In this first part of a 3-part series, Lucid News asks chemists, intellectual property attorneys, and research organizations to consider some of the central issues underlying the development of psilocybin-based therapies for depression. These business strategies and patent disputes reflect the challenges that other researchers may encounter as they develop psychedelic-based therapies in the years to come.

The UK-based mental health care company Compass Pathways Ltd announced in January that it had been granted a US patent for a formulation of crystalline psilocybin in a therapy protocol for patients with treatment-resistant depression. The patent has drawn opposition from critics who argue that Compass is attempting to claim ownership of prior psilocybin research and unfairly block potentially competing therapies. Ongoing legal challenges to the Compass patent, and scrutiny of its business strategies, have cast a spotlight on the burgeoning psychedelics industry and how companies entering the space make intellectual property claims.

Psilocybin is a naturally occurring compound found in more than 200 species of mushrooms, some known by indigenous healers for centuries. Compass is one of two organizations that have received breakthrough therapy designation from the FDA for therapies to treat forms of depression using synthetic psilocybin. This designation speeds up the development and review of these therapies and puts them on track to seek expedited FDA approval for their treatments. As Compass pursues a strategy of assertive patent filings, the US nonprofit Usona Institute is taking a different approach. Usona has chosen not to patent the synthetic psilocybin it uses in its clinical trials and is instead making it freely available to researchers under a different set of agreements.

These contrasting strategies illustrate a tension in the emerging psychedelics industry between organizations that pursue tactics of exclusive ownership used by some pharmaceutical companies, and others that follow more egalitarian traditions that support Open Science. These different approaches shape funding tactics used to bankroll expensive clinical trials and will impact the future of a groundbreaking industry.

Even before the challenges presented by COVID-19, psychedelic substances long used by healers in many cultures were being studied for possible FDA-approved mental health treatments that could reach millions of people. Looking ahead, the worldwide pandemic is likely to increase the number of patients seeking relief from trauma, anxiety, and depression. Demand for effective therapies will likely accelerate investigations into the therapeutic potential of psychedelic substances and the emergence of more companies in this market.

Clinical Trials Focus on Psilocybin to Treat Depression

In the pharmaceutical industry, some companies attract the large sums of capital necessary for drug development by assuring investors that the company’s intellectual property locks in significant market share. Compass followed this model, assertively filing for patents in the US and Great Britain. Concerned that these patents were too broad and would stifle competition, a legal team presented a series of challenges. In response, Compass withdrew some of its patent claims. But the company was recently granted a U.S. patent that some believe could potentially block other organizations like Usona from offering mental health therapies that use forms of synthesized psilocybin.

Usona announced in October 2019 that it had launched its first trial site at the NYU School of Medicine for a phase 2 clinical trial investigating the safety and efficacy of psilocybin for major depressive disorder (MDD). The organization received its breakthrough therapy designation a month later. According to Usona spokesperson Penny Patterson, the clinical trial supported by the nonprofit has been underway at other sites around the US including Johns Hopkins University, University of California San Francisco, and Yale University.

“This trial is a randomized, controlled, double-blind study with 80 planned participants,” says Patterson, who adds that the trial will continue despite delays due to COVID-19.

Compass Pathways has a head start in the development of its psilocybin therapy. The company announced in August 2018 that it had received FDA approval for its clinical trial that focuses on patients with treatment-resistant depression (TRD). In October 2018, the FDA granted the company breakthrough therapy designation for its formulation of synthetic psilocybin and therapy protocol. In December, the company shared results from its Phase 1 study and said it was conducting phase 2b clinical trials for 216 patients with TRD in Europe and North America.

While the global pandemic has introduced uncertainty for many researchers, Compass CEO and co-founder George Goldsmith told Bloomberg Businessweek in January that the trials were expected to end this summer and produce results by early 2021. This would allow Compass to seek FDA approval for the treatment a couple of years later.

In addition to its lead in clinical trials, Compass has controversially patented a formulation of crystalline psilocybin used in its therapy. Compass announced in January that it had been granted US Patent No 10,519,175 which:

“…covers the use of Compass’ synthesised investigational psilocybin formulation, COMP360, in a psilocybin therapy protocol for patients with treatment-resistant depression (TRD).”

Compass declined to comment for this story, but states on its website that claiming a formulation of psilocybin as its intellectual property (IP) is necessary to secure the funding needed to make emerging therapies widely available.

“Without IP,” reads the Compass website, “there would be little incentive to take the risk to fund the research and development of new products, given the large number of drug candidates that fail during the development process.”

Usona Institute takes a different approach. It has chosen not to patent its formulation of synthetic psilocybin, which it developed for use in its therapy for MDD. Usona makes its synthetic psilocybin available free of charge as an investigational drug to other qualified researchers studying a variety of conditions, such as substance misuse disorders, obsessive-compulsive disorder, and PTSD. Usona says that it is already providing its synthetic psilocybin to qualified researchers and therapy centers “at cost and gratis,” and that it will deliver approved therapies to those in need “at the lowest possible cost.” According to Patterson, Usona’s Investigational Drug Supply Program is currently processing requests from over 50 sites in 14 countries.

By patenting its psilocybin-based therapy, Compass is making its own version of psilocybin, COMP360, and its therapy protocol available to researchers through licensing agreements. Goldsmith said in a press release that if the company’s research demonstrates that their psilocybin therapy is a safe and effective option for patients, they will, “…price it responsibly with the goal of making it as affordable and accessible as possible.”

In addition to highlighting ideological differences between licensing a product and providing it at cost or free of charge, the Compass patent has raised questions about efforts by companies to own forms of psychoactive substances, and the role IP claims play in promising returns to investors.

Matthew Baggott, the former Director of Data Science and Engineering at Genentech and a researcher of psychedelic substances, believes that the market for all illnesses that psychedelic medicines could potentially treat is valued at more than $400 billion.

Baggott says that given the size of the market for psychedelic therapies, the Compass IP effort is being replicated by other for-profit companies entering the psychedelic industry.

“There is a land rush going on with companies trying to be the first to claim they invented different psychedelic products and procedures,” says Baggott.

In one recent example of a trend towards patents, Canadian company Mind Medicine (MindMed) Inc. announced on April 1, that it had signed a multi-year agreement with the Swiss-based laboratory of Dr. Matthias Liechti. The deal gives MindMed exclusive worldwide rights to data, compounds, and patent rights associated with the laboratory’s research with LSD and other psychedelic compounds. MindMed said it has begun working with the laboratory to file patents for the data and clinical trials, especially a Phase 2 trial investigating two single doses of LSD for the treatment of anxiety.

Compass’ patent for its therapy targeting treatment-resistant depression may give the company a competitive edge in at least one part of a lucrative market. Even prior to the worldwide spread of COVID-19, the World Health Organization estimated 350 million people globally are affected by depression. Existing approved treatments for depression only work for 70% of patients despite a global anti-depressant medications market valued at more than $14 billion. Usona’s psilocybin therapy for major depressive disorder could cover many forms of depression, including cases that do not respond to conventional treatments.

The Compass patent and its clinical trials have helped the company attract investors. According to Bloomberg Businessweek, Compass raised $58 million in venture funding from German biotech company ATAI Life Sciences, founded by Christian Angermayer, Thiel Capital, headed by Silicon Valley investor Peter Thiel, and New York-based Galaxy Investment Partners led by Mike Novogratz and Sam Englebardt.

Prior to the global economic turmoil sparked by COVID-19, Compass appeared to be considering an IPO. Atai has reportedly approached a number of financial institutions for a Compass IPO, seeking to raise $800 million, possibly on the Canadian stock exchange.

Up until recently, says Baggott, investors largely overlooked psychedelic molecules because they didn’t think it was possible to develop them into commercial products. But, he says, these molecules are no longer considered off-limits and many are taking a close look at their potential.

“There is a lot of interest because they are small molecules that are known to be fairly safe and have many intriguing effects,” says Baggott. “All this interest is great, but the way the patent system is set up, it encourages companies to make their claims as broad as possible and get walls of patents to protect the profitability of their potential products.”

In other words, companies that receive broad patent protection are in the best position to potentially stifle competition.

In a pitch document to potential investors, Compass emphasizes its IP claims for its COMP360 therapy protocol and its plan to gain exclusive rights and market protection from providers of generic forms of synthetic psilocybin.

“Strong IP position:,” reads a bullet point in the document, “Never registered as new chemical entity (NCE) and strong protection from four independent sets of patent claims filed in UK/PCT*/US in Oct 2018; market protection from generics for 8-11 years in EU, 5-7.5 years in the US.”

While Compass is promising investors that it has strong IP protections for its psilocybin therapy protocol, its patent claims are being challenged by IP attorneys. The law firm Duane Morris reports that Kohn & Associates, PLLC filed a petition on February 21st for Post Grant Review of patent 10,519,175 with the Patent Trial and Appeal Board at the United States Patent and Trademark Office (USPTO).

“The petitioner asserted that the claims in the ‘175 patent are invalid and should never have been granted because they are obvious in view of articles in scientific literature that published before the priority date of the patent,” reads the Duane Morris report. Kohn & Associates confirms that it requested a review of the patent and presented evidence that the claims in the Compass patent are “obvious over prior art.” That is, a person could derive the invention from prior art or known research by making obvious changes.

Challenges to Patent 10,519,175

Opponents of Compass’ intellectual property strategy have repeatedly challenged the company’s patent applications for a therapy based on a formulation of synthetic psilocybin. They charge that the company is trying to halt potential competitors by claiming ownership over past research and one crystalline form of the long established molecule.

Psilocybin was first identified and synthesized in 1958 by Swiss chemist Albert Hofmann, who years earlier discovered LSD. There is an established body of scientific research on psilocybin published in scientific journals.

Compass noted some of this prior research when it filed a patent application with the World Intellectual Property Organization (WIPO) in 2018 that contained 27 claims for its psilocybin therapies. Compass also filed patent applications in Great Britain in 2018, including GB2572023A and GB2576059A, and a patent application in the US. After Compass’ patent filings, the European Patent Office rejected some of the Compass applications citing prior research by Hofmann, the pharmaceutical firm Sandoz, and other researchers.

According to Fortune, Compass initially filed 27 claims in its patent applications, but then withdrew all 27 after they were challenged. The company then filed another application with 10 claims of novelty for COMP360 and the Compass treatment protocol. When this patent application was also challenged, Compass withdrew these claims. It then filed another patent application to the USPTO, which finally granted Compass US patent 10,519,175 on December 31, 2019.

Compass CEO George Goldsmith declined to address specific challenges to the Compass patent applications or how the company has created something truly new, but told Fortune that his company has done nothing improper. “We don’t comment on the specifics of our patent prosecution, but there’s always back and forth,” Goldsmith is quoted as saying in the Fortune article. “That’s the way the patent process works. The idea is you build on what others have done.”

Kohn & Associates confirmed in an email that it participated in numerous rounds of challenges to Compass patents, and that it filed “third party observations” in two Great Britain patent applications assigned to Compass, including GB 2571696, which made claims directed to a method of manufacturing psilocybin, and GB 2572023, which included claims covering a specific polymorph of psilocybin.

A polymorph is an organism or material which takes various forms and in the case of the Compass patents, is a formulation that includes crystalline synthetic psilocybin. As a result of these objections, Kohn & Associates says Compass was given until March 30, 2020 to make amendments to the claims.

According to Kohn & Associates, Compass filed a separate US patent application, Application No. 16/155,386, related to the Great Britain applications. The law firm again filed third party observations on May 23, 2019 arguing that the claims in the US patent were obvious in view of prior art. In response, writes Kohn & Associates, “Compass amended their claims by deleting claims directed to a specific polymorph of psilocybin and adding claims directed to a method of treating drug resistant depression with a composition of the specific polymorph of psilocybin.” In other words, Compass shifted their patent strategy to claim ownership over using a form of psilocybin in therapy.

Kohn & Associates once again filed observations regarding Compass’ US patent on July 26, 2019. The attorneys objected to the amended claims arguing that the claims were obvious in view of prior art. But these claims were found patentable by the US patent examiner and the application was issued into US patent 10,519,175 .

Carey Turnbull, who has helped fund the Kohn & Associates patent challenges against Compass, says it was inevitable that for-profit pharmaceutical companies would start producing psychedelic therapies. Turnbull is a board member of Usona and the nonprofit Heffter Research Institute, which assisted in the design and funding of early phase clinical studies on psilocybin at research institutions in the US and Europe. Turnbull contends that Compass is attempting to unfairly block competition by claiming ownership of scientific discoveries that are already well established in the public domain.

“I’d welcome Compass manufacturing and distributing psilocybin,” emailed Turnbull, who says he speaks on behalf of himself and not any organization. “I object to their preventing anyone else from doing so.”

Baggott notes that once a company is granted a patent, it is expensive to challenge and can be used to halt competitors unless they pay for permission. Kohn & Associates confirms that notices of allowance were recently issued for the two Compass’ patent applications in Great Britain related to the patent applications filed by Compass in the US. The law firm says that the objections it will file with the USPTO against the US Compass patent will use the same approach that it will take in its opposition to the patentability of Compass’ applications in Great Britain (GB).

“To date we have been quite successful, and I am confident we will continue to be,” Kohn & Associates in a statement emailed on April 2. “Compass has repetitively withdrawn, narrowed, and amended previous broad and specious claims to the work of Albert Hofmann, Roland Griffiths, Steve Ross and others. The GB patent continues that clumsy and disingenuous pattern. Our objection should be filed one day early next week, in parallel with our objection at the USPTO.”

In its announcement of US patent 10,519,175 Compass vigorously defended its patent strategy. “Patents help ensure sustainable funding to conduct the highest quality clinical research to bring the best new therapies to patients who urgently need them,” reads the statement.

Compass’ Chief Medical Officer and co-founder, Ekaterina Malievskaia, MD, writes in a essay on the website of the non profit Multidisciplinary Association for Psychedelic Studies (MAPS) that the development of Compass’ psilocybin therapy will cost the company nearly $4 million. Dr. Malievskaia says Compass’ patent initiatives allow it to recoup expenses and ensure integrity of data collected before and after approval. She says this effort will not prevent others from finding different ways to synthesize or formulate psilocybin “nor do they preclude the use of naturally occurring mushrooms, extracts, or any other products created by alternative synthesis and formulation routes.”

Dr. Dave Nichols Ph.D. advised Compass on aspects of the synthesis of its synthetic psilocybin and is named a co-inventor of patent 10,519,175. A founding Heffter board member and Emeritus Distinguished Professor of Medicinal Chemistry and Molecular Pharmacology at Purdue University, Nichols is a longtime leader in the field of psychedelic medical research. He disputes assertions that the patent claims ownership over the work of others.

“The patent was based on findings published in the open literature, specifically work from Imperial College based on psilocybin therapy of treatment resistant depression,” writes Dr. Nichols in an email. “If the clinical work is published in the open literature, no one owns it. It is available to anyone to base a new treatment on.”

The 21 claims in patent 10,519,175 cover a process for synthesizing high purity crystalline psilocybin and the large-scale production of psilocybin for use in medicine. These claims all hinge on a specific dosage form of synthetic psilocybin, called Polymorph A, which will be explored in detail in part 2 of this series.

Polymorph A contains crystalline synthetic psilocybin and microcrystalline cellulose as a tableting agent. Dr. Nichols said in an email that he was “not aware of the specific polymorph that Albert Hofmann characterized, but if he had determined that it was ‘polymorph A’ then polymorph A could not be patented.”

Turnbull believes that Compass’ patent for a specific crystalline form of psilocybin as an inherent property is an effort to establish ownership over the entire molecule.“How do you determine that the polymorph you are looking at is not the one that Albert Hofmann has created?” asks Turnbull. “There are a lot of polymorphs with slightly different crystalline structures, it’s not an inherent property or an invention with a benefit.”

For Profit Versus Nonprofit Models of Drug Development

Organizations that receive FDA approval for their psychedelic therapies sometimes receive exclusive rights over clinical trial data and permission to market their treatments. But nonprofits may have more difficulty raising funds to complete the research needed to meet these requirements. To help raise funds for its clinical trials, the nonprofit MAPS created a for-profit subsidiary to help generate income from the legal sales of MDMA and other psychedelics.

Independent of patent protections, Compass and Usona are also both moving as quickly as possible for FDA approval of their psilocybin-based therapies. When an organisation receives this approval, they are often granted an exclusive right to use their clinical trial data and market their therapy protocols for five years. The European Medicines Agency has a similar system in Europe which can extend this right for up to eleven years.

Baggott notes that when a company is granted this right by the FDA, it makes it more expensive for competitors to introduce generic versions of a medicine. “Without this data and marketing exclusivity, another company can quickly introduce a generic version of your medicine without needing to conduct their own clinical trials,” explains Baggott. “They can just cite your results.”

This data and marketing exclusivity is the same right that the FDA may grant to MAPS if it receives full marketing approval for its MDMA-assisted psychotherapy for PTSD, which the organization is now bringing through Phase 3 clinical trials. Rick Doblin, founder and executive director of MAPS, says he believes that the Compass patent will not present a significant obstacle for Usona from moving forward with its own drug development program. “It is costing time and money to challenge Compass’ patent claims,” writes Doblin in an email. “But I’m convinced that Compass will not be able to block Usona from moving forward with its own drug development program using its own psilocybin.”

Patents will likely remain a central focus of debates around intellectual property claims for psychedelic substances because patents last twenty years, much longer than the five years of exclusivity that the FDA might grant. Turnbull argues that while the patent dispute continues, Compass should rethink its drug development strategy.

“Whether they are too narrow to prohibit others or not,” says Turnbull of the Compass patent strategies, “they should not rely on attempting to be an exclusive provider for a decades-old substance and should follow the practice of other pharma companies and offer a generic version.”

Compass itself used to be a nonprofit organization when it was founded in 2015. As reported by Quartz, Compass made an abrupt transition to a for-profit company in 2016. Doblin told Bloomberg Businessweek that Compass’ initiatives, and other for-profit psychedelic pharma efforts, are largely possible because of MAPS’ success in shifting political dynamics at the FDA and changing public attitudes. Turnbull says he agrees with Doblin and asserts that he has no objection to any company attempting to make a profit by manufacturing and distributing synthetic psilocybin as long as they have the appropriate permissions to do so.

But Compass’ shift to a for-profit company raises questions about whether nonprofit donations can provide sufficient funding to develop widely available psychedelic-based therapies. Some organizations are taking both a nonprofit and for profit approach. MAPS is seeking to raise $30 million from donors to support the completion of its Phase 3 clinical trials for MDMA-assisted psychotherapy for PTSD. This funding is needed to support a New Drug Application to the FDA, approvals from the Israeli Ministry of Health, and Health Canada, “along with the necessary initiatives to provide patient access including therapist training, an Expanded Access program, and other commercialization activities,” writes Doblin. “I’m hopeful we can raise the funds but it will be a challenge.”

In 2015, MAPS created a for profit subsidiary, the MAPS Public Benefit Corporation (MPBC), to conduct clinical trials and generate income from the legal sales of MDMA, other psychedelics, and cannabis. Public benefit corporations are a type of for profit company which includes social good as a measure of success.

Baggott notes that the average drug costs close to a billion dollars to get approval from regulators, which factors in the cost of all the other drugs that fail. Of all drugs in development, he observes that only 15% are approved for medicines. He says that companies developing psychedelic medicines are leveraging the fact that hundreds of millions of people have informally tested psychedelics.

“If you know lots of people take a drug without problem and many even find it helpful, then your chances of approval are a lot better than 15%. In such cases, a pharmaceutical company might need to spend $400 million or less to bring the drug to market.”

While drug development is expensive, the action of the psilocybin molecule is well-understood, which may lower the cost of FDA-approved therapies based on psilocybin formulations. It’s still to be seen if a nonprofit model can raise sufficient funding to secure FDA approval for a psilocybin-based therapy. Doblin believes that raising donations for a nonprofit initiative is more difficult than obtaining capital from investors.

“I’m not aware of Usona’s financial situation but my guess is that they will be able to find the funds to complete their research,” writes Doblin.

Usona did not reply to a request for information about how much money it has raised for the development of its psilocybin therapy or its expected cost. But, according to Patterson, they are optimistic that their efforts to raise funds from donors will be successful.

“Usona is positioned to work as rapidly as possible towards our goal of a new treatment for major depressive disorder,” Patterson said in an email. “If findings are positive, Usona will continue into Phase 3 trials and is already mobilizing resources to enable this possibility in the months ahead.”

Dr. Nichols, who has worked in the field of medicinal chemistry since 1969, believes that because drug development is such an expensive and lengthy process, nonprofits have an uphill fight to get their therapies approved.

“There is such a huge need for new therapies for treating depression and addictions that it seems improbable to me that a not-for-profit strategy is sustainable,”Dr. Nichols said in an email. “I applaud the Usona Institute’s efforts to bring this medication into global use, but personally I don’t see how workable it will be. I look forward to watching how it will play out.”

Read Part 2 of this series here.