In any sector with entrenched competitors, there's room for a disruptive upstart to come in and steal oodles of market share. Such innovative new entrants can often be great picks for your portfolio, as they have the benefit of doing things differently to address problems that have already proven to be profitable to solve. Of course, there's always a chance that a scrappy young business will fail to gain traction, but if it succeeds, it has a solid chance of going big.
Each of the three healthcare companies I'll analyze today is pioneering a unique business model to address the needs of patients with difficult-to-treat issues. If everything goes according to plan, they'll excel and become the very first juggernauts of their kind. And that could make the people who invest now significantly richer.
1. Compass Pathways
Compass Pathways (CMPS -4.10%) is developing psychedelic chemicals like psilocybin into therapies for difficult conditions including treatment-resistant depression. Aside from its drugs, Compass' lead depression program also includes elements of psychotherapy to help patients prepare for and adjust after their treatment with psilocybin. Working with chemicals formerly eschewed by the medical establishment is one thing that makes Compass a disruptor, but the idea of combining psychedelics with support from trained clinicians into a cohesive package is even more important.
The thing to appreciate about Compass' conception of psychedelic therapy is the numerous options it offers to add value for customers beyond what might be "normal" for a biotech company's product.
Before patients even get to the front door of the therapy clinic, they've interacted with the company's automated online prep platform, which helps them to get ready for their experience. And they've already had contact with the support staff that will be a part of their therapy. Once they're in the clinic for the duration of the eight-hour therapy experience, the company's carefully designed therapy rooms are packed with amenities to support their comfort and healing.
All of the above gives Compass the ability to command a high price for its services while also providing the opportunity for customers to build positive feelings about its brand, thereby creating a competitive advantage and cementing market share. If it were only in the business of making psychedelic drugs, it would not be able to accomplish either of those things.
At the moment, Compass' lead program is in phase 2b of clinical trials, and it could report results by the end of the year. By the end of the decade, it could be operating therapy clinics everywhere if its brand of clinician-assisted psychedelic therapy is proven to be effective, and that's what makes it worth a purchase today.
Talkspace (TALK -3.23%) provides telehealth services for behavioral health, so its psychotherapists and psychiatrists can help patients who would otherwise be far beyond the geographical reach of robust local mental health systems. It sells subscriptions to businesses, insurers, and consumers, all of which pay monthly according to the services their patients use.
Right now, the company is leading other behavioral telehealth providers in brand awareness, though it isn't profitable. Growing its membership base and forming a core of loyal customers domestically are the challenges of the moment. In the future, it plans to expand its coverage outside the U.S. to all of the English-speaking world.
The key point of uncertainty is whether Talkspace will be able to outcompete the other behavioral telehealth companies once the market shakes out, including those that currently do mental healthcare only as an ancillary service. On the basis of its plans at the moment, it could report positive earnings before interest, taxes, depreciation, and amortization (EBITDA) as soon as 2022 while growing annual net revenue by as much as 64%. Aggressive investors may want to consider buying the stock sometime over the next few quarters, as proof of progress toward those estimates starts to trickle out.
3. Atai Life Sciences
Atai Life Sciences (ATAI -2.52%) is a biotech that aims to combine the innovative therapies of Compass Pathways with the behavioral telehealth of Talkspace, though its primary focus is on drug development for the time being.
Atai is collaborating with Compass Pathways on its psilocybin program for treatment-resistant depression. But it also has a few other development collaborations for projects addressing opioid use disorder, generalized anxiety disorder, and post-traumatic stress disorder (PTSD), to name a few. The majority of Atai's pipeline is in the early stages, which means that it could be years before it brings a drug to the market.
Atai's innovation is to make treatment with novel psychedelic drugs into something that's safe, effective, scalable, and accessible via telemedicine. To accomplish this, it's building a suite of telehealth tools for remote counseling of patients during their treatment with psychedelics. And it's also developing new drug discovery and delivery technologies so its therapies are more effective and more efficient than competitors'.
Its telehealth tools are what could enable Atai to scale its psychedelic therapies to address a huge swath of the market for novel behavioral health solutions. If the company's therapists can prescribe its medications for patients to take in the comfort of their homes with continuing support from afar, that would negate the need to operate costly clinics -- and keep the price of treatment much lower, too.
In sum, Atai is planning to make its psychedelic therapies scale better than any other company can manage, and that's why it's worth considering as an investment.