World Reimagined: The Growth of the Psychedelic Industry

When we think about disruptive technologies, we tend to think of computers, artificial intelligence, the space race, and so on. Today we are writing about a very different type of disruptive technology, versions of which are as old as civilization itself, but have only recently come back into focus for their potential to alleviate some of the most widespread and devastating human ailments. Today we are talking about the clinical use of psychedelics to address a range of problems from depression and PTSD (post-traumatic stress disorder) to migraines.

According to the National Institute of Mental Health, over 17 million Americans have at least one major depressive episode every year, and up to 30% of them receive insufficient help from current medical treatments. Roughly 8 million people suffer from PTSD, and over half a million of those are veterans. Another estimated 40 million adults struggle with anxiety disorders, and we suspect that over the past 12 months plus, that number increased.

The benefits of psychedelics were first studied back in the 1950s and 1960s when hundreds of people in the Los Angeles area participated in legal LSD studies, including actors Cary Grant and Jack Nicholson, as well as Harvard psychologist Timothy Leary. Professor Leary encouraged American students to “turn on, tune in, and drop out,” which likely contributed to the drug being branded a “hippie psychedelic” and criminalized as a Schedule 1 drug in 1967.

In 1971, President Nixon launched the war on drugs, and that same year, the United Nations Convention on Psychotropic Substances listed psilocybin and psilocin as Schedule 1 drugs. According to the U.S. Drug Enforcement Agency, “Schedule 1 drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse.”

Evidence has been mounting that definition is no longer accurate.

Researchers have been investigating psychedelics for the treatment of cluster headaches since 2006. In recent years, interest in the therapeutic potential of psychedelics has grown, aided in 2018 by the publication of the bestseller from Michael Pollan, How to Change Your Mind – What the New Science of Psychedelics Teaches Us About Consciousness, Dying, Addiction, Depression, and Transcendence.

The FDA granted psilocybin “breakthrough therapy” status in 2018 for the treatment of severe depression. In May 2019, Denver became the first city in the U.S. to decriminalize psilocybin mushrooms, followed by Oakland, California. During the November 2020 election, the state of Oregon voted to legalize psilocybin for mental health treatment at licensed centers and to decriminalize the possession of small amounts of all drugs, with the law becoming effective February 1, 2021. Washington DC passed an initiative to decriminalize the cultivation and possession of “entheogenic plants and fungi.” California is currently reviewing bill SB-519, which would decriminalize a variety of psychedelics, including psilocybin.

We are seeing a growing number of studies that are finding psychedelics to be highly effective. In May 2021, Nature Medicine published a major study on the assisted use of MDMA (methylenedioxymethamphetamine) to treat PTSD that is both more effective and safer than conventional antidepressants, and some experts anticipate that such use could win federal approval as soon as 2022 or 2023. The New England Journal of Medicine recently published an Imperial College London study of psilocybin to treat depression.

As with any potential disruptors, investors have been paying attention, and 2020 was a particularly robust year, despite a global pandemic and worldwide lockdowns. Well over $220 million was raised by private companies in the space in 2020, and several companies went public, such as Cybin (NEO:CYBN) (OTC:CLXPF), which raised C$88M and is investigating psychedelic therapies to improve the lives of those suffering from mental illness. According to Cybin, “One in four people will be affected by mental or neurological disorders at some point in their lives.” That makes for an incredible opportunity from a humanitarian standpoint, as well as from a business perspective.

Cybin has four active drug programs targeting major depressive disorder, alcohol use disorder, anxiety disorders, and therapy resistant psychiatric disorders. Early this month, the company announced the establishment of Mental Health Centers of Excellence, in partnership with TMS NeuroHealth Centers, to facilitate the R&D of innovative psychedelic therapies through newly formed mental health centers of excellence.

On January 27, 2021, the first psychedelic stock ETF began trading on Canada’s NEO exchange under the ticker PSYK, launched by the Canadian financial services company Horizons ETF Management. You may recognize the company as the one to bring the first cannabis ETF Marijuana Life Sciences Index ETF (HMMJ) to market, but we hear from people in the psychedelic industry that a comparison to marijuana is way off base. Where marijuana has been found to have medicinal uses, a focus of many in the industry has been on legalization for recreational use; on the other hand, when we spoke with Cybin’s CEO Doug Drysdale, it was clear that his company is focused solely on the use of psychedelics in a therapeutic setting and is quite wary of recreational use, a sentiment that appears to be widespread in the industry.

Compass Pathways (CMPS), which went public on the Nasdaq in September 2020, was the largest publicly traded company in the space until the Peter Thiel-backed Atai Life Science N.V. (ATAI) went public in June on the Nasdaq as well. The company is studying psilocybin and ketamine for treatment-resistant depression and an MDMA derivative for PTSD, as well as other treatments for anxiety, brain injury, and Opioid Use Disorder. Another player in the space, Seelos Therapeutics (SEEL), started trading publicly on the Nasdaq in September 2020 and is in the early stages of ketamine studies for the treatment of Acute Suicidal Ideation and Behavior (ASIB) in Major Depressive Disorder (MDD) and PTSD. Mind Medicine Inc (MNMD) started trading on the Nasdaq in March 2020 and is focused on the development of psychedelic-inspired therapies to address addiction and mental illnesses.

There are also a number of companies trading OTC in the space for those who would like to investigate further such as UK-based Small Pharma (OTC:DMTTF), which began its Phase I/IIA study, in collaboration with Imperial College London in February 2020, using N, N-dimethyltryptamine (DMT) as a rapid-acting treatment for depression. Canada-based Numinus Wellness Inc (OTC:LKYSF) announced just a few days ago that Canadian authorities had approved a single-arm, open-label safety and feasibility study to evaluate psychedelic-assisted therapy for PTSD.

The bottom line is that over the past year-plus, much of the world has experienced a shared mental health crisis which has helped bring the importance of mental health to the forefront and reduced if not removed whatever social stigmas may have previously existed. At the same time, views and laws surrounding psychedelics are evolving, with a growing appreciation for their efficacy in treating those who are most in need of help and for whom other treatments have been unable to provide relief. These treatments can completely change lives, allowing joy to take root where before there was only sadness, despair, or fear. That is a world beautifully reimagined.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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