The cannabis industry may offer a glimpse into the kind of challenges psychedelics investments will face as the market rises its interest.
Investors in the emerging psychedelic sector may need to brush up on the steps taken by the cannabis industry across the capital markets.
While the psychedelic industry may not have a direct path to profitability as cannabis did in its own leadup to legalization, experts and advocates are quick to signal the resemblances between the two drug sectors.
Here the Investing News Network (INN) offers a closer look into the ways the cannabis market and psychedelics market compare and contrast for investors in the novel drug sector.
Medical potential offers similarities between industries
While a lot of the attention for cannabis has gone towards its appeal as a consumer packaged goods (CPG) item, primarily hemp-derived cannabidiol (CBD), there have been hints at the advanced medical research attached to cannabis as a medicine, akin to what psychedelics is seeing at the moment.
In 2018, English drug-maker firm GW Pharmaceuticals (NASDAQ:GWPH) obtained approval from the US Food and Drug Administration (FDA) for its CBD-based oral solution medical cannabis product.
While not being a typical cannabis company, GW Pharmaceuticals’ appeal as a cannabis stock became evident as investors looked for high-end medical options with legal cannabis.
Since cannabis remains a controlled substance in the US, investors have struggled to pursue big-picture investment options in the public market.
This novel drug, Epidioliex, is designed to treat rare and severe forms of epilepsy. The approval of Epidioliex represented a landmark achievement for the community advocating the medical benefits and traits of cannabis as a whole.
Since Epidioliex’s release to the public in November 2018, GW Pharmaceuticals has credited the drug as a key contributor to its growth. The firm reported sales numbers of US$269 million for the drug’s first year of commercial availability, a huge plus for the cannabis investor.
In its 2019 annual report, the drug-maker indicated it will continue to explore both additional uses for Epidioliex and new formulations of CBD entirely as a medical element.
Meanwhile, psychedelics companies have planted their business, for the most part, in the research sector, meaning a pack of leading firms plans to pursue medical trials as a way to develop novel drugs founded in psychedelic components.
Psychedelic-inspired medicines research has focused on mental health treatments, particularly relief of anxiety, stress and in some cases even post-traumatic stress disorder.
When it comes to the evolution of these magic mushroom drugs, the option for a clinical trial has been explored, opening the door to a future with psychedelic medicine options for patients.
Fight against stigma unites marijuana and psychedelics industry
In an interview with INN, Field Trip Health founder and executive chairman Ronan Levy said the path marijuana as an entire industry has taken both in the lead-up to legalization in Canada and after this critical event, has greatly helped psychedelics.
Both drug industries still face significant stigma from the masses as the advocates and companies of the sectors attempt to dissuade those still fervently against the use of these drugs as medicine, let alone for recreational uses.
Levy said from his perspective the social, therapeutic and medical attitudes in regards to cannabis have shifted quickly in acceptance over the last five years, which has “made the discussion around psychedelics that much easier.”
Canada legalized cannabis for recreational use in 2018 following a campaign promise from now Prime Minister Justin Trudeau. The cannabis legalization change, which represented the first time a G7 nation did so, opened the doors to a brand new consumer product market.
In the lead-up to the marijuana legalization, the industry had already seen a massive amount of support by way of public capital, as the promise of a brand new consumer sector tantalized investors of all sizes.
“Had cannabis not come along, it probably would have been a longer road to be having some of these conversations,” said Levy.
Cannabis early public market steps shows path ahead for psychedelics
Another way the two industries have been linked has been through the heavy involvement of investors and some of the earliest backers of cannabis in Canada.
During an online seminar with investors Richard Carleton, CEO of the Canadian Securities Exchange (CSE) said in the increased interest for psychedelic investments, he has seen a collection of leaders from the cannabis investment world throw their weight in support of the new investment vehicle as well as latching onto the potential for this emerging capital market industry.
Carleton pointed to the emergence of former Canopy Growth (NYSE:CGC,TSX:WEED) CEO Bruce Linton, a significant investor and role player in psychedelics, as an encouraging sign for investors.
Linton, who was dismissed from his duties with Canopy Growth in July 2019, serves as an advisor for Mind Medicine (MindMed) (NEO:MMED) and Red Light Holland (CSE:TRIP).
As with cannabis before, the CSE is angling to become a welcoming exchange for the industry. However, there will be differences compared to the rush of listings available exclusively to the CSE with cannabis.
The CSE saw an advantage develop in its number of cannabis listings thanks to its admittance of US businesses, while TMX Group (TSX:X) exchanges blocked the option due to legality concerns with the active US federal illegality of cannabis in all forms as a scheduled drug.
This time around there’s already one company publicly available on the TSX Venture Exchange (TSXV). Similarly the NEO Exchange has seen one of the most prominent public companies pick it as its home listing.
Carleton said the CSE already counts with 10 companies in its exchange involved in the industry–either from an organic business launch or through an acquisition strategy. The CSE executive said there is a very clear appetite from the retail investor sector for psychedelics as it stands.
The CSE indicated an additional six firms plan on issuing public launches with the venture exchange.
While the psychedelic renaissance seen in the capital markets may resemble the rise of the cannabis industry as an alternative investment option, it’s clear the psychedelic drug will move at a different speed.
According to an executive with a Canadian accounting and business advisory firm, there is one distinct difference between medicinal psychedelics investment as it stands right now and options with cannabis use.
During an online forum with investors, Maruf Raza, national director of public companies with MNP, said as of right now psychedelics by and large is a research and development investment opportunity.
A sentiment Carleton echoed during the same online discussion, indicating he views the current stage of psychedelics investment in a similar way to junior mining companies, meaning there’s no expectation for revenue to arrive in the near future but to instead advance the development of research studies and potential medical candidates.
The cannabis industry has seen incredibly rewarding ups and severely straining lows, as the space continues to establish itself as an encouraging investment decision for potential players.
On the other side of the table is the psychedelic industry, which is just starting to begin telling its story and selling investors on the potential with psychedelic treatments and psychedelic substances, such as MDMA, ketamine, LSD or psilocybin.
Investors are getting started with mushrooms and the race of public listings in the Canadian markets is just beginning, but there are some lessons available from the way cannabis moved forward with its path in the capital raising stage.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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