eResearch | Psychedelics-focused companies are migrating from the private markets into the public markets, as the largely misunderstood industry is quickly changing. Recent studies are proving viability for a legal medicinal market in compounds such as LSD and psilocybin to treat a wide range of mental health problems.
Psychedelic Fungi Research
Two years ago, the U.S. Food and Drug Administration (“FDA”) provided “breakthrough therapy” status for psilocybin in the treatment of clinical depression. Psilocybin is a chemical alkaloid that induces psychedelic effects, often found in psilocybin mushrooms (AKA “magic mushrooms”) or psilocybin truffles (AKA “magic truffles”).
The industry has since gained momentum as several large pharmaceutical companies including Johnson & Johnson (NYSE: JNJ), AstraZeneca PLC (LON: AZN), Merck & Co., Inc. (NYSE: MRK), and Pfizer Inc. (NYSE: PFE), announced commencement of trials to research the effects of psychedelics on a range of medical ailments from mental health to cancer.
In March, the psychedelic market garnered the attention of investors as the industry was catalyzed by IPOs from MindMed Medicine Inc. (NEO: MMED; OTC: MMEDF) and Champignon Brands (CSE: SHRM; OTC: SHRMF).
The stock prices of MindMed Medicine and Champignon Brands increased more than tenfold after listing. However, the stock prices of the two companies have since consolidated, resulting in a market cap for each company around US$100 million.
Recreational and Medical Use
As both the recreational and medical use of psychedelic products are currently illegal in most jurisdictions, the industry has been operating privately. However, more institutional capital is flowing into the sector as researchers approach proving the medical value of psychedelic medicine.
Psychedelics Industry
The psychedelics industry is focused on developing treatments for clinical mental health conditions including obsessive-compulsive disorder, PTSD, opioid addiction, alcoholism, eating disorders, depression, and anxiety.
The psychedelics industry is similar to the cannabis industry as both industries are fighting with the FDA for federal legalization of their respective drugs. Cannabis and psilocybin are still currently registered as Schedule 1 drugs under the United States Controlled Substances Act.
According to Legal Partners from Aird & Berlis, who spoke on a webinar panel called “The Rise of the Psychedelics Sector”, psychedelics were banned in most jurisdictions by the 1970’s. However, similar to cannabis, recent research and lobbying support is pushing for the legalization of psychedelics.
Countries such as Jamaica and Holland have legalized some forms of psychedelics, while Austria, Portugal, Czech Republic, Cyprus, Italy and Spain decriminalized the drug to varying degrees.
Since 2018, the growing evidence on the benefits of psychedelic medicine for mental health treatments has pushed the FDA and Health Canada to fast track their discovery programmes.
Canadian Public Companies
The psychedelic market is steadily growing in the number of public companies. Professionals in relevant disciplines start new psychedelic companies while existing public pharmaceutical companies acquire smaller private companies focused on psychedelics.
In May, Red Light Holland closed a reverse takeover transaction (“RTO”) and started trading on the Canadian Securities Exchange under the ticker symbol “TRIP.” Red Light Holland plans to establish itself as a producer and distributor of psilocybin truffles within the Netherlands. The Netherlands is one of only two countries in the world where psilocybin is legal.
After raising C$3.5 million at $0.06 per share as part of the RTO in February, Red Light Holland closed a C$3.8 million private placement in June at $0.165 per unit with each unit comprising of one share and one warrant (exercise price at $0.26 per share and 4-year term).
In March, Revive Therapeutics Ltd. (CSE:RVV; OTC:RVVTF), a developer of cannabis-based therapeutics, announced a C$2.8 million acquisition of Psilocin Pharma Corp., a psychedelics company focused on developing psilocybin-based therapeutics.
On the same webinar mentioned above, 10 public Canadian companies related to psychedelics were mentioned (chart below). Among the listed companies, six are currently in the application pipeline.
CHART 1: Canadian Public Companies Related to Psychedelics
| Company Name | Exchange: Ticker | Market Cap. (C$M) |
| Champignon Brands | CSE:SHRM | $135 |
| Mydecine Innovations Group | CSE:MYCO | $101 |
| Mota Ventures | CSE:MOTA | $67 |
| Revive Therapeutics | CSE:RVV | $24 |
| Red Light Holland Corp. | CSE:TRIP | $21 |
| Hollister Biosciences | CSE:HOLL | $19 |
| Yield Growth Corp. | CSE:BOSS | $15 |
| Empower Clinics | CSE:CBDT | $7 |
| PharmaDrug | CSE:BUZZ | $7 |
| Codebase Ventures | CSE:CODE | $6 |
Source: “The Rise of the Psychedelics Sector” Webinar; eResearch Corp
Though the psychedelics industry constantly gets compared to the cannabis industry, it may be a different story on whether it gets legalized or receives the same type of investor activity.
The legalization of the cannabis industry in Canada was driven by strong social movements which pushed for the recreational market, however, the psychedelics industry is mainly focused on the medicinal market.
As most psychedelics companies currently focus on research to legalize both medicinal and consumer usage, it will be interesting to see how the psychedelic industry’s growth compares with that of the cannabis industry.
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