The industry is on the cusp of delivering a new age of healthcare and will need capital. Can it retain its idealism through that process?
Follow the sector closely and you’ll start to notice an underlying theme in the new age of psychedelics — a deep-rooted ambition to do good for others. Not every industry is able to deliver on that promise, but the business of psychedelics wants to be different.
Although 2020 served as a launching pad for psychedelics investing, decades of work and activism have gone largely unnoticed by players in the capital markets.
Now that there’s money to be made — and lots of it by even the most conservative estimates — investors will have to grapple with the altruistic interests of the players shaping the industry. Those same players may have to get accustomed to the realities of the capital markets.
Can psychedelics have the best of both worlds?
In the pursuit of capital for such a compassionate industry, which interests will win out? One industry insider believes it could be possible to have both.
Liana Gillooly is a development officer at the Multidisciplinary Association for Psychedelic Studies (MAPS), a research group working on one of the most advanced drug development studies for a psychedelic substance. MAPS is investigating the use of MDMA as a method of psychotherapy for patients with PTSD.
In 2017, this psychedelics-based method was granted a “breakthrough therapy” designation by the US Food and Drug Administration in a move that represented the drug authority’s changing perspective. MAPS has said in the past that it expects its Phase 3 trials sometime in 2021.
Gillooly told the Investing News Network (INN) that existential questions about how a business and its purpose can help the world at large aren’t so radical anymore, and psychedelics can help push that even further without compromising capital needs.
The expert is no newcomer to the investment landscape, especially drug-related businesses. Gillooly previously worked with the Arcview Group, a cannabis policy advocacy group and investment network.
The group tracks and advocates for the legalization of cannabis across jurisdictions. But while noble in its intention, the experience of trying to push the social awareness platform into the cannabis investment space eventually began to feel hollow for Gillooly.
“I started feeling like our words were empty, because I was looking around the industry and I was seeing that a certain demographic of people was making cash hand over fist, millions of dollars, while another demographic of people was still serving time behind bars for minor cannabis offenses,” she said.
The legalization trend for cannabis has highlighted the disparity in opportunities the industry has brought. A report from Vice on a recent study shows white men represent the leading demographic in cannabis companies’ leadership positions. The study’s findings echo a report from the Financial Post showing an absence of minorities in leadership positions in the space.
Gillooly said the stakes are even higher when it comes to social responsibility for the psychedelics industry, since these drugs, if approved, will likely become part of a patient’s life.
“I think the set and setting and the context from which these medicines are received matters, not just, you know, in the immediate environment, but the cultural context. I think it really impacts what a person can get out of these experiences,” she noted.
When asked about the entrance of parties interested in psychedelics only for the potential end-game gains, Gillooly recognized that this is already happening in Canada.
She also pointed out that when it comes to the growth factor for the psychedelics stock market, there are very few legitimate opportunities at the moment since the trend is heading towards drug development.
In a previous interview with INN, Richard Carleton, CEO of the Canadian Securities Exchange, said investors should be realistic about the time proposition attached to the investment story of psychedelics.
Even so, the welcoming nature of the Canadian markets has attracted a new rush of listings from various companies trying to capture the attention of investors interested in the psychedelics business proposal.
While Gillooly said this natural, she thinks a critical few are capable of dictating the path for this industry.
“I do think that there’s enough people and there’s enough entrepreneurs and enough funders that recognize that this is a really precious and critical moment and opportunity, and are genuinely desiring to put their money where their mouth is, and to be a little bit more experimental and to see what we can make happen,” she said.
“I don’t think we need everyone, I just think we need a critical mass of people to do that.”
Mental health connection puts ethics at the forefront
Why is psychedelics raising these questions more than other industries?
Sa’ad Shah, managing partner with Noetic Psychedelics, thinks it’s because the psychedelics business is uniquely positioned to directly help people’s mental health. That’s the main purpose put forth by those directly involved in the sector.
Watch the full interview with Rahn above.
MindMed was one of the first firms to publicly list based on the psychedelics business proposition.
The industry, which has seen a steady rush of new listings and existing public companies rejigging their approaches to pursue opportunities in psychedelics, has received votes of confidence from significant investors with large sway on the motivation of investors.
Arguably chief among them is Shark Tank investor Kevin O’Leary. The celebrity businessman politician hasn’t shied away from his support of psychedelics with the public launch of MindMed back in February.
Since then, O’Leary has continued to voice his enthusiasm for the investment possibility with psychedelics. Most recently he re-emphasized his opinion via Business Insider.
Such high-profile connections have only added to questions about how an industry based on grassroots activism can deal with heavy interest from commercial and investment opportunities as they bubble up.
This discussion recently reached one of the leading drug policy events. At the latest edition of the online Prohibition Partners LIVE event, a panel featuring non-profit psychedelics experts expressed hesitation about the general idea of commercializing plant-based medicines.
The panelists were skeptical about who benefits from introducing commercial concepts to an industry otherwise known for grassroots activism.
Dr. Victoria Hale, a board director for MAPS, said the industry has to be “careful and conscientious” as commercial interest is only set to grow from hereon out.
“The possible benefit of commercialization is broader access, and I think we all would agree that there are many people in the world who would benefit from these medicines,” Dr. Hale said.
Alongside the interest from the capital markets comes the question of if that level of attention will affect the focus or direction of the psychedelics industry. One industry observer with plenty of experience in the cannabis space doesn’t think so.
Stephen Murphy, co-founder and managing director of drug research firm Prohibition Partners, said capital interest doesn’t necessarily mean there isn’t an inherent desire to help people — otherwise, he said, “There’s money to be made in gold and oil and 1,001 other areas.”
Prohibition Partners prepares and publishes market insights on the global cannabis industry and has been taking a closer look at the rise of psychedelics, issuing its first report earlier this year.
“I think it is the challenge of psychedelics that is attracting a lot of interest,” Murphy told INN. “There is more information on this now more than ever, yet it’s just getting the light of day, which is why I think we are seeing this wave of interest.”
Murphy called on investors to ask smarter questions when it comes to this sector and for those at the management level at companies in the space to get psychedelics into the mainstream in a responsible and ethical way.
While it’s clear the psychedelics industry will have to grapple with continued interest from the investment community, one investment group partner previously told INN he’s hoping for a marketplace focused on principles and doing good for others.
“I think the interesting thing about these substances is that beyond the obvious therapeutic and medical applications that we’re seeing, I think on a personal level they have this kind of tremendous capacity to (create) personal development and empathy,” said Michael Hoyos, co-founding partner, Americas, with the Conscious Fund.
“I think that’s helped a lot of folks that I’ve spoken to feel almost like a certain responsibility to help this industry flourish and develop in the right way.”
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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.