Psychedelics: Are They the Next Big Thing in Health and Wellness?

For thousands of years, psychedelics have been used by cultures around the world for their positive health benefits. However, due to psychedelic drugs like psilocybin (the chemical contained in magic mushrooms) being classified as a Schedule I drug under the US Controlled Substances Act, manufacturing, distributing and possessing remain illegal in the US.

Being part of the Schedule I list has also meant that research into the medicinal benefits of psychedelics in therapeutic settings has been scarce. Despite remaining illegal at the federal level, regulations have gradually loosened over the past several years, allowing for more clinical research to be conducted across the country.

Similar to cannabis, the use cases for psychedelics are continuously being discovered, providing early investors with the chance to invest in a budding industry that appears capable of satisfying the global demand for innovative treatments when it comes to mental health.

Changing perception: Lessons learned from the cannabis sector

In 2019, the Center for Psychedelic and Consciousness Research at Johns Hopkins Medicine was established, marking the first research center in the US dedicated to studying the therapeutic effects of psychedelics. Since then, psychedelics like psilocybin, ketamine, MDMA and LSD have all been researched as options to treat a wide range of mental health issues.

As a result of increasing scientific consensus on the positive health impacts of psychedelics, jurisdictions across the country have begun to loosen regulations that restrict access to this group of drugs. In November 2020, Oregon became the first state in the country to decriminalize psilocybin and legalize possession for therapeutic use. Prior to that, the cities of Denver, Oakland and Santa Cruz also decriminalized the possession of psilocybin between 2019 and 2020.

Legislative changes continue to happen at the state level rather than the federal level, which means there are many parallels between the movement for cannabis legalization and the more recent push for psychedelic legalization. States began legalizing cannabis as early as 1996, when California became the first state to legalize it for medical use. This was followed by the 2012 decisions in Washington and Colorado to fully legalize cannabis for recreational use.

A domino effect occurred in the following years, with a total of 17 states now allowing the recreational usage of cannabis. With Oregon leading the way on psychedelics, it is likely that a similar pattern could result in additional states opening up to legalization in the coming years.

Another sign that the psychedelic sector is following in the footsteps of the cannabis sector is the fact that many psychedelic companies have management teams with experience in the cannabis sector. One of the earliest psychedelic companies to publicly list was MindMed (NASDAQ:MNMD), a company that former Canopy Growth (NASDAQ:CGC) CEO Bruce Linton serves as Director of the Board.

MindMed has attracted significant attention from both retail and institutional investors for their experimental therapies to treat anxiety, opioid withdrawal and ADHD. Havn Life Sciences (CSE:HAVN), another major player in the psychedelic space, also has connections to the cannabis industry. Former CEO of Canadian cannabis producer Aphria, Vic Neufeld, joined the company in 2020 as a director. With executive teams that successfully navigated the complex political and regulatory landscape in both Canada and the US at the helm, these companies are well positioned to move quickly should there be any changes to the status of psychedelics as a controlled substance.

The case for sustainable health and wellness

The catalyst most likely to move the needle on legalization is the development of concrete evidence in regards to the medicinal benefits of psychedelics. Early research has shown significant positive impacts of psychedelic usage on improving mental health.

According to research from Yale, users of psychedelics reported feeling more socially connected and better moods. Study participants noted that the effect lasted for days after the initial effects of the drugs wore off. In another study from New York University, researchers found that positive impacts of psilocybin, including reductions in depression and anxiety, lasted up to five years after initial treatment.

Perhaps the most groundbreaking results came from research conducted by John Hopkins University’s Center for Psychedelic and Consciousness Research. An initial study consisting of 51 cancer patients revealed that 79 percent of patients who received higher doses of psilocybin over six months reported a significant drop in depression and anxiety.

Another 24-patient study completed by the center, which sought to analyze the effects of psilocybin on major depressive disorder, resulted in 17 patients experiencing a decline in their depression just one month after treatment. Furthermore, of those 17 patients, 14 said they no longer suffered from depression.

Similar research involving long-term smokers taking psilocybin to combat nicotine addiction yielded similar results. In that study, 60 percent of participants stated they had quit smoking 16 months after starting treatment.

According to Matthew Johnson, a professor of psychiatry and behavioral sciences at the center, psilocybin is an effective treatment for these conditions because of the way it activates the brain’s “serotonin 2a receptors,” which are heavily linked to mental health.

“There is also a massive increase in communication across the brain [after the treatment] in areas that do not normally communicate,” Johnson added.

For many, psychedelic treatments provide an alternative solution — one that can effectively treat the root cause of mental illness — rather than provide temporary relief. Psychiatrist Amanda Itzkoff, M.D., who offers ketamine infusions at her Manhattan clinic, is a firm believer in the health and wellness benefits of psychedelic treatments.

“It doesn’t remove the external pressures. But when you’ve got someone with severe depression, who has kind of given up, then there’s real promise in this treatment,” said Itzkoff, “By breaking the negative thought loop—even temporarily—you show someone it’s possible to feel another way.”

A new type of treatment: The psychedelic retreat

While psychedelics remain illegal in most places across the US, there are still several options potential patients who are interested in psychedelic therapy can take advantage of. One of which is a psychedelic retreat, which brings individuals to jurisdictions where the consumption of psychedelics is not criminalized in order to take advantage of the wellness and mental health benefits.

Psychedelics-focused venture capital firm Energia is actively exploring opportunities in this exact segment of the industry. According to CEO Marik Hazan, psychedelic retreats provide patients with a measurable experience that caters to their interests.

“I think that the majority of the industry right now is focused more on these deep experiences,” said Hazan.

The publicly traded company at the forefront of these personalized experiences is Silo Wellness (CSE:SILO). Silo Wellness facilitates psychedelic retreats in Oregon, as well as on the tropical island of Jamaica. These retreats, which are 100 percent legal, allow individuals to take part in a guided journey through a transformative healing process. Silo Wellness has carefully curated experiences to ensure that experiences are inclusive and can be enjoyed by everyone. From their women’s retreat to their 5-MeO-DMT retreat, individuals are invited to enter a safe environment where they can embark on a journey of self exploration. Psilocybin and ketamine are being used as part of these retreats and 5-MeO-DMT will be served at retreats starting in August 2021.

Privately held companies like Kaivalya Kollectiv and Behold Retreats also specialize in psychedelic retreats. Kaivalya Kollectiv currently has locations in Mexico and Costa Rica and even formed a partnership with Silo Wellness, providing them with access to safe 5-MeO-DMT treatments.

“When used properly, 5-MeO-DMT can be one of the most powerful tools known to man, allowing participants a brief yet intense mystical experience,” said Joël Brierre, founder and CEO of Kaivalya Kollectiv. “We are excited to partner with fellow pioneers of the psychedelic industry like Silo Wellness in expanding the resources and tools available to assist people on their journeys towards greater enlightenment and enhanced self-actualization.”

In therapeutic settings, psychedelics are usually taken under the supervision of professionals who ensure that the experience is comfortable and meaningful. Silo Wellness is unique in that they are one of the only publicly traded companies with a business model that focuses on retreats and the administration of drugs rather than strictly producing them. In contrast to the company’s developing drugs that undergo costly and time consuming clinical trials, Silo Wellness has developed a model that is generating revenue today rather than years into the future.

The opportunity: Investing in treatments designed to combat the growing mental health crisis

The investment opportunity in the psychedelic market is highly promising. Having controlled and regulated access to psilocybin and other psychedelics will allow for the positive medical benefits to be fully realized. As acceptance amongst investors and the general public continues to grow, more patients will likely seek out this type of treatment for a wide range of mental health issues.

Estimates show that the psychedelic market will grow to $10.75 billion by 2027. Many investors are eager for another opportunity similar to the substantial gains found in the cannabis sector, which saw publicly listed companies run up at a time when legalization efforts across a number of states were in full swing. The domino effect seen in cannabis legalization is likely to be mimicked in the psychedelic sector, and state by state legislative changes are likely just around the corner.

In the meantime, companies like Silo Wellness have taken advantage of the current environment by creating a business model that can both generate sustainable revenue in the present day as well as scale up to meet increased demand should legalization be on the horizon.

Takeaway

As public perception of controlled substances continues to improve, new research is conducted and the ongoing mental health crisis continues to worsen, the psychedelics industry could be poised for significant growth as new consumers turn to new forms of treatment to combat the mental health crisis.

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