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The first wave of psychedelic-drug companies is preparing to go public on Canadian exchanges, with many of the entrepreneurs, bankers and promoters who were involved in the cannabis industry looking to recreate their early successes using a familiar playbook.

The first company to seek a listing in Canada, Mind Medicine Inc., begins trading on the NEO Exchange on Tuesday. Backed by former Canopy Growth Corp. chief executive Bruce Linton and celebrity investor Kevin O’Leary, Mind Med closed a $32-million financing round last week. A handful of other companies, pitching everything from psilocybin “magic” mushrooms to MDMA (ecstasy), are touring Bay Street, raising millions of dollars and lining up shell companies as go-public vehicles.

Over the past year, the collapse in cannabis stocks has left small-cap stock promoters looking for a new theme to pitch to retail investors, while independent investment banks and junior exchanges have been hunting for alternative ways to generate fees.

Even people set to benefit from a new crop of companies, however, are cautioning against the enthusiasm and hype which inflated the cannabis bubble between 2015 and 2018. Psychedelics are not legal for recreational use in Canada or the United States, and scientific evidence about the efficacy of psychedelic drugs for medical conditions such as depression and addiction is preliminary.

“I would be concerned that valuations don’t run away on these things,” said Richard Carleton, head of the Canadian Securities Exchange, a popular listing place for cannabis companies.

“Clinical trials take a very long time for the results to come through. These aren’t companies that necessarily are going to win gigantic pieces of market share in a short period of time to justify the kinds of valuations that may be thrown around,” Mr. Carleton said.

There is a range of business plans among the psychedelics companies. Some look like traditional exploratory drug plays. Mind Med, for instance, owns the intellectual property around a drug known as 18-MC, a synthetic form of the hallucinogenic drug Ibogaine, and is conducting clinical trials looking at the effectiveness of 18-MC in treating opioid and nicotine addiction. The studies, which are taking place in the U.S., are at an early stage and the U.S. Food and Drug Administration has not yet approved the use of 18-MC for medical purposes.

Other companies are taking a more aggressive approach, opening psychedelics-assisted therapy clinics, or promoting things such as microdosing, the trendy (and illegal) practice of taking small doses of psychedelics substances, not to get high, but supposedly to improve creativity.

"The first psychedelics company I sat down with was maybe two or three years ago, so they’ve been around for a while. But in the last maybe three or four months, we’ve had several companies come through our door raising capital,” said Elizabeth Staltari, managing director of health-care investment banking at Eight Capital Corp.

“Whether they all end up going public or not, I don’t know. But there are certainly companies out there looking for money, and it looks like there’s people willing to fund them," Ms. Staltari said.

So far, such companies have attracted more interest from U.S. investors, said Derek Ham, Canaccord Genuity Group Inc.’s managing director of capital markets origination. Canaccord led Mind Med’s private placement financing, and American investors made up between 85 per cent and 90 per cent of the most recent round, Mr. Ham said.

“The Canadian investor, institutional and retail, has had quite a tough time over the last six or seven months in the cannabis space. I think they’re quite nervous to answer anything that’s new,” he said.

While the sell-off in cannabis stocks has hit many Canadian retail investors as well as the Bay Street players who floated the legal marijuana industry, it has also created an incentive for people to find new opportunities. Canaccord, for instance, saw its Canadian investment banking revenue drop 28 per cent for the first nine months of its current fiscal year, compared with the previous year, largely owing to lower cannabis underwriting fees.

“I’m here because I can see a symmetry in the pattern,” said Mr. Linton, who became a director of Mind Med in September, after being fired from his position as Canopy’s CEO last July.

"The reason I was able to finance Tweed [which became Canopy] in 2013 is because the price of gold and the demand for extraction was low, so those people had to rotate their money somewhere,” Mr. Linton said.

“Had it been a boom resource market, I would have gone bankrupt. So there is always a benefit of having idle capital, and there's idle capital now," he said.

The approach of getting psychedelics companies public certainly resembles the early days of the cannabis space, with speculative ventures aiming to go public via the reverse takeover of mining shells, and early investors setting themselves up for massive returns.

The founders of Mind Med, for instance, collectively own 35 million Class B shares in the company, which they acquired last summer for $0.0001 a share. When Mind Med goes public, those shares convert into publicly trading common stock. The Class B shares are locked up for six months, meaning the founders will not be to sell their positions right away.

“Not everyone invests capital, people also found companies ... in Silicon Valley this is quite standard,” said JR Rahn, Mind Med’s co-founder and co-CEO, in response to questions about the Class B shares.

Whether the psychedelics trend builds momentum depends on the success of the first few companies that go public, Mr. Ham of Canaccord said. All eyes will be on how Mind Med trades this week – which may well prove choppy, given the broader volatility in the markets.

“Are we going to see more public listings? I have no doubt about it," said Jos Schmitt, CEO of the NEO Exchange.

“The only thing I truly hope is that we’re not going to see the same thing that happened in the cannabis space, where we’re suddenly going to see hundreds of corporates emerging that in fact are not driven by a true business,” he said.