The emerging psychedelic drug sector was an opportunity in need of a base of operations.
Why is Canada becoming the natural destination for this industry? Why is this such an important question?
Major investment opportunity
The psychedelic drug industry has all of the ingredients necessary to become the “next big opportunity” in the highly lucrative life sciences space.
It has a driver.
The WHO has officially declared a “Mental Health Crisis”. It affects over 1 billion people around the world. It is expected to cost the global economy $16 trillion in lost productivity by 2030.
It has a market.
The mental health services market is already a $225.1 billion treatment market in the United States alone.
It has a competitive advantage.
Existing therapies for mental health conditions such as depression, addiction and PTSD suffer from appalling success rates for treatments currently on the market. Early clinical trials with psychedelic drug-assisted therapies are generating far superior clinical results.
It has the backing of market-makers.
Heavyweights from both Silicon Valley and Wall Street have been quick to get involved in building this industry. Big-name investors like Peter Thiel, Mike Novogratz and Tim Ferriss have personally invested in and lent their reputations to this new sector.
It has the funding.
Even at this early stage, psychedelic drug companies have cumulatively raised $100s of millions. Now one individual player – Compass Pathways – is raising over $127 million just for its IPO.
But where is the best launching-pad for this exciting opportunity?
Canada: first for cannabis, first for psychedelics
There is no doubt that the United States represents the single largest potential market for psychedelic drug therapies. But it’s a terrible base of operations for an industry that requires both enormous regulatory movement and flexible capital markets.
Canada scores top marks in both of these categories. We can illustrate this by looking no further than the cannabis industry.
Canadian exchanges provided the access to public markets that permitted over 100 cannabis companies to raise billions in seed capital.
Canada’s government was the first major economy to fully legalize cannabis at the national level. And years after the cannabis industry was launched, it’s still well ahead of other nations in facilitating the development of a cannabis industry.
We already see strong parallels in the psychedelic drug sector.
Once again, it’s Canadian exchanges that have taken the lead in allowing psychedelic drug companies to go public.
More than a dozen psychedelic drug companies have public listings in Canada, led by emerging names such as MindMed Inc (CAN:MMED / US:MMEDF) and Champignon Brands (CAN:SHRM / US:SHRMF).
These companies are either new RTOs or IPOs, or else already-public companies (mostly cannabis companies) that have been allowed to add psychedelics-based operations to their business model.
Despite their microcap status, these public companies have collectively raised approximately $100 million already, led by MindMed – who has raised over $40 million itself.
Similarly, Canada is already (once again) showing political leadership on the regulatory front.
While most of these substances are still criminally prohibited in Canada, Health Canada has already begun to grant “medical exemptions” to allow patients with exceptional medical need to access psychedelic drug therapies.
An industry starts to take root
As previously noted, the participation of Wall Street and Silicon Valley corporate icons has already generated significant visibility and credibility for the psychedelics space.
What is another indication that this is a sector starting to come of age? The lawyers are moving in.
Last week, the Canadian legal publication Law Times highlighted the growing corporate involvement and increasing regulatory activity in the psychedelic drug industry in Canada.
Lawyers such as Jeffrey Merk, a partner at Aird & Berliss LLP are doing more and more business working with clients in the psychedelics industry as part of its corporate finance and commercial practice.
As mental health has expanded in the public consciousness, many are exploring the opportunities in alternative treatments available through psychedelic drugs, he says. Over the last two-to-three years, he has had clients involved in psychedelics emerge from both the capital markets and research and development streams of the industry.
Merk cited four types of psychedelics-related “business” that now regularly lands on his desk.
- R&D-related work, especially with respect to drug patent law and other IP
- Nutraceuticals work, especially with respect to the psychedelics companies also involved in the rapidly-growing functional mushrooms space
- Providing legal services for psychiatric clinics that offer psychedelic-assisted therapies (at this stage of regulation, most commonly ketamine)
- “psychedelic tourism”
Even at this early stage, Aird & Berliss is already fielding considerable interest from clients interested in legal psychedelic “experiences” – in jurisdictions like the Netherlands and Brazil.
A new industry is emerging with the potential to capture a $225 billion market – to address a multi-trillion-dollar crisis.
Canada stands front and center as a safe jurisdiction for this R&D with one of the most progressive regulatory environments – and close access to the huge U.S. market.
As IPO fever hits the psychedelics space, Psychedelic Stock Watch will be publishing an exclusive feature article on a new life sciences startup (based in Canada) that is well-positioned for this market.
Published at Sat, 19 Sep 2020 06:00:05 +0000