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Interest in the medical use of psychedelics increasing

Venture capitalists high on magic mushrooms
Perry Chua, chief creative officer for NeonMind Biosciences Inc., a company pursuing research into the medical benefits of psychedelic drugs | Chung Chow

Psychedelics aren’t just for Woodstock anymore.

In a quest to fill a seemingly insatiable appetite for new markets and after witnessing the success of the cannabis industry, many venture capitalists are looking for investment opportunities on the frontiers of research into psychedelic drugs.

“Right now there seems to be a tremendous amount of interest in getting these ideas up, running and funded,” said Robert Tessarolo, president and CEO of NeonMind BioSciences Inc. (CSE:NEON). “There’s a lot of wind in the sales of this industry, money flowing in, capital flowing in.”

Psychedelics are being used to treat health issues ranging from post-traumatic stress disorder to obesity. Proponents claim that the way psychedelics affects users’ thinking can allow patients to confront deep subconscious issues and address the root of the problem.

“Pharmaceutical discovery and development are global industries, so the potential business case is very attractive to junior, boutique-based pharma development companies and big pharma, too,” said Calum Hughes, CEO of Kelowna-based Allied Corp.

The industry is forecast to grow to US$6.8 billion in North America by 2027 according to Data Bridge Market Research.

Tessarolo is the former CEO of Vancouver-based Mind Medicine (MindMed) Inc. (Nasdaq:MNMD). In early 2020, MindMed became the first psychedelics company to go public, and in a little over a year, more than a dozen others have followed suit. From September 2020 to January 2021, psychedelic stocks raised more than US$500 million.

Payton Nyquvest, president and CEO of Vancouver-based Numinus Wellness Inc., said the rising entrepreneurial interest stems from increasing concern over mental health paired with doubts about the effectiveness of many current medicines and treatments. At the same time, more relaxed legislation surrounding controlled substances is allowing for more research into beneficial uses of illegal drugs. The company is expanding its Nanaimo facility, which is licensed under Canada’s Controlled Drug and Substances Act, to produce a variety of psychedelics, including LSD, MDMA, DMT, ketamine and psilocybin, the hallucinogenic substance found in psychedelic mushrooms. Hughes said that while cannabis legalization enabled physicians and scientists to research the benefits of cannabinoids, it also more recently allowed them to look at psilocybin’s medical benefits.

Tessarolo said the resurgence of research sparked entrepreneurial interest in psychedelics as a legitimate life sciences enterprise, under a more receptive regulatory regime willing to provide special status for psychedelics and, in one case, even approval for use.

While relaxed regulations for cannabis helped open the door for psychedelic testing and acceptance, Tessarolo insists this isn’t Cannabis 2.0. For decades, there was a large, grassroots cultural movement around cannabis that touted the benefits of medical marijuana as well as the negative consequences of criminalization. Medical marijuana was largely seen as a step towards broader legalization. The same can’t be said for psychedelics. Even though psychedelics have permeated popular culture, there aren’t annual demonstrations for mushroom legalization. Instead, companies are leading the decriminalization effort by seeking Health Canada and U.S. Food and Drug Administration (FDA) approval in a way more akin to the process for traditional pharmaceuticals.

Tessarolo said his company and others like the pharmaceutical paradigm, and he doesn’t think broader legalization is needed.

“Ultimately, we believe at NeonMind that the greatest chance that psychedelics have to affect the largest number of patients is with strict regulation through the FDA or Health Canada,” said Tessarolo. “We don’t see this as being a legalization effort.”

But not everyone agrees.

Nyquvest said that a patient’s access to new treatments should be prioritized. And while the pharmaceutical model may work for synthetic drugs like MDMA, Nyquvest said he is concerned that applying the model to naturally occurring substances could raise corporate intellectual property concerns above patients’ interests.

“These are molecules that have occurred in nature for tens of thousands of years, and we need to really look at what accessibility looks like. You look at the amount of people suffering, there’s no shortage of ‘market’ that is desperately needing new treatment, so I think that needs to be the focus of all companies in this space.” •