The mere mention of
magic mushrooms, ecstasy or ketamine is enough to send parents of teenagers
into conniptions. But are these so-called party drugs poised to follow cannabis
into the realm of a medical treatment within a legitimate listed sector?
As a likely precursor to more local action in the
(mind) expanding field, cannabis play, Creso
Pharma (CPH) this month said it would acquire the privately-owned Nova
Scotia based Halucenex Life Sciences.
Capitalising on the 21% share bounce after the deal
was unveiled on March 15, Creso has embarked on a capital raising … as you do.
As its name implies Halucenex is delving into hallucinogens
as a therapy for mental health conditions such as hard-to-treat depression and
post traumatic stress disorder (PTSD).
Initially Halucenex is focused on psilocybin – a.k.a.
magic mushrooms – having procured a stash of the synthetic variety to undertake
a clinical trial when it obtains regulatory clearance to do so.
Worth an initial $7 million or so, Creso’s mainly
scrip purchase means the company becomes the first ASX exposure to hallucinogens,
although it remains predominantly a cannabis company.
In the US and Canada already there are several large listed
pure-play psychedelic stocks. As with cannabis five years or so ago, the
regulatory landscape is messy although pockets of liberalisation are emerging.
According to advocates of medicinal usage, psychedelic-assisted
psychotherapy has been around for thousands of years. In the 1970s, MDMA
(ecstasy) was reputedly used in 1970s counseling sessions to bring the loving
feeling back into vexed relationships.
The trouble is, hallucinogens became synonymous with
the counter-culture of the late 1960s and 1970s, exemplified by Dr Timothy
Leary’s exuberant advocacy of LSD.
With no intention of joining Dr Leary in turning on,
tuning in or dropping out, President Nixon declared such hallucinogens a schedule
one banned substance – the highest level of prohibition.
The reputation of MDMA (‘molly’ or ecstasy) became
tainted by the 1980s party scene and medical research efforts went cold until
2017, when the US Food and Drug Administration (FDA) granted ‘breakthrough
therapy’ for the use of MDMA to treat PTSD.
The agency has also accorded the same status to
psilocybin for treatment- resistant depression and major depressive disorder.
In essence, the therapies can be used ahead of approval in strictly controlled
A legal veterinary anaesthetic and an illicit party
drug, ketamine has been approved by the FDA as a modified nasal spray for
treatment-resistant depression, administrable only in the clinic.
Exploiting a grey area of the law relating to off
label usage, hundreds of “wellness centres” have sprung up across the US
offering ketamine infusion sessions for up to $US1,000 per session.
Locally, hallucinogenic medicines have enjoyed the
lively advocacy of Mind Medicines Australia, a not-for-profit body run by
former investment banker Peter Hunt and wife, opera soprano Tania de Jong.
So far, the Therapeutic Goods Administration has not
been singing the same tune. In an interim decision last month, the agency opted
not to downschedule psilocybin and MMDA from a schedule nine (prohibited)
substance to schedule eight (controlled).
A final ruling is due on April 22, but don’t hold
your breath for an about face. The agency opined that while psilocybin and MDMA
therapies “may eventually prove to be safe and efficacious”, the evidence to
date was not strong enough.
Hunt points out the current “absurd” situation by
which Australian psychiatrists can obtain approval through the TGA’s special
access scheme, which allows administration of unapproved drugs – even
controlled ones – on a patient-by-patient basis.
But the “prohibited” status means the substances
can’t be legally procured here, so in reality special access usage is not
MMA argues there is ample data from overseas trials
to support usage in Australia on a case-by-case basis, “as occurs in other jurisdictions such as Canada, the US, Israel and
American investors aren’t waiting for the regulators’ full-hearted endorsement
and are tripping into the listed psychedelic exposures.
Listed on Canada’s NEO Exchange, MindMed Inc is
carrying out three clinical trials for anxiety, opioid withdrawal and adult
attention deficit disorder. The latter uses a non-trippy version of LSD, which
is not quite what the doctor – Dr Leary – ordered in the hippy era.
The $1 billion-plus million market cap stock has the
backing of businessman Kevin O’Leary – as seen on the American version of Shark
Tank – and pot stock pioneer (and Creso Pharma adviser) Bruce Linton.
The Vancouver based TSX listed Numinus Wellness Inc
is running psilocybin and MDMA trials and is the only party granted a licence
by Canada Health to procure “naturally sourced sustainable psilocybin” (magic
Listed on an over-the-counter (OTC) market, 20/20
Global proclaims its “evidence based research”, but also has a subsidiary that
runs global “psychedelic retreats”.
The mind boggles …
Also Vancouver based and OTC listed Champignon Brands
is researching the use of psilocybin and ketamine derivatives to treat PTSD and
The company also faces a potential class action over
allegations of misleading market disclosures.
As with medical pot, there’s deep anecdotal and
historical evidence of the efficacy of hallucinogens.
Given prevailing community attitudes and the dearth
of formal clinical trial data to date, we can’t see the regulators leaping to
approve new therapies.
Then again a decade ago few would have foreseen
cannabis as a mainstream investment, for both medical and – in many
jurisdictions – recreational usage.
Disclaimer: The companies covered in this article (unless disclosed) are not current clients of Independent Investment Research (IIR). Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense.