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 like cannabis did in the lead-up to legalization, advocates have been quick to point out the similarities between the two drug sectors.
With that in mind, here the Investing News Network (INN) offers investors a closer look at the ways the cannabis market and psychedelics market compare and contrast.
Fight against stigma unites marijuana and psychedelics
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.
It’s true that both drug industries still face significant stigma from the masses, even as advocates and companies lobby for the use of these drugs as medicine — let alone for recreational use.
But Levy said that from his perspective the social, therapeutic and medical attitudes towards cannabis have shifted quickly toward 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 current Prime Minister Justin Trudeau. The cannabis legalization change, which represented the first time a G7 nation had made such a move, opened the doors to a brand-new consumer product market.
In the lead-up to marijuana legalization, the industry had already seen a massive amount of support by way of public capital as the promise of a fresh 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.
Early public market steps for cannabis show path ahead
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 that as interest in psychedelics investing increases, he has seen a collection of leaders from the cannabis world throw their weight behind this new investment vehicle.
Carleton pointed to the emergence of former Canopy Growth CEO (NYSE:CGC,TSX:WEED) Bruce Linton as an encouraging sign for investors.
Linton, who was dismissed from his duties with Canopy Growth in July 2019, has become a significant investor and player in psychedelics. He 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 terms of its cannabis listings because it admitted US businesses, while TMX Group (TSX:X) exchanges blocked the option due to legality concerns.
This time, 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 10 companies 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 that an additional six firms plan on issuing public launches with the exchange.
Medical potential of psychedelics and cannabis
While the psychedelic renaissance seen in the capital markets may resemble the rise of the cannabis industry as an alternative investment, it’s clear psychedelic drugs will move at a different speed.
According to an executive with a Canadian accounting and business advisory firm, there is one distinct difference between cannabis companies and medicinal psychedelics investment as it stands right now.
During an online forum with investors, Maruf Raza, national director of public companies with MNP, said that psychedelics by and large is a research and development investment opportunity.
That’s a sentiment Carleton echoed during the same online discussion, indicating that 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. Instead, companies will have to advance the development of research studies and potential medical candidates.
That said, cannabis companies have seen some success in this arena. Notably, in June 2018, English drug-maker GW Pharmaceuticals (NASDAQ:GWPH) obtained approval from the US Food and Drug Administration (FDA) for its CBD-based oral solution medical cannabis product.
The company’s 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 firm indicated that it will continue to explore both additional uses for Epidioliex and new formulations of CBD entirely as a medical element.
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 of 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.
Editorial Disclosure: 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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