Palo Santo raises $50 million for the largest venture capital fund ever dedicated solely to psychedelic medicine

Venture capital fund Palo Santo closes its first oversubscribed fund with $50 million in commitments in what the two-year-old company describes as the largest venture capital pool dedicated to the development of FDA-approved psychedelic drugs, learned MarketWatch.

While $50 million would be considered a smaller VC fund compared to others in the big tech or biotech sectors, Palo Alto is playing a small industry so far.

But with MDMA, also known as Molly or ecstasy, as well as magic mushrooms, or psilocybin, gaining traction as a potential drug, Palo Santo sees an opportunity to support new drug development.

“It becomes a biotechnology company [and] it needs to take a sophisticated life science approach to make sure these compounds get through the FDA and hopefully get reimbursed by insurance,” Daniel Goldberg, co-founder and partner of Palo Santo, told MarketWatch. “It was crucial that we played in this sandbox.”

Goldberg said he received MDMA to treat his post-traumatic stress while living in the community exposed to bloodshed in the July 2021 Highland Park shooting in Illinois that killed seven people and injured 30 people.

“I was lucky to have access to and be able to work with psychedelics and that was helpful,” Goldberg said. “It made me realize that we need to get things done as quickly as possible. Our job is…to make sure we get drugs that can help people and are safe and make them accessible. That’s a good thing for a lot of people, but it’s not regulated.

Read also : ‘Magic mushrooms’ can help alcoholics drink 83% less – or quit drinking altogether, research suggests

The company raised the majority of its first $50 million fund before the 2022 financial markets downturn, but it has attracted around 40% of the fund this year. Palo Santo has already deployed $25 million of the fund to 20 core portfolio companies, including Tactogen, Beckley Psytech, Bexson Biomedical, Delix Therapeutics, Fluence, Ksana Health, Gilgamesh Pharmaceuticals and Journey Clinical.

Valuations of target companies have risen in 2021 amid a bullish private market and as other companies have seen positive research. While some institutional investors have injected money into the sector, some of the companies that have secured funding were not poised to scale successfully.

“We’re proud to have taken passes on companies that are now penny stocks,” Goldberg said. “We can show investors that not only are we doing well in a very tough market, but we’ve also avoided the disasters of a foamy market.”

Goldberg traced his interest in the field about five years ago when he attended a talk by Michael Pollan, author of “How to Change Your Mind.” He realized that there was a deep bench of scientists and researchers working to gain wider acceptance and use of psychedelics to treat addiction, depression, PTSD and other ailments, but with little ethical or scalable investment in space.

“We thought we stumbled upon a real secret,” said Goldberg, who decided to bring his experience to the fledgling space as co-founder and director of Bridge Venture Fund and Bridge Investments since 1998.

For his part, Tim Schlidt, co-founder and partner of Palo Santo, worked in the field of life sciences and health services at the private equity firm Madison Dearborn Partners and noticed favorable university studies on psychedelics at Johns Hopkins and elsewhere, starting about four years ago and started telling his friend Goldberg about it.

“When we looked at the data, we said, ‘This is a game changer,'” Schlidt said. “It started a long exploration of meeting people and getting to know academics. We’ve seen the COVID-19 pandemic as a wave of mental illnesses. It’s settled and you’re seeing a resurgence of interest in academics. mental health care.

Unlike antidepressants and other medications that patients must take every day, MDMA was offered as a vehicle for a fixed set of therapy sessions with trained professionals in the room.

The Multidisciplinary Association for Psychedelic Studies, or MAPS, has conducted phase 3 trials of MDMA, which could be marketed for therapeutic use by 2024 or 2025. MAPS data showed that 67% of participants n have more PTSD after three sessions in phase 3 trials.

In addition to the founder’s combined pool of experience in private equity and venture capital, his roster of advisors, including Charles D. Nichols, John D. McCorvy, Dr. Julie Holland, Dr. John F. Greden, and Dr. Stephen Wright, Gretchen Temeles and David Sherman.

Nichols is a professor at LSU School of Medicine who has conducted research and lectured on psychedelic medicine and Holland is a medical advisor for clinical studies of MDMA-assisted psychotherapy for the treatment of post-traumatic stress disorder and an advisor to from MAPS.

“A big differentiator was having Chuck Nichols, Julie Holland and our other advisors, so we carved out a name for ourselves as a validator in the space,” Schlidt said.

Palo Santo is closing its fund amid healthy psychedelic drug activity.

The FDA under the Biden administration fast-tracked MDMA treatment for possible approval. MAPS continues to conduct phase 3 trials for the drug.

As psilocybin (psychedelic mushrooms) becomes legal for adult consumers in states such as Oregon, Palo Santo is focusing on FDA-approved treatments that can then leverage the existing distribution ecosystem for FDA-approved regulated drugs. the government.

MindMed MNMD Small Cap Company,
-0.33%
organized a placebo-controlled, investigator-initiated Phase 2 trial of LSD as a treatment for anxiety and published an article about the study in the journal Biological Psychiatry.

MindMed has received backing from Jake Freeman, a 20-year-old investor who made $110 million buying shares of Meme stock Bed, Bath & Beyond BBBY,
-4.72%
during the summer.

Read also : Shares of psychedelics company MindMed fall 50% after selling new shares

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