Psychedelics M&A Could be Motivated by FOMO

- August 18th, 2020

Some experts believe big-name corporations could enter the psychedelics space by way of mergers and acquisitions.

One business lawyer focused on mergers and acquisitions (M&A) expects to see large entities, such as pharmaceutical companies, enter the psychedelics space sooner rather than later.

Kris Miks, partner at Norton Rose Fulbright Canada, said these potential entries will be fueled by a desire to not be left behind as the industry continues to develop.

Miks was speaking during a panel conversation surrounding M&A possibilities in the nascent psychedelics space at the monthly Psychedelic Capital forum hosted online by Microdose Psychedelic Insights, a division of the Conscious Fund.

 

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“I think there’s going to be more of an appetite and more of an interest from large pharma to get into the space early and see if they can get involved,” Miks told the online audience.

The lawyer specified that since psychedelics companies have mostly stuck to the medical side of the business opportunity as opposed to the recreational aspect, pharmaceutical corporations may want to step in and collaborate on the development of these drugs.

“We’re also going to see people who weren’t early on into cannabis wanting to get in early because they missed the boat,” Miks said.

Investment in cannabis initially became a rush due to increased interest and exorbitant projections about how big the industry could become. However, more recently the cannabis public space has suffered heavy losses because the industry is lagging behind early estimates.

While the sector may still reach a lofty size, cannabis investors and companies have gone through a significant difficult period of growing pains.

In a recent interview with the Investing News Network (INN), JR Rahn, co-CEO of Mind Medicine (MindMed) (NEO:MMED,OTCQB:MMEDF), said a potential entry by a pharmaceutical company is a definite possibility and is something his company is exploring as a way to offset costs for future trials.

“We are going to fund the programs in a way that we find most efficient, so if a pharmaceutical company wants to partner with us on a specific project, we are certainly open to that and are looking at it as a strategy on how we will fund some of these projects in the future,” the executive said.

Watch the interview above for more from Rahn on MindMed and psychedelics.

Adele Byrne, senior analyst with Prohibition Partners, told INN the pharma industry is taking notice of the medical benefits of psychedelics. When asked if acquisitions by pharma players are the natural endpoint for the psychedelics companies coming out today, Byrne said she thinks that will be the case.

“It’s sort of becoming impossible to ignore in terms of the scientific evidence that’s accruing … and the potential that these compounds have for treating mental health conditions,” Byrne previously told INN.

Also on the Psychedelic Capital panel was Ashley Chiu, cannabis strategy advisor with EY Canada, who went against Miks’ perspective on the potential entry of big pharma into psychedelics.

“I think there’s still a roadblock when it comes to stigma,” Chiu said. The EY expert added that in her conversations with larger players she hasn’t seen a lot of interest in securing a first-mover advantage.

That disinterest can be traced back to the rocky path paved by cannabis investments in the past couple of years, according to Chiu.

“In their typical drug development pipeline they would typically roll any type of development costs into how they size the future opportunity, and so whether that’s coming in acquiring later or developing it themselves, I think they are quite indifferent,” Chiu said.

In terms of entrances from larger companies or investors, one exchange executive told INN he is encouraged by the potential emergence of institutional investors.

During a recent interview, Jos Schmitt, CEO of the NEO Exchange in Toronto, said as long as the psychedelics sector sticks to the medical avenue it has been carving for itself, then institutions will seriously consider making runs at the market.

Don’t forget to follow us @INN_LifeScience for real-time news updates!

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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