley through his tenure at Uber, or maybe the eye-catching logo rolled out by the company, nonetheless, there was a certain panache to MindMed in those early months following their launch that made many out there, myself shamelessly included, feel like something legitimate was truly beginning to develop for the psychedelics sector and that MindMed was going to be at the forefront of leading us there. 

Adding to the ground swell of buzz surrounding MindMed was the company’s late 2019 endorsement from Shark Tank superstar, Kevin “Mr. Wonderful” O’Leary, followed by a series of YouTube videos from O’Leary throughout 2020 promoting, in some form or another, MindMed as a solid investment opportunity. In fact, in many of these videos, O’Leary and Rahn appear together, tag team style, to help build hype around MindMed’s business model and long-term potential as a biotech leader for the emerging psychedelics sector. 

In less than a year since launching, MindMed had become the face of the developing psychedelics industry and a darling amongst those in online investor chat boards and rooms as word began to spread about a potential up-listing to the NASDAQ. Of course, none of this was by mistake. The brains behind MindMed’s marketing and investor awareness strategies were geniuses. They gave the company a look and feel that oozed fun, cool, and exciting new tech startup – Uber before Uber became Uber, or something like that. And then position a notable public figure like Kevin O’Leary as the “Chief Endorsement Officer” of the company, and boom! You have the spark needed to start a wildfire amongst the investment community. 

Three years later, and it's difficult not to argue the fact that those pre-NASDAQ listing days were peak happiness and excitement for MindMed. Their debut on the NASDAQ in April of 2020 hit like a fart in church dropping 30% in the first listing day alone. 

Things for the company in the months, and now years, that followed this up-listing have only gotten increasingly turbulent and unstable as the company has struggled mightily to find its footing within a sector that continues to struggle with establishing stability. 

In what at the time appeared to be the climax of this turbulence, JR Rahn, to the surprise of some and relief of others, stepped down as CEO of the company in June of 2021 telling Benzinga in an exclusive interview that “MindMed requires leaders better equipped to pursue late-stage clinical trials and solve regulatory hurdles.”

Since Rahn’s abrupt departure from the company, Robert Barrow has occupied the position of CEO. Barrow originally joined the company in January of 2021 as Chief Development Officer and, according to his profile on the MindMed website, “is an accomplished pharmaceutical executive and clinical pharmacologist with over a decade of experience leading drug development programs in a variety of disease areas.”

One could somewhat easily speculate that pressure from MindMed’s board and perhaps largest shareholders and stakeholders led to someone with more of a pharmaceutical pedigree such as Barrow being fitted into the position formerly occupied by Rahn. One could also reasonably speculate that Rahn had become the scapegoat for MindMed’s shortcomings and severely underwhelming performance post-NASDAQ listing and in an attempt to demonstrate a proactive approach, pressure was placed on Rahn to step down. 

Whatever the true motive or motives that were behind Rahn’s departure, it is certainly looking now, in hindsight, that the move was nothing more than a bandaid over a much deeper wound. And judging from the recent news that has been circulating surrounding MindMed, the severity of that “wound” has not only gotten worse, but is in pretty serious condition.  

MindMed's Battle with FCM

In recent weeks, much of MindMed’s dirty laundry has been aired out in the public for all to see. A letter from MindMed to its shareholders was released recently and peeled the curtain back on some relatively serious dysfunction brewing amongst some of its shareholders. The “tea” as the kids like to say, is “piping hot” here. 

MindMed’s letter to shareholders highlights a battle that appears to be forming between the company and FCM MM Holdings, LLC (“FCM”) who is said to own approximately 3.5% of the company’s outstanding common shares. In the letter, the company states that “FCM is waging a proxy contest to take control of the Company despite only owning a small percentage of our outstanding shares and failing to provide any realistic strategic plan for MindMed. We believe that allowing FCM to harm the Company’s current strategy and management team – who have been successfully executing our plan under your Board’s oversight – would put your investment at risk.”

The full letter from MindMed to its shareholders can be found here courtesy of yahoo! Finance. 

And as if MindMed’s letter to its shareholders wasn’t eye raising enough, FCM countered with a letter of their own on May 5th which, amongst other details, stated that: “FCM determined that the only way to put MindMed back on track and stop the destruction of further shareholder value would be to reconstitute the Board and take immediate action for the benefit of all shareholders.”

More information on FCM’s letter can be found here courtesy of Deborah Borchardt from Green Market Report. 

Much of this dispute is likely to come to head at the Company’s 2023 Annual General Meeting of Shareholders, scheduled for June 15, 2023 and may very well play a significant role in dictating where MindMed goes, or doesn’t go for that matter, in the months and years ahead. 

It’s clear, however, that the potentially billion dollar question being asked here is whether or not MindMed’s existing team of head honchos can successfully and effectively navigate the company to the psychedelic biotech promiseland (i.e. guide their existing clinical trials to FDA approval with all sights set on bringing them to market). 

It would appear from the stance that the folks at FCM are taking, and as evidenced in the aforementioned letter to MindMed, that they have arrived at a conclusion where they do not believe the team that MindMed has out on the field right now is capable of carrying the ball into the endzone and, in essence, is asking them to punt the ball in an effort to put new players out on the field.

And while I’m not here to tell you who I think is right or wrong in this little spat, I am here to say that I believe the decisions that will be made by whoever is in the driver’s seat of this company over the next few months will ultimately determine the fate of its future. 

Speculation aside, what we know as fact through observing MindMed’s 2022 filing is that the company appears to have enough cash on hand (approximately $142M) to sustain through at least the first half of 2025. And depending on whether you’re a glass half full or half empty type of person, this news is either positive and confidence boosting, or it is cause for a slight bit of concern given the road that the company still needs to travel down in order to bring any of what they have in their development pipeline to market. 

Speaking of which, within their current research and development pipeline, MM-120 (LSD D-tartrate) for General Anxiety Disorder (“GAD”) and Attention Deficit/Hyperactivity Disorder (“ADHD”) is closest to seeing the light of day from a registration standpoint. However, according to the company’s March 2023 Investor Presentation Deck, they anticipate MM-120 for GAD to reach Phase 2b by “late 2023.”  

With this being the case, it isn’t so wild to entertain the thought of the company’s future being incredibly and almost precariously dependent on the success or failure of MM-120, which brings me back to the concerns being raised by FCM. 

In dissecting other concerns outlined by FCM in their letter to MindMed, there appears to be a fairly significant disagreement over the need for the company to pursue and enter into a Phase 2b study versus moving directly into the Phase 3 portion of the study. MindMed and its Board are holding their ground on the need to complete the Phase 2b study before it can move into 

Phase 3. Meanwhile, FCM seems to believe that a Phase 2b dose finding study would be “flawed and unnecessary.” Furthermore, FCM is also seeking for unnecessary expenses to be cut which, in combination with their desire to skip over the Phase 2b study and move into Phase 3, reasonably suggests that they do not believe MM-120 will make it across the finish line if it remains on its current trajectory. 

In fairness, MindMed is far from the only psychedelic biotech and drug development company that has seen so much promise and optimism shift to doubt and uncertainty in such a short period of time. Volatility has unfortunately become as synonymous with virtually every company operating in the psychedelic industry as lasagna is to Garfield. 

Whether due to internal or external factors, I really can’t think of very many companies that have operated in the psychedelic sector over the last 3 to 4 years who haven’t had at least one moment of “What the hell am I doing here?”

The reality here is that many mistook the early months and years of this sector as a sprint instead of a marathon and burned through their resources before the first leg of the race. Others, actually recognized this would be a marathon, but fell into the trap of assuming that there would be enough refueling stations along the way to keep them going only to learn that no refueling station would have enough resources to fill their tank back up to full capacity. 

Because of the success that companies like MindMed, Compass Pathways, and ATAI had with raising capital in the very early days of the development of this sector, they have had the advantage of being able to stockpile additional resources as well as arrive at these “refueling stations” ahead of everyone else. Unfortunately, this left little-to-nothing for other companies arriving at these refueling stations and is a big reason why we started to see some of them such as Mind Cure and HAVN Life Sciences fall to the wayside throughout 2022. 

Given the complexities and unknowns that are inherently involved with clinical trials, I am going to steer clear from offering any predictions as to whether or not MindMed crosses the finish line with MM-120, or anything else they have in their pipeline for that matter, and ultimately lives up to just a fraction of the potential that Mr. Wonderful was touting for the company back in 2020. 

What I do know is that one of these psychedelic biotech companies is inevitably going to make it across the finish line even if it's with severe battle wounds and ironically, or unironically, a pretty intense case of PTSD from the journey to get there. 

And take this for what you will, but MindMed is still in the race. Sure, the wheels may look a little wobbly and the check engine light might be on, but when you look at the other cars that are still in this race, it's tough to argue that anyone else is in exceptionally better shape really. 

Its early founders, adopters, and fans all believed that MindMed was destined to be the exotic Ferrari of psychedelic biotech companies. And perhaps this is a dream that can still come true. However, almost four years later, when you take a very honest look at the psychedelic biotech landscape and the challenges many of the companies in this sector have had to fight through,a and still have to fight through for that matter, it's kind of difficult to view any of them like a sleek and sexy sports car coasting their way to the finish line. Instead, this has become a marathon of a race where no one would be shocked if it was that old, boring, yet reliable, 2008 Toyota Camry that ends up crossing the finish line first. 

So I guess the question that should be posed to the leaders of MindMed today is whether they are cool with letting go of aspirations of being the Ferrari of psychedelic biotech companies and simply adopting the mentality of a Toyota Camry for the sake of making it across the finish line? 

I suppose time will tell.