Given the current state of the world, missing a significant shift in the zeitgeist when it comes to psychedelic medicine would be forgivable. But you’re on notice: A monumental change in our understanding of some mind-altering substances rapidly is becoming more apparent.
Psychedelics like psilocybin, LSD, MDMA, and ketamine, all of which have been dismissed as street drugs and bound by the chains of prohibition, are seeing a rebirth of sorts. This rise from the ashes follows clinical research pointing to them as potentially effective treatments for a wide array of disorders, so the once-stringent rules around their use are changing.
Considering cannabis followed a very similar trajectory in recent history, it’s hard not to see parallels.
The City of Denver decriminalized psilocybin in May 2019, and both Oakland and Santa Cruz, California, followed shortly thereafter. In November 2020, Oregon became the first state in the United States to eliminate criminal penalties for small amounts of all federally illicit drugs. On the same ballot, Oregonians voted in favor of legalizing therapeutic psilocybin use.
A cornucopia of rule changes around the sale, use, transport, and distribution of psychedelics is happening all over the U.S., suggesting sooner or later the substances may join the marketplace as acceptable products for medicinal or even recreational use. In light of this development, should cannabis cultivators and manufacturers consider adding psychedelic products to their long-term growth initiatives?
“It’s a good time [for psychedelics] in terms of momentum,” said Matt Maurer, chair of the cannabis law group at Torkin Manes LLP. “I think cannabis legalization has paved the way to give some momentum to other legalization or decriminalization movements.”
Although he believes other substances may follow cannabis’s lead, he’s not convinced they’ll take a chunk out of operators’ profits. “I view them as somewhat different products,” he said. “Cannabis is much more frequently and widely used, I would say.”
Nevertheless, Maurer believes adding psychedelic products to long-term business strategies could be beneficial in some cases. “For some, it does make sense,” he said. “The benefit to having a psychedelics division, if you will, is the experience cannabis companies have in a highly regulated substance industry. If you know about all the standard operating procedures, manufacturing, and regulatory hoops you have to jump through for cannabis, it’s going to be the same with psychedelics. You’ve got the playbook. The pages might be a little bit different, but you know how to read it.”
Lucas McCann, cofounder and chief scientific officer at cannabis and psychedelics consulting firm CannDelta, agrees with Maurer’s assessment. “It’s important to be able to quickly pivot in a new industry to new business ideas, and a lot of the equipment used in cannabis and the psychedelics sector is transferable,” he said. “For those cultivating cannabis and exploring cultivating mushrooms that contain psilocybin, this could be an easy business model to adapt to.”
However, he cautioned, companies must understand the business models for cannabis and psychedelics aren’t identical. “Companies hedging their bets on psychedelics in hopes of becoming an early mover in the new sector [must realize] it’s not even in its infancy,” he said. “There’s a risk of spreading yourself and your operations too thin.
“That said,” he added, “it’s wise to be able to pivot, and the psychedelics sector is getting a lot of attention from clinical research organizations and investors alike.”
For cannabis companies considering venturing into the space, McCann said the first step is determining exactly which sector best fits with their existing operations. “Do you want to synthesize? To cultivate? To test? To help patients get access to restricted medicine? Having a clear idea is crucial to understanding what equipment or retrofitting will be required,” he said.
He also pointed out the U.S. currently has no legal path to applying psychedelic therapies, with the exception of clinical research. However, a path may not be far off. Pharmaceutical company COMPASS Pathways and groups like the Multidisciplinary Association for Psychedelic Studies are pushing for expanded clinical research to explore alternative, psychedelic-assisted therapies.
“We have a similar issue in Canada where a patient that has a serious illness could get an exemption, called a Section 56 exemption, which works like a decriminalization model protecting the patient and the practitioner,” McCann said. “These exemptions are approved on a case-by-case basis.”
He added the model only permits possession and use by the end-user. “In cases where an exemption is granted, patients would not be able to acquire access from regulated sources. Instead, they would have to grow their own mushrooms or acquire them from the illicit markets,” he said. “And still, the suppliers or growers who were providing the medicine to the patient are not officially part of the exemption and could be stopped and subject to criminal prosecution.”
But in Canada, things are changing.
“With the new Special Access Program, patient approvals are now rapid and the products they can get are safe and regulated from licensed government dealers,” McCann said. “This is a very encouraging change for patients and for the industry. We have legal producers of magic mushrooms for these therapies, which are some of the same producers growing legal cannabis.”
Despite a few remaining regulatory tangles in Canada, Spore Life Sciences got a jump on the emerging psilocybin market. Cofounder and Chief Executive Officer Michael Zavet said the nutraceutical company based in Toronto focuses on functional mushroom formulations and already is “in the midst of a transaction with a psychedelic company.”
Zavet believes a long-term growth plan involving psychedelics certainly deserves exploring, but he cautioned cannabis companies to be aware of important differences.
“With cannabis, a lot of companies are recreationally focused, which is a very different business model than psychedelics,” he said. “In psychedelics, there is no recreational market — not yet, anyway.”
He added there may be a space for recreational psychedelics in the future — in fact, some companies foresee such a market developing soon, he noted — but the current model is primarily clinical- and research-oriented.
“In the U.S., there are a number of companies seeking Food and Drug Administration approval, including Mindmed, Cybin, and Atai. They are at various stages of clinical trials,” Zavet said. “The aim for these companies is to get their drugs federally approved and ultimately prescribed for the various conditions they target.”
He added cannabis companies considering entering the space must understand the clinical side of the business. “In cannabis, there are companies focused on the more medical and clinical part of the industry and, for those companies, it could make sense to pursue psychedelics,” he said. “If you are a recreational company betting on psychedelics as a recreational product, then you are probably some time away from that reality.”
Zavet believes an eventual recreational psychedelics market is a possibility, but it won’t develop as quickly as cannabis’s did. “There is more liability associated with [psychedelics], so legislators probably will not move as rapidly to look for a recreational market,” he said. “It’s also a smaller industry today. Even on the black market side, cannabis has always been pretty dominant relative to psychedelics.”
His advice? “I would say understand the investment you’re making. It’s a long-term investment,” he said. “Make sure the infrastructure is there on the clinical or medical research side, because it is a long game and fairly capital-intensive.”