Taking Psychedelics (Seriously)

What a trip.

Firstly, this article is for Vekica.

Before I can write this, I want to lay some groundwork. Please understand that nothing contained within this should be taken as investment advice, because it is decidedly not investment advice.

I am licensed, however, you are not my client. I have not looked at your financials, asked you anything about your appetite for risk, or even asked your name. As such you simply cannot be my client because I do not know you. I have not done my due diligence on you. Financial regulations talk about KYC rules-- I can’t K my C this way.

The other thing I want to get out of the way immediately: I will not be diving into the financials of these companies. This is specifically because I want you to do your own due diligence. If you were looking for a technical deep-dive analysis into balance sheets and 10Ks and 10Qs, you’re going to be let down. It isn’t fun for me to write about this from that angle. In my first draft, I did discuss financials, and when I read it back, you could tell I wasn’t interested in it, and had to force it out.

What I am going to do is write about something I’m passionate about. We’re going to start with some stage setting. I’m going to walk through a little bit of history, some policy decisions that have shaped the way we think and also explain why this is just now becoming a thing. After that, I’m going to talk about some companies and the interesting things they’re doing. Keep in mind, this isn’t only about mushrooms.

Now that that’s out of the way, let’s get to the drugs!

Do you actually know what psychedelics are? 

There’s a lot that is misunderstood about the psychedelic. Most of the things you believe you know are more than likely myths, urban legends, and shrapnel of facts that are half-truths. Fallout from the war on drugs.

Here are some of those myths. None of them are true:

• No one has ever believed they were a glass of orange juice who couldn’t be spilled or they would die

• No one has ever died from taking too much LSD, or Psilocybin [source]

• No one has seen the Hollywood version of a trip:  there are no leprechauns running around, the walls don’t melt (though they can breathe), and you don’t see your best friend as a human-sized ice cream cone.

Here are some things psychedelics that are true, however:

• Psychedelics are being studied as a potential therapy for a multitude of disorders, including but not limited to OCD, PTSD, alcoholism, addiction, depression, and cluster headaches. 

• Psychedelics promote neurite growth, and synaptic plasticity.

• Psychedelics have been shown to have anti-inflammatory properties, and may have the same therapeutic effects on humans that they have on animals - this may help with things like asthma, cardiovascular disease, and diabetes. 

To begin, there is more to classification of hallucinogens than “it makes you see things”. There’s two main ‘types’: on one hand you have your classic psychedelic, and on the other you have dissociative drugs like PCP. Both will make you hallucinate, but I’m not going to spend time talking about dissociative drugs (with one exception) because they’re an entirely different animal. There are three main sub-classes of psychedelics: tryptamines, phenethylamines, and lysergamides.  Not all psychedelic substances are created equally. Not all are created, for that matter. 

Tryptamines are present in plants, fungi and animals. You have some in your brain, and some more in your stomach. These drugs act as non-selective serotonin receptor agonists - basically, they bind to serotonin, in a similar fashion to MAOIs. Tryptamines have a tendency to evoke serotonin and dopamine releases over norepinephrine. Some examples of tryptamines found in nature are psilocybin (psilocin), DMT, and 5-MeO-DMT. Psilocybin is found in nature. There are more than 200 types of fungus that contain the drug. The most potent concentrations are generally found in mushrooms. 

The second group of psychedelic is phenethylamines. Phenethylamines are stimulant, entactogenic, and hallucinogenic substances. Some are found naturally, while others are synthesized compounds. These are actually found in humans and plants. These drugs instead bind to different receptors, which play roles in regulating dopamine, serotonin, and norepinephrine. Mescaline (found in the Peyote cactus, and also in some members of the bean family) is a phenethylamine. MDMA is another well known phenethylamine, though it’s not known for being hallucinogenic as much as it is known for being entactogenic. Entactogens are psychoactive molecules that enhance empathy and emotional closeness when ingested. The lesser known 2C series and its derivatives (like 25i) are also phenethylamines. 

The third, and probably the most well-known, is lysergamides. These are amides of lysergic acid, and are not found in humans, but are found in nature. LSD is the most famous lysergamide. Lysergic acid is a precursor for a wide range of ergoline alkaloids, which are produced in many plants-- namely Morning Glories and Hawaian baby woodrose. If you’ve ever read The Anarchist’s Cookbook, there’s a recipe for extracting LSA (a cousin of LSD) from seeds.

While these three classes have remarkably similar effects in that they will alter perception, they have substantial differences. Tryptamines, for example, are usually what you’re thinking of when you think classic ‘trip’; increased empathy, visual distortions (breathing, wiggling, melting), closed-eye hallucinations and familiar patterns, and ego death are all hallmarks of the tryptamine experience. Some phenethylamines are more hallucinogenic than others. Some won’t make you hallucinate at all.

Several studies have attempted to define a phenomenological structure of effects, but there’s no classical ‘taxonomy’. Think of cannabis: this is somewhere in between the “indica/hybrid” dichotomy and “here’s every individual terpene known to man”.

Psychedelics have always been a part of the human experience 

Psychedelics have been a part of society for thousands of years. Take, for example, Peyote: Peyote has been used for at least 5,700 years by indigenous peoples in Mexico. European conquerors noted the use of Peyote on very early contact, most notably by the Huichols in Mexico. 

To go back even further into the history of humanity, our love affair with seeing things that aren’t there is prehistoric. Cave drawings and murals in modern-day Spain and Algeria imply psilocybin mushroom usage predating recorded history. The Spanish first documented their use in the 16th century - and in Mesoamerica, mushrooms are known to have been consumed in spiritual ceremonies long before the Spanish ever arrived.

Peyote doesn’t only have an ancient history of use in South America. The cactus was also commonly used in Aztec religious ceremonies. These practices spread throughout the North American continent, and by 1880 both the Kiowa and Comanche peoples in North America had incorporated it into ceremonies, religious and otherwise. 

Bad Policy has also always been a part of the human experience

Throughout the 1950s, the potential therapeutic effects of hallucinogens were studied in the United States and in Europe. This changed fairly abruptly. Mescaline, along with a whole host of helpful compounds like psilocybin, were legal until about 1966 in the USA. These first laws prohibited production, trade, and ingestion of hallucinogenic drugs. Later, the Comprehensive Drug Abuse Prevention And Control Act, the worst part of the war on drugs, categorized all psychedelics as Schedule 1 hallucinogens.

Psychedelics didn’t become immediately off-limits by being labelled as ‘Schedule I’ by the Controlled Substances Act (Schedule I drugs are illicit drugs that are claimed to have no known therapeutic benefit) - it was after the Controlled Substances Act became law in 1970 that the main agency providing grants for research on psychedelics, the National Institute of Mental Health (NIMH), stopped funding studies into their therapeutic potential. At the same time, getting approval from the DEA to possess these drugs, even for preclinical studies, became nearly impossible to obtain.

The outlawing of drugs during the ‘60s is not random, nor is it by coincidence. In the ‘60s, these drugs became popular, and much easier to get. A lot of government authorities did not like this. The standard arguments included reasoning like “lower moral standards” and “negative health effects”, despite the fact that these drugs had not been studied extensively.

The studies that were done were mostly horrible ethical violations, given to subjects in extremely high doses, and without consent. The CIA had a project named ‘MKULTRA’, which tested psychedelics as a method of mind control. These studies did a lot of damage to a lot of people, and weren’t particularly scientific. They gave unknowing people in universities, hospitals, and prisons in both the US and Canada massively high doses of LSD against their will, and the full extent of the damage done is still unknown.

By the time we reached 1966, the CIA had a plan in which they slipped “P-1” (LSD) to people they deemed as socialist, or enemies of the state. Simultaneously, the same people were stealing doses for themselves and using them recreationally. Both the CIA plans and the abuse by insiders led to high-ranking military and CIA officials labelling LSD as a threat. After this, psychedelic research was all but abandoned until the ‘90s, and even those studies were few and far between.

We still have a long way to go. Among young adults, the perceived risk of trying LSD once or twice in their entire lifetime is higher than that of binge drinking weekly[source], which is breathtaking. The serious side effects of LSD and other hallucinogen use is extremely rare. Alcohol, on the other hand, is directly responsible for more than 88,000 deaths per year in the US alone.

The psychedelics industry is in its infancy, but isn’t entirely alien

The first American decriminalization of psilocybin came in May 2019, when the city of Denver, CO decriminalized mushrooms. In January of 2020 Santa Cruz decriminalized mushrooms and in September of 2020 Ann Arbor, Michigan followed suit. The state of Oregon has most recently been in the headlines, passing full-on legalization of psilocybin for mental health treatment. 

There is growing enthusiasm for what people have deemed as the ‘shroom boom’, or the ‘mush rush’. The most common comparison is to the newly-legal cannabis industry, which has gone from Schedule 1 to multi-billion dollar industry in a few short years. Cannabis, while a decent comparison, is actually not what I think is the right one.

Cannabis as an industry is treated as a ‘sin’ sort of good, and is usually compared to alcohol. I don’t feel that that comparison is entirely fair as alcohol is not prescribed for any sort of medical treatment while cannabis has many medical uses. This is slightly better, but no one is putting Tilray in their Healthcare fund. 

The comparison also misses a couple of key differences. The budding cannabis companies were defined in the beginning by their ability to manufacture, produce, and distribute the most product in the shortest amount of time. The psychedelics leaders will probably be based around their drug development pipelines, data, and intellectual property. 

What industry does this sound like to you?

• Small caps with terrible financials that are considered plucky upstarts, putting all their resources and efforts into one drug which may or may not pass the FDA trial stage.

• Hundreds of experimental-- at the edge of acceptable (but very clever)-- constantly in need of more research, yet eternally “promising” drugs.

• Small clinical studies, done in any number of settings that someone on the internet will find any number of reasons to fault.

The baby psychedelic industry deserves a real comparison. If you zoom out, the “Shroom Boom” parallels the biopharmaceutical industry quite well. 

One more thing to really drive my point home: the psychedelics industry will also have an opponent that the cannabis companies largely didn’t in that the success of any of these companies will come only after numerous FDA approvals and successful clinical trials.

On the bright side, in 2018 the FDA granted Breakthrough Therapy Designation for psilocybin-assisted therapy for treatment-resistant depression. In 2019, the FDA granted Breakthrough Therapy Designation for psilocybin therapy treating major depressive disorder. The point I’m trying to make here is that psychedelics as an industry aren’t a cannabis, tobacco, or booze newcomer. The shroom boom is the new biopharma kid on the block, only with a flashier headline. 

This isn’t a bad thing. After all, this is a brand new field and there’s brand new materials with which to make brand new cures. Biopharmaceuticals are allowed to get away with terrible financials for a lot longer, which is lucky for the budding psychedelic industry, because R&D is expensive and waiting for drugs to get to any level of approval takes a while. Investors in Pink Sheets companies play by different rules than they do in ones listed on the Nasdaq, The biopharma crowd is not only used to it, they forgive it. 

So… what are these companies? 

Almost all of the stocks I’m about to mention are Pink Sheets. Investors here know that they’re basically in the Wild West. They get absolutely no respect, and they’re fine with it-- and most of the time it’s for a reason! Tell anyone that doesn’t regularly invest in penny stocks that you’re in penny stocks, and you’ll get less respect than a blown up French derivatives desk. 

As I told you before, this really isn’t investment advice. This isn’t even advice. I would not put a single dollar on this I wasn’t comfortable losing. I’m very passionate about this as a cause and I’ve left the financials and deciding which companies are the “best” as an exercise for the reader. A final warning: information is sparse. It’s much harder to do a clean analysis of a company that doesn’t really have to show you very much. This is also why I am not diving into the financials. If one of these interests you, you shouldn’t be just taking my word for it.

Now that that’s all settled, I’m going to talk about a handful of players in the space that I think are doing some interesting things. I’m more interested in their possibilities and their potential and I’ve done this just as an overview to shed light on the space.

The first company I want to touch on is Compass Pathways [ticker CMPS]. Compass Pathways is British, backed by Peter Thiel, and brands themselves as a “mental health” company focused on only one thing: treatment-resistant depression treatment with psilocybin.

Compass Pathways aims to treat treatment-resistant depression with a drug called COMP 360. COMP 360 is 10mg and 25mg of synthetic psilocybin, which is given to clients in conjunction with guidance through their trip and subsequent follow-up therapy.

So far Compass has run phase one trials which reportedly had no bad side-effects. Currently they’re trying to run phase two, which they need 216 patients with treatment-resistant depression. This study is scheduled to come out in 2021. 

This sounds great, but there’s an issue with the Phase II trials: the trial began in January of 2019 and they still haven’t had 216 people sign up. This isn’t because people are scared. The issue is that in order to be in the study, you have to taper off your current meds and remain off of them for weeks in order to get one dose of COMP360 (which may not help). That’s asking a lot of somebody who is already suffering. 

The real problem is that if COMP360 turns out to be no good, they have no other drugs in the pipeline. They aren’t doing any other research-- it’s really do or die for Compass Pathways. That being said: things are looking bright because this isn’t the only study that’s really being done.

Compass has partnered with at least three different hospitals for different reasons. Among these is the Aquilino Cancer Center at Adventist Healthcare Shady Grove Medical Center in Maryland. In this partnership, they are looking to help treat anxiety in depression in cancer patients with psilocybin (via COMP 360).

Compass has another research study partnership being done right now by Maryland Oncology Hematology. This study enrolled 30 patients with treatment resistant depression and gave them the 25mg dose of COMP360, which is what patients in the official Stage II trial are taking. This study is apparently due to wrap up in January, which may bring some good news.

Compass Pathways is also partnered with the Grady Trauma Project, based at Grady Memorial Hospital and Emory University School of Medicine in Atlanta. The Grady Project is focused on PTSD and the clinical and physiological implications of trauma. In this partnership, Compass is supporting research that investigates perceptions of psychedelics in underserved groups, particularly racial and ethnic minorities to help inform best practices.

Beyond these partnerships, Compass has a program in which they offer research-grade psilocybin for free to those interested in doing Investigator Initiated Studies in exchange for the right to use their data. This is clever from a cost perspective and a branding perspective: it’s wonderful PR that patients get the materials for free-- and no one has ever turned down good publicity! The move is also smart cost-wise: they don’t have to do all of the studies themselves and extracting the psilocybin is fairly cheap and easy to do. This, along with the big backers, gives Compass a lot of breathing room to really focus on what it is they want to do.



The second company I want to point out is Champignon Brands [ticker SHRMF in the USA, SHRM in Canada]. Champignon is a Canadian research-driven company specializing in ketamine treatments for depression and other mental health conditions as well as delivery platforms for other health products. They focus on researching rapid-onset treatments aimed at “improving the quality of life for people with PTSD, depression, and addiction.”

Champignon has a little bit wider and weirder net than Compass that focuses on a two-pronged sort of approach. The first one of those is a little out there--which is part of what makes it interesting.  Under the brand name ‘Vitality Supertea’, Champignon is making and selling mushroom-infused beverages. Their current offerings are unique: they have some unexpected flavors like cordycep and hibiscus, green ginseng and lions mane, and a reishi ryobus based tea. This brand tries to appeal to a younger generation, which includes doing a lot of their marketing on Instagram and selling t-shirts and other various branded apparel on their website.

Another interesting (and more compelling) thing is that Champignon is expanding their rapid-onset treatment for major depressive disorder by beginning to offer esketamine treatment at their clinic. Ketamine has been declared a breakthrough treatment for depression by the FDA, and in May of this year Canada approved esketamine for the treatment of MDD.

(Five seconds on Ketamine)

Let’s talk for a second about Ketamine, because this is my one exception to the “not touching on dissociative drugs’ rule. Ketamine is what people are talking about when they say “horse tranqs”. How’s that for coming on strong?

Ketamine, in reality, is a medicine that’s on the WHO’s Model List of Essential Medicines [seriously]. Regardless of how you feel about the WHO, this list is of medications considered to be most effective and safe to meet the most important needs in a health system. It is also on the WHO’s Model List of Essential Medicines for children. Countries use these lists to guide their own lists of essential medicines. It is primarily used as an anesthetic and generally produces a sort of trance-like state that provides pain relief, sedation, and amnesia among other things.

Ketamine was used extensively during the Vietnam War due to its relative safety as an anesthetic. Adjunctive to morphine-- or on its own-- ketamine reduces morphine use, pain level, nausea, and vomiting after surgery. Ketamine is most beneficial for surgical patients when severe postoperative pain is expected and is also used for opioid-tolerant patients. It is not the horse tranquilizer that D.A.R.E propaganda would like you to believe.

To step back off my soapbox and continue talking about Champignon: Champignon’s clinic, the Canadian Rapid Treatment Center of Excellence (the CRTCE mentioned above) is a multi-disciplinary community clinic offering rapid onset treatments for depression, substance abuse disorders, PTSD, and alcohol abuse. The clinic opened in Ontario as the first one in Canada. Last month they announced they were opening a second location: a new clinic in downtown Toronto. This is great for them, especially in light of esketamine being approved as a breakthrough treatment. 

The third interesting name in the space I felt like writing about is Revive Therapeutics [ticker RVVTF in the USA, RVV in Canada].  Revive has developed a pipeline with some interesting things contained within it. Holistically, Revive takes a little bit of a different approach than the first two companies I mentioned-- their angle is developing drugs for orphan disorders and rare diseases.

Revive is doing work in a couple of different spaces. Part of this portfolio is cannabinoid pharmaceuticals. This arm focuses on rare inflammatory diseases, and was granted FDA Orphan Drug designation for the use of CBD to treat auto-immune hepatitis (liver disease) as well as the use of CBD to treat ischemia and reperfusion injury from organ transplantation. They’re working on some other neat stuff within this portfolio, including a shrimp-based delivery system that has blood-clotting and anti-microbial properties to it.

Revive recently acquired Psilocin Pharma Corp. and is using this acquisition to develop psilocybin-based compounds that take advantage of regulatory incentives awarded by the FDA: Orphan Drugs, Fast Tracks, Breakthrough Therapies, and Rare Pediatric Disease designations. In addition, they are working on novel delivery mechanisms: sublingual sprays, gel caps, and oral/transmucosal strips. This is interesting because drugs delivered via these methods have much higher bioavailability and come on much quicker: ie. you don’t have to eat it and wait to metabolize it. This is one thing Revive has patented or filed for a patent on; their IP link lists 12 pending or issued patents.

The last, and probably most varied company on my small list is Mind Medicine; Mind Med for short [ticker MMEDF in the US, MMED in Canada]. Mind Med is probably the company with the strongest development pipeline. They’ve got quite a few different patents (at least 8 that I could find) in different areas with a variety of drugs. Among the drugs they’re studying are psilocybin, LSD, MDMA, DMT, and an ibogaine derivative called 18-MC. 

Recently, Mind Med announced that they’ve had successful meetings with the FDA for Project Lucy, which is a project aimed at studying LSD’s effect on cluster headaches. They’ve also just finished Phase I trials of a study on LSD and depression, and a third study where they’re working on micro-dosing as a potential treatment for ADHD. 

Mindmed is also working on an LSD Neutralizer-- which, in my opinion, is really cool. The LSD Neutralizer is designed to shorten and stop the effects of an LSD trip during a therapy session. The goal of this is to reduce the acute effects, and shorten the hallucinogenic effects. In essence, they’ve built a “turn it off” switch.

It’s still in the works, but this alone would be a game-changer. A lot of the fear and panic involved in “bad trips'' is due to the idea that the experience will never end, and they’re stuck like this forever. People also have anxiety about the idea of taking LSD because of the fear of a “bad trip”. An off switch could help reduce the anxiety surrounding both the fear and the bad trip, opening people up to alternative treatment that may help them.

On top of all of that research, Mind Med has been able to get exclusive licenses and exclusive rights to more than seven ongoing Phase 1 trials with drugs like for DMT, MDMA, LSD, and psilocybin. They have started a collaboration with University Hospital Basel’s Liechti Labs (the birthplace of LSD), which gives them access to more than ten years of psychedelic research. MindMed aims to use the University’s lab as their research arm, which could bring them new projects for years.

Where I think Mind Med has the best advantage is actually not the psychedelics just yet. They’ll have a big advantage with the ibogaine-based drug 8-MC, because 8-MC is actually not federally illegal. The ibogaine derivative drug has been shown to help people with addictions, and has been especially effective with opioid addictions.There’s much less risk to it than any of the things I mentioned above as it doesn’t have to navigate the complexity of legality in this brand new market.

Just to emphasize how varied Mind Med really is, here’s a page from their investor deck:

I won’t pretend there aren’t flaws to Mind Med, but these risks apply to the entire space. While all of these little players are doing quite a lot of very inventive things, it’s only a matter of time before Bigger Pharma takes notice and comes into the space. As a whole, there’s a lot of R&D and a lot of trials but not a whole lot of revenue happening yet. These clinical trials are not only expensive, they’re lengthy, and all for a drug that may not make it to market in the end.

The Pharma Empire Strikes Back

Like David versus Goliath, all of these companies are going head-to-head with established antidepressant manufacturing giants like Pfizer, Eli Lilly, Merck, GlaxoSmithKline, Teva, Bristol Myers Squibb, etc. These companies not only know what they’re doing, but they know they’re being disrupted and they won’t let it happen easily. As a matter of fact, they’re already here: Johnson & Johnson manufactures and sells Spravato. If you have a Google Home, ask it to tell you about Spravado. If you don’t, click here.

In spite of Big Pharma’s best efforts to limit this new market, it has the potential to be huge. Data Bridge Market Research forecasts the psychedelic pharmaceuticals market could grow to almost $7 billion in 2027 from $2.07 billion this year. An analyst for Canaccord wrote in a March research report that the industry could eventually reach $100B. Sales of antidepressant drugs totaled $14.1 billion, according to a study by Allied Market Research, which said that it expected those sales to rise at a compound annual rate of 2.1% through 2023.

If psilocybin is found to be safer, more effective, and less addictive than many currently available antidepressants there’s a massive market, full of people who are really suffering. There are an estimated 100m people worldwide with treatment resistant depression. 7% of Americans a year have a severe depressive episode which deeply impacts their ability to work, maintain close friendships, or really interact with their family.

It wouldn’t be birb without philosophical implications, right? 

I’m going to get on my soapbox for a moment, because this is my article and I can do what I want. Let’s address legality and ethics. I’m not sure how you made it this far in the article if you’re uncomfortable or don’t like the prospects here, but let’s examine it for a moment: 

If you didn’t know a drug was ever illegal, would you care?


Have you ever looked up the history of your girlfriend’s antidepressant? What about your friend’s mom’s mood stabilizer? We know next to nothing about the history of these drugs and we willingly take them. Benzodiazepines are twice as dangerous as LSD and yet 30 million Americans are prescribed them a year. If you were suffering and there was a new cure for you, would you mind where it came from?

The paradigm shift towards drugs as a moral hazard is more recent than the Space Race. I’ll save you the disbelieving Google; the Space Race started in earnest in 1955. Sputnik 1 was launched in October of 1957. The Controlled Substances Act, Title II of the Comprehensive Drug Abuse Prevention and Control Act was passed in 1970.

Ketamine is already used in pediatric care. We don’t all shun morphine when it’s used in the hospital, even though it’s made from poppies and can alter your perception so much that you no longer feel pain.  We don’t shun the car accident victim taking daily opioids in order to function in society.

What’s different about a mushroom dose via pill? If it cures depression, if it eases cluster headaches, if it truly can help break addictions, and the FDA says it’s safe? What’s so bad about giving MDMA to shell-shocked men who come home from wars they shouldn’t be fighting with PTSD? Who is hurt by the assault victim undergoing MDMA therapy so that she can go outside again? Can you tell me who is harmed if an opiate addict breaks their addiction before it kills them (Aside from the Sackler family)?

Even the harshest utilitarian would agree that this seems to be a net positive. A relativist might not understand why this was illegal to begin with. It seems cruel to be of the mind that altered perception is something that should be kept away from the people it could heal, because the government in the 1960’s felt it added to moral decline and civil unrest. 

If you’re looking for a Wikipedia rabbit hole to fall down, start with PiHKAL (or TiHKAL).