Worthy Or Superfluous? Psychedelics Experts Discuss The Sector's Ongoing Patent Debate

Co-written by Andrew Ward and Natan Ponieman

The race is continually heating up in the psychedelics space.

An array of companies, educational institutions and investors have already obtained patents on formulations, processes, compounds and other aspects of psychedelics treatment.

The race has heated to such a degree that certain compounds, like psilocybin, have patent trackers to keep abreast of the market.

While exciting, the development of the space creates a discussion around psychedelic patent ethics.

In early 2021, COMPASS Pathways PLC CMPS made headlines for its patent applications. Unlike previously granted patents for formulations, Compass applied for patents on commonplace psychedelic experiences, including holding hands and comfortable furniture.

As the psychedelics patent race heats up, the market continues to struggle with a line between business ethics and public domain psychedelics.

A Pathway For Patents And The Public? Mind Army Founder and psychedelics investor Michael “Zappy” Zapolin believes there is an opportunity with psychedelics that demands investment.

However, he doesn't believe that opportunity calls for patenting every aspect of the process. He believes patents for formulations, delivery systems and compounds are warranted.

"I think that should be supported like it is in any other industry," said Zappy. "Of course, I'm sure there's very frivolous patents being done."

Zappy doesn't see such patent applications receiving approval once vetted. He believes the move just upsets the market.

Still, he understands the need to drive investor interest. To incentivize people, Zappy explains that some upside must be available.

"You can't expect people to do this completely out of the goodness of their heart," he said.

Christian Angermayer, founder of Atai Life Sciences, shared a similar position in an open letter released last month.

“Without the chance of turning millions into billions, the investors disappear, and without the hundreds of millions of dollars from investors, progress to bring these medicines to patients slows to a glacial pace,” said Angermayer.

Delic Holdings Inc DELCF Co-Founder Matt Stang said he found himself "somewhere in the middle" on the issue. Creating an FDA-compliant substance is a massive undertaking, and deserves patents for the companies that sink hundreds of millions of dollars into R&D.

"You can't spend half a billion dollars and not expect to make money off it," Stang said. However, he drew a line in patenting pure substances, noting that no company should have a claim to compounds like pure psilocybin.

While psilocybin is naturally produced by the Psilocybe mushroom, Compass achieved a patent in 2020 for a method of isolating the compound into a crystalline powder called COMP360.

Stang sees the market benefitting from an array of FDA-approved novel formulations while also continuing to use pure compounds. He expects psychedelics reform to continue across the country. He posits that the two tracks should lead to FDA-approved patents and sunset exclusivity on patented formulations, while personal access to healing plants remains.

See Also: Amanita Muscaria: A Legal Psychoactive Mushroom With Potential Therapeutic Effects

What Are Patents For In The First Place? "The fundamental requirements of a patent are that every claimed invention must be both novel and non-obvious in view of the state of the art. In theory, no patent should be granted that doesn't meet these requirements," said Graham Pechenik, a patent lawyer who founded Calyx Law, a firm that works with cannabis and psychedelics intellectual property. "The policy rationale behind patents is that they incentivize innovation and public disclosure."

He thinks when patents serve these ends, they can create enormous value.

Patents can allow a company to obtain financing to bring a novel therapy to market that wouldn't have happened otherwise. In an ideal world, the rights granted by patents direct resources and energy into a space to develop it.

“This development is the rising tide that lifts everyone, patent holders and not,” said Pechenik.

“The risk of going through those processes as required by law is extremely high. And if there's no way for investors to recover their investment, then they won't fund it. And then these drugs, which might be lifesaving drugs, will never get approved and society will never benefit from them. So there’s a value to patents,” says Dr. Joseph Tucker, CEO of MagicMed, a company developing second-generation psychedelics.

The Harm In An All-Out Patent Land Grab: Patents can also bring negative consequences to a developing space, and in some cases, even slow down patient access to medicines and therapies being developed.

If a company obtains several strong and important patents, it can leverage them to prevent competition.

“In a worst-case scenario, that patent holder spends its resources policing potential infringement, rather than pursuing continued innovation, and has broad enough rights to prevent others from innovating too,” said Pechenik.

If many patent holders have overlapping rights, this can create what Pechenik calls a "patent thicket."

“If a dozen companies held patents covering different aspects of psychedelic therapy, how could a new clinic easily open and operate? Eventually, the time and expense of investigating and negotiating patent licenses might limit a market to only the biggest players,” he warns.

Sometimes, companies can claim patents they know they won’t receive as a strategy to attract investor capital. Other times, companies claim broad patents, suspecting they’ll receive a narrower version in the end.

“A common strategy taken by patent applicants is to seek as much as possible initially, expecting that scope to be narrowed, but hoping some broad claims will still be allowed,” said Pechenik.

The problem with the filing of broad applications is it can create uncertainty on whether the claims ultimately will be allowed, so they can discourage competitors from entering the area, or make them divert their resources toward fighting the application.

Pechenik worries that once these patents start to be granted, companies will want to maintain as much exclusivity as possible by restricting access to a medical context, and lobbying against or failing to support decriminalization and legalization.

“Many companies would love to say ‘we own the whole space and nobody else can do anything but us. So, all you investors, if you're interested in space, you all have to invest in us.’ But if they make some kind of a mistake or they run out of money, they can damage the whole field if they blocked it and then did not succeed,” says MagicMed’s Tucker.

New Molecules And Psychedelics 2.0: Many of the molecules being researched today in the psychedelics space either exist in nature or are old enough to be public domain. That’s the case for psilocybin, ibogaine and DMT, which are derived from natural plants or fungi; or LSD and MDMA, which were discovered in the early decades of the 20th century.

A 2020 study found the average price for R&D to get a new medicine to market in the U.S. is $985 million and ranges between $314 million to $2.8 billion.

While “classic psychedelics” can't be patented, companies can claim patents of specific uses of those compounds like a method for applying psilocybin in the treatment of depression.

Tucker doesn’t believe these types of patents should be granted, since in his view, most of the applications of psychedelics that are currently under research were already in use decades ago and were not discovered by the companies doing the research.

“One should not be granted a patent for using an existing molecule in a way that’s pretty much been used for decades or thousands of years,” he said.

MagicMed is developing a library of new molecules that are often referred to as “psychedelics 2.0.” These are molecules that take classic psychedelics as starting points to develop improved versions, with upgraded effects and reduced side effects.

In MagicMed’s line of business, patents are the most efficient method of securing long-term revenue.

“We're definitely filing patents, but the patents that we're filing on are for new molecules being used in ways that have not been done before,” he explains.

His company is focusing on discovering and testing new molecules that will then be licensed out to other companies in the space for them to commercialize: "Our ethics is: 'let's get as many of these molecules being developed by as many different companies as possible so that there's a much higher likelihood that one or more of these molecules will actually succeed and we can get them to society.'"

Posted In: CannabisPenny StocksGuidanceSmall CapTop StoriesExclusivesMarketsInterviewATAI Life SciencesCalyx LawCOMPASS Pathways PLCDelic Holdings IncMagicMedMind ArmyPsilocybinPsychedelics


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