Why psychedelics may be mind-changing for investors

The burgeoning industry appears to be destined for success, offering returns for early backers

Why psychedelics may be mind-changing for investors
Steve Randall

There was a time when most media talk of psychedelic drugs was confined to the tales of aging rockers, but now they are changing minds in different ways.

Following the surge in interest in the cannabis industry, where Canada was a frontrunner, the psychedelics industry appears to be in line for exponential growth.

Despite the muted performance of the North American Psychedelics Index, which dropped almost 4% in the second quarter of 2021, Canadian investors remained bullish on the industry according to Horizons ETFs survey of investors and advisors.

The 46% bullishness rating for psychedelics matched that of the more established cannabis sector, although advisors are more cautious at 34%, the same share as those that are neutral.

Meanwhile, Dentons Canada partner Eric Foster has seen strong demand for legal work relating to psychedelics.

“We’ve seen an absolute explosion of capital markets work focussed on the psychedelic sector,” he told Canadian Lawyer. “I would say Canadian capital markets over the last three to five years have been really focused on emerging markets, whether it is blockchain, crypto, eSports, cannabis, and now psychedelics.”

However, Foster noted that there are differences between the cannabis and psychedelics markets, not least that the use cases for psychedelics are focused on medicinal use, not recreational which has been a big part of the cannabis story.

He also told Canadian Lawyer, a sister title of WP, that institutional investors that missed out on early investment in the cannabis industry may be keen to put that right with psychedelics.

Market growth

Psychedelics use as a medicine is focused on the behavioural heath sector, forecast to grow to a US$240 billion industry by 2026, a 2.5% CAGR over the 2019-2026 period according to Acumen Research and Consulting.

The potential as a treatment for PTSD and anxiety make it highly desirable, especially at a time where mental health issues are escalating due to the pandemic.

The use of mushroom-based psilocybin-assisted psychotherapy appears to have strong support in Canada.

A survey by Nanos Research that was published by the Canadian Psychedelic Association found an approval rating of 82% for the use of psilocybin-assisted therapy for people suffering from an end-of-life illness.

However, the industry’s success – including frontrunners such as Compass Pathways and Cybin - depends on regulatory approval and more flexible legislation and will certainly not offer a quick return.