- GH Research is a psychedelics company that recently listed on the Nasdaq.
- Despite its big market value and experienced investors, not much is known about the firm.
- GH Research wants to come up with new options for treatment-resistant depression.
In June, an Irish biotech firm went public on the Nasdaq, raising at least $160 million and positioning itself as one of the biggest psychedelics companies in the world.
The thing is, hardly anyone noticed — and that’s how the company wants it.
The biotech firm, GH Research, has chosen to follow a different playbook from some of its rivals as it quietly pursues a medicine for treatment-resistant depression that’s based on a psychoactive compound found in the Sonoran Desert toad. Also setting it apart from psychedelics rivals: GH Research is headed by longtime healthcare veterans and is backed by institutional investors who specialize in biotech.
“There’s a bit of an aspect of being ‘part of the club,” said Tim Schlidt, a partner at the psychedelics venture-capital firm Palo Santo.
“They’re plugged into that whole community,” he said.
The company has a market value of $1.1 billion, making it the third-largest publicly traded psychedelics company. GH Research declined to make executives available for this article.
Over the past year, psychedelics companies have rushed to go public, in part to fund the expensive clinical trials needed to bring medications to market. Many have listed in Canada, while others trade in the US.
It’s far from certain that GH Research will succeed in developing a new drug for treatment-resistant depression. TRD is depression that doesn’t get better after people have tried two antidepressant medications, including pills such as Prozac and Zoloft.
Many biotech firms fail, and the drug-development process takes years. Stifel analysts led by Paul Matteis gave the company a 33% chance of successfully finishing clinical trials and bringing a medication to market, while Canaccord Genuity gave it a 40% chance.
If it succeeds, the drug could be a blockbuster.
Ritu Baral, a Cowen analyst, estimated that there are around 1.9 million TRD patients in the US, and said that she expects GH Research to price the treatment at an annual net price of $10,500 — in line with the cost of other treatments on the market. She said annual sales could reach $1.2 billion. Stifel’s Matteis estimated a $1.5 billion annual US revenue opportunity.
GH Research is working on two depression drugs
GH Research has a relatively limited pipeline. The company is working on two drugs for treatment-resistant depression that are based on 5-MeO-DMT, the psychoactive compound found in the Sonoran Desert toad and some plants.
GH001 is an inhalable treatment, while GH002 is set to be injectable. GH001 has completed early-stage safety testing, and is currently conducting one mid-stage human trial, while another may start later this year. GH002 hasn’t been tested at all in people.
There’s less evidence and research on 5-MeO-DMT than there is on psychedelic compounds such as psilocybin and MDMA, both of which are being tested in mid- to late-stage trials. GH Research said early academic research showed that the compound works on similar brain receptors to other psychedelics, indicating that it has medical promise.
To get the drug approved in the US, GH Research would likely need to show that it works in two late-stage trials involving hundreds of people.
If GH Research can prove its drug works, it might have an important leg up over some rivals: It appears to take effect more quickly. GH Research said it took 30 minutes to two hours for a full treatment. The medication is being developed for use in just one session.
Canaccord analysts Sumant Kulkarni and Tania Gonsalves said in a note that because GH Research said its drug involved little psychological preparation and help, as well as a short treatment time, the treatments could also be more readily reimbursed by insurance companies.
Another treatment on the market is Spravato, a nasal spray developed by Johnson & Johnson’s Janssen that was approved in 2019. It’s based on the semi-psychedelic substance ketamine, and it requires patients to undergo monitoring for two hours during each treatment session for their depression. Patients come in twice weekly for four weeks for treatment and then come in weekly for continued sessions, if necessary.
Compass Pathways is developing a psychedelic treatment for TRD that can be given as one dose during a six-hour session. Patients also need to undergo counseling sessions before and after the treatment.
GH Research was started by experienced biotech investors and executives
Overseeing GH Research’s efforts are a group of founders who have substantial biotech experience.
“That’s part of the reason that I think GH was able to catapult awareness among specialist investors so quickly, because it did have that pedigree,” Baral told Insider in a recent interview.
The company was started in 2018 by Theis Terwey, Florian Schönharting, and Magnus Halle. Terwey, GH Research’s CEO, also works as a senior consultant for Forward Pharma, a Danish biopharma company, and is a partner at NB Capital. NB Capital focuses on investing in pharmaceutical and biotech companies.
Schönharting, a board chair at GH Research, has helped start biotech companies such as Genmab, Zealand Pharma, and Forward Pharma. Halle, a managing director at GH Research, previously worked as an analyst at NB Capital.
GH Research has a deep-pocketed investor base made up of traditional biotech investors
The founders have attracted VCs focused on healthcare.
After raising a modest $5.5 million in 2020, the company took in $125.2 million in a Series B round in April led by the healthcare specialists RA Capital, RTW Investments, and BVF Partners. RA Capital, RTW, and BVF declined to comment.
GH Research’s public filings show that BVF owns 17.1% of the company’s shares, making it one of GH Research’s biggest backers.
Cofounder Florian Schönharting owns 29.8% of the company’s shares, making him the largest shareholder. RA Capital has a 5.9% stake, a separate filing said.
Schlidt said that while having institutional backers come into the psychedelics space helps validate the industry, it also brings a downside: It could raise valuations among startups that are looking to get funding.
“Every company is now going to point to GH Research and say they are the next GH Research and try to fetch the same valuation,” he said. “We’ll see where that goes for subsequent rounds with other companies in this space.”
Schlidt’s firm invested in the private psychedelics company Beckley Psytech, which is working with the same compound as GH Research.
‘Room for both’
While other companies are working on psychedelics-based medicines for TRD, the competition won’t necessarily be a big problem for GH Research.
For one, some patients may respond better to GH’s drug compared to other psychedelic treatments, such as Compass Pathways’ psilocybin-based COMP360, because the two drugs work in slightly different ways, Baral said. The reverse may also be true.
“There is room for both,” she added.
Dr. Matthew Johnson, a professor of psychiatry and behavioral sciences at Johns Hopkins University and a longtime researcher of psychedelics, said that because there are so many patients who have TRD, having multiple companies working to address the disease creates “more opportunity for greater impact.”
“There are so many patients that need to be helped,” he said. “There’s always going to be competition — any for-profit is going to want the largest market share — but there are so many people out there eligible for this treatment that you need multiple entities to fill up this niche.”