Nicholas Kadysh: Are psychedelics the next cannabis in Canada?

Probably, but don't bet on governments moving too quickly.

By: Nicholas Kadysh

Close watchers of the financial markets in Canada will have noticed that something has been happening in the nascent, and still relatively small, world of psychedelics companies. In fact “something” is an understatement. Companies such as MindMed and Numinus posted eye-popping one-day growth last Friday, for some rising over 80% in one day. The psychedelics industry, having sat largely in the doldrums for the past year, has suddenly been propelled to front pages: less High Times and more Bloomberg Business.

As a legacy of the cannabis finance boom of the past eight years, Canadian companies were very well positioned to take advantage: while the largest company in the psychedelics space (Compass Pathways, which was granted fast-track approval by the FDA this year) is British, the vast majority of publicly listed companies looking to deal in psychedelics are based right here in the Great White North.

Why this attention, and why now? And most importantly, is the media’s framing of psychedelics as “The new cannabis” the right way to view this category?

Firstly, there are some undeniable similarities: besides the long history of traditional usage (just like cannabis) there is an undeniable recreational black market for substances like psilocybin (‘shrooms), MDMA (Molly) and DMT. But the push to legalize and regulate these substances comes from a far more mundane and scientific place: these products have shown incredible clinical promise as a treatment for a number of mental-health conditions, ranging from depression in the case of psilocybin to PTSD in the case of MDMA.

Dozens of researchers, such as Dr. David Nutt of Imperial College London, have decades-long bodies of persuasive clinical research showing that, when combined with counselling and behavioral therapy, these substances can alleviate real human suffering. The fact that 2020 has been a banner year for mental illness is almost certainly driving much of the interest on the part of both government and the private sector. We just aren’t very good at treating mental illness, and psychedelics represent remarkable potential new tools.

It bears repeating that, generally speaking, these are relatively safe substances with low addiction potential. Part of the interest in the stock market is a reflection of the fact that last week Health Canada announced its intention to include both psilocybin and MDMA in the Special Access Program, which would allow for easier pathways to clinical trials even though they remain illegal.

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Secondly, it’s also vitally important to remember that psychedelics, unlike cannabis, are not “one thing.” Cannabis, in all of its varieties, is functionally just one plant with several centrally active substances, whereas the psychedelics category is diverse, containing many substances with many applications. My own company, Psyched Wellness, is focused on the commercialization of the mushroom Amanita Muscaria and the active ingredient it contains, muscimol. Our path forward to approvals will likely be different than a company using a different mushroom with different active ingredients.

The regulatory approvals, clinical testing and ultimately use of all of these products will be as varied as the conditions they are meant to treat — and this means that investors should look carefully at what each company actually intends to do.

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Finally, there is an undeniable popular interest in psychedelics. Silicon Valley is so awash in mushroom-microdosing tech bros that it’s become a trope. Products like psilocybin may very well become a consumer product one day in the future — but investors who believe they will pick up a Magic Mushroom tea and a tab of LSD at their neighbourhood dispensary next year should likely temper their expectations. Even the most enthusiastic proponents of psychedelics, such as Michael Pollan, believe their use is appropriate only in controlled circumstances. These are substances for the therapists’ office, not a rave.

The companies that survive and thrive in the wild world of psychedelics will be those that approach these products with due diligence and serious scientific rigor; In short, the boring ones. These are the companies which will be rewarded by regulators with preferential access to markets. We should all be happy that Canada is leading the way in the regulation of a potentially revolutionary new tool in the treatment of mental illness, and the removal of psychedelics from criminality represents real progress on harm reduction — but a deeper look at the realities of this industry may be good food for thought. Are they promising the next recreational drug for the mass market, or a medical treatment?

Nicholas Kadysh is a government affairs and regulatory expert. He sits on the board of directors of Psyched Wellness (CSE.PSYC).


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