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Psychedelic Patents

COMPASS Pathways’ $100+ Million Crystalline Form Patent

Compass Pathways Plc. has developed a crystalline form of psilocybin (COMP360) that makes other crystals (like the Hope Diamond, pictured above) look cheap.  Over the last four years, Compass has built a company around this crystalline form.  Earlier this year, Compass received a patent on this crystalline form.  Now, Compass is going public. And despite zero revenue and plenty of expenses, Compass is already valued at anywhere from $100 to $500 Million.

Why?  Patents.  Specifically, the company’s clever strategy of patenting a novel crystalline form of psilocybin.

Compass Pathways IPO on Nasdaq under the symbol CMPS

On Friday August 25, 2020, Compass Pathways filed to go public on the Nasdaq Global Market under the symbol CMPS.  According to the documents filed with the U.S. Securities and Exchange Commission, Compass plans to raise $100 million through the IPO. According to Bloomberg‘s accounts from “people familiar with the matter, who asked to not be identified because the details aren’t public,” Compass’s “[m]ost recent funding rounds suggest a value of more than $500 million, before proceeds from the initial public offering….”

According to the “Financials” section of the above mentioned SEC S-1 document (see page 118) Compass is not making any money but they are burning through a ton of cash.  They have raised $116M in equity offerings and also issued about $25 Million in promissory notes, which have now converted into equity. (page 129).  As of August 20, 2020, Compass had about $72 Million of this cash remaining.

Why is Compass worth between $100 to $500 Million?

Patents.  And a very clever strategy for attaining them. After spending 4 years and about $60 Million, Compass is not making any money.  However, Compass has developed patent assets that protect its psilocybin product, COMP360.  See Compass Pathways’s PatentsIn January of 2020, Compass Pathways issued a press release stating “that it has been granted US Patent No 10,519,175 (“the ‘175 patent”), relating to methods of treating drug-resistant depression with a psilocybin formulation, by the US Patent and Trademark Office.”  See also Compass Pathways’s Crystalline Form Patent.

Here, Compass deserves some high praise for their approach to patenting psilocybin. Florian Brand, co-founder and CEO of ATAI Life Sciences, Compass’ biggest investor, recognized the importance of being able to “re-ornament chemical compounds in a way that makes them new — and patentable.”  See Investors.com. Mr. Brand explains, “If you talk about the psychedelic compounds, the well known ones, like psilocybin and ibogaine, you certainly have to be a little bit more creative, once there’s a lot of knowledge on these molecules, to establish an ability to block [competitors from entering the space].” He continued: “We are working with attorneys on this, across the platform, with all companies, to have a strong ability to block in place. It ranges from composition of matter, to use patents to process formulation and manufacturing patents.”

Although psilocybin is a natural product and has been in the prior art (in both mushrooms and as an isolated compound), Compass developed a novel crystalline form of psilocybin. By recognizing that COMP360 is a novel crystalline form, Compass’s IP team at Cooley LLP was able to craft a patent strategy based on the differences between Compass’s crystalline form and those already in the prior art.  And it worked!

In allowing Compass’s claims, the patent examiner at the USPTO explained the importance of Compass’s crystalline form data.  Specifically, the examiner’s reason for allowing Compass’s claims hinged on the difference between (A) the characteristics of the crystalline form of psilocybin recited in Compass’s claims and (B) the characteristics of the crystalline form of psilocybin recited in “the closest prior art of record….”  This distinction made it possible for Compass to patent its crystalline form of psilocybin despite 60 years of prior art related to the compound psilocybin and thousands of years of use within naturally occurring mushrooms.

Now, Compass’s patents covering COMP360 (their crystalline form of psilocybin) support an IPO of $100MM+.  As discussed below, Compass plans to use the proceeds from the IPO to develop its most valuable asset: COMP360.

What is Compass’s Plan?

Compass plans to use proceeds from the IPO to fund clinical trials for “COMP360,” its psilocybin crystalline form product. According to the S-1 document filed with the SEC, Compass intends to use the proceeds from the IPO for the following:

  1. Fund Phase II clinical trials for COMP360 (their crystalline form psilocybin product), beginning in 2020;
  2. Fund R&D for use of COMP360 for other indications beyond Treatment-resistant depression. (The indications being explored in Compass’s investigator initiated studies include: bipolar type II disorder, body dysmorphic disorder, chronic cluster headache, depression in cancer, MDD, and severe TRD.)
  3. Fund other business activities, including R&D for other novel drug compounds and strategic investments in digital technologies to complement their therapies

Compass’s Crystalline Psilocybin Makes Diamonds Look Cheap

Looking at the big picture, Compass’s present $100-500 Million dollar valuation and the company’s future all rests on the foundation of a single crystalline form of psilocybin. This one new crystalline form of an old compound (psilocybin) has made it possible for Compass to earn patent protection on its COMP360 product.  That IP is Compass’s most valuable asset.  For comparison, the famous Hope Diamond is worth an estimated $250 Million dollars, making it an exceptionally valuable crystal.  Arguably, Compass’s IP team has already made a more valuable crystal with COMP360, its novel crystalline form of psilocybin.

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Psychedelic Patents

MagicMed – The First Psychedelic Patent Troll?

Is MagicMed Industries Inc. the first patent troll to enter the psychedelic space? Or has MagicMed come up with a brilliant plan that will benefit the entire psychedelics industry by providing access to new psychedelic compounds?  The short answer is that only time will tell.  We’ve provided a short discussion below.  Please feel free to offer your thoughts by commenting below.

Developing Patents for New Psychedelic Compounds

On July 9, 2020 MagicMed Industries Inc. (“MagicMed”) announced that it filed a provisional patent application with the United States Patent and Trademark Office (USPTO) covering composition of matter, drug formulation and process of preparation claims for novel psilocybin derivatives.  MagicMed characterized that patent filing as the first in a series of applications that together will protect the Company’s broad portfolio of novel psilocybin molecular derivatives, the PsybraryTM.

On August 24th, 2020, MagicMed issued a press release confirming the company’s intention to file patent applications.  According to the press release, “MagicMed Industries intends to file numerous patents to stake broad claims over the new derivative molecules contained in the Psybrary™, from which the company’s partners can gain a significant competitive edge in new product development using molecules that are fully patent protected.”

According to MagicMed, “[t]he initial focus of the Psybrary™ is on psilocybin, and is expected to expand to other psychedelics, including MDMA, ketamine, ibogaine, mescaline and ayahuasca.”

What is MagicMed’s Psybrary?

Based on MagicMed’s press releases, the term “Psybrary” refers to a library of different psychedelic molecules, “derivative molecules,” presumably because they are based on known psychedelics like psilocybin. MagicMed defines term “Psybrary” in their August 24th, 2020 press release as a “collection of novel psychedelic derivatives we are amassing through an industry leading combination of synthetic biology and medicinal chemistry.”  This approach is interesting.  Instead of synthesizing the compounds via synthetic chemistry, MagicMed is using synthetic biology (bioengineering) and medicinal chemistry (usually reserved for studying the properties of compounds as opposed to making the compounds themselves).

What is MagicMed’s Strategy?

MagicMed is synthesizing new psychedelic compounds with the intention of selling or licensing them to others in the industry. (“MagicMed is employing a diversified partnership model.  What that means is we see ourselves as enablers of the entire sector.”)

MagicMed does not have aspirations of conducting clinical trials but rather intends limit their focus to developing new psychedelic compounds. (“We are really good at creating new drug candidate psychedelic derivatives, but don’t aspire to get into clinical trials ourselves.”)

What Value is MagicMed Creating?

Patents.  Plain and simple.  MagicMed is clear about this point.  They are synthesizing psychedelic compounds and patenting them. “We anticipate filing many patents and synthesizing many new molecules, which our partner companies can screen to find their ideal drug candidate to select and advance into further development.”

“The Psybrary we anticipate will be a highly valuable resource for our partners, as it will contain many new molecules to screen, increasing their chances of finding an ideal drug candidate, and each molecule will come with a commercially-friendly manufacturing method and have its composition patent protected. We expect this will be a big asset for our partners, and could be a big hurdle for those who don’t partner with us.”

In other words, MagicMed’s “partners” can use the compounds in their Psybrary without getting sued for patent infringement.  And MagicMed’s patent portfolio can be view as a moat (aka “big hurdle”) around those compounds “for those who don’t partner with us.”

Is MagicMed the First Psychedelic Patent Troll?

Good question.  The term “patent troll” best describes a non-practicing entity that seeks to extract royalties from other practicing entities by leveraging its patent portfolio.  Whether or not MagicMed qualifies as a patent troll probably depends on what R&D MagicMed contributes to the industry.

On the one hand, MagicMed is candid about their lack of interest in clinically developing their compounds in favor of “partnering” with others interested in doing that work.  This feels like trolling because the patent owner is holding downstream research hostage in order to extract a profit by enforcing patents on technology that the patent owner has no intention of using itself.

On the other hand, MagicMed appears focussed on filling a longstanding unmet need for making psychedelic compounds. The industry wouldn’t have the ability to work with these compounds at all without MagicMed’s efforts in synthesizing them.  Arguably, their patent portfolio will enable them to enjoy some form of compensation for making those compounds available to the rest of the world.  Additionally, some have pointed to a lack of IP in the psychedelic space as a major limitation to attracting meaningful investment capital.  Creating patent assets solves this problem, allowing for growth in the space.

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Psychedelic Patents

Aion Therapeutics Files Five Patent Applications

In an September 3, 2020 press release on Psilocybin Alpha, Aion Therapeutics reported that it was “pleased to announce that the Company has filed five patent applications with the United States Patent and Trademark Office (USPTO) pertaining to new treatments combining healing compounds in medical cannabis with healing compounds from mushrooms (edible and psychedelic), and other natural plants known for their medicinal properties.”

The press release also clarified that these are provisional patent applications.  “Aion Therapeutic’s intellectual property counsel, Pinnacle IP Strategies LLC (“Pinnacle“), drafted and will prosecute the patent applications. According to Pinnacle, Aion Therapeutic’s provisional patent filings in the U.S. will provide Aion Therapeutic a right of priority under the Paris Convention to pursue patent protection to Jamaica, as well as, priority for over 170 countries under the Patent Cooperation Treaty (“PCT“). Establishing an effective filing date for Aion Therapeutic’s inventions in the U.S. preserves that priority date – with up to one year to pursue a subsequent filing in any country that is a party to those agreements.”

In a previous post about How to Evaluate Psychedelic Patents, we distinguished between issued patents, pending patent applications, and provisional patent applications. The later two have not been issued/granted and must first be examined in order to see if the claimed invention is both (1) New and (2) Non-obvious in view of the prior art.  (Prior art means anything published before the application’s priority date, which in Aion’s case appears to be sometime in the summer of 2020.

In the case of Aion Therapeutics, it is unclear how the company will overcome the prior art issued associated with other (much earlier filed) patent applications that are directed to (what appears to be) very similar subject matter.  For example, this patent application by inventors Murat KÜÇÜKSEN and Neset KÜÇÜKSEN shows up on Google Patents by searching for Psilocybin + Cannabinoid.  The application has a priority date of January 18, 2017 and “relates to the use of one or more cannabinoids and/or terpenes in combination with psilocybin and/or psilocin for use in the prevention or treatment of psychological or brain disorders. Preferably the one or more cannabinoids are taken from the group cannabidiol (CBD); cannabidiolic acid (CBDA); tetrahydrocannbidivarin (THCV); tetrahydrocannbidivarinin acid (THCVA); cannabichromene (CBC); cannabichromenic acid (CBCA); cannabigerol (CBG) and cannabigerolic acid (CBGA).”

One possibility is that the Aion technology does not use psilocybin and/or psilocin but relies on other “psychedelic” components from mushrooms.  (The above mentioned KÜÇÜKSEN application is limited to combinations that include psilocybin and/or psilocin with the cannabinoid(s).).   Another possibility is that the Aion technology avoids the use of the cannabinoids listed above as part of the KÜÇÜKSEN application.

The idea of combining a psilocybin derivative with a cannabinoid does have tremendous promise because of the potential for harnessing the Entourage Effect and making formulations that are better than single active ingredients (see, e.g., Compass Pathways use of pure psilocybin without the other synergistic actives in magic mushrooms). But, can Aion pursue this technology without running into competing IP, like the KÜÇÜKSEN application? Moving forward, it will be interesting to learn more about Aion’s patent portfolio, especially what makes it “novel” as we watch the situation develop.