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While cannabis takes a breather from the capital markets rollercoaster ride that has characterized that sector lately,psychedelics are in the news lately and all the rage in thecapital markets. Junior pharmaceutical companies, specializedclinics and Caribbean retreats are common water-cooler topics ofconversation these days among capital markets investors andobservers alike. To be sure, momentum is building and publicperception is changing in Canada and in some parts of the UnitedStates toward reducing barriers to access for psychedelics. Lowenforcement priorities in Denver, Oakland and Santa Cruz, as wellas Oregon's proposed laws to regulate cultivation,manufacture and sale of psilocybin products for medical purposes,broadens the discussion. Today's momentum has been a longtime coming particularly as a viable new option for mentalhealth treatment.
Psychedelics, entheogens, entactogens and dissociativeanesthetics are a broad group of substances that are intenselypsychoactive, with effects including visual and other illusions,mystical-type experiences, synesthesia, intensified emotionalstates and other disorienting effects. Duration of these effectsmay range from 15 minutes or less to more than 24 hours. The termsfor these compounds and the plants or fungi they are sourced fromvary depending on the perspective and context. For simplicity, weuse the term familiar to most psychedelics as ablanket term for psychedelics, entheogens, entactogens anddissociative anesthetics.
Psychedelics are not illegal. That said, many psychedelics arescheduled in the Controlled Drugs and Substances Act (theCDSA), making them controlled substances and unless otherwiseauthorized, possession and manufacture of any controlled substanceis prohibited. Most psychedelics that are controlled substances arewithin a certain class of controlled substances calledrestricted drugs. Investigators for clinical trials,preclinical studies and other researchers may possess restricteddrugs through exemptions issued under the CDSA. Authorization tomanufacture, compound, package and otherwise work with restricteddrugs is available through a dealer's licence issued underthe Food and Drug Regulations (the FDR).
Like any drug substance, a drug product including a psychedelicsubstance as an active pharmaceutical ingredient (API) is saleableunder the FDR once a drug identification number (DIN) is issued byHealth Canada for use of the drug product in association with agiven therapeutic indication. Clinical evidence establishing safetyof a drug product and efficacy for treating a given condition isrequired for Health Canada to issue a DIN for the drug product. AnMDMA drug product is on track to receive a DIN for use in treatmentof post-traumatic stress disorder (PTSD) and the equivalentregulatory approval in the United States within the next two tofour years. A psilocybin drug product for treatment-resistantdepression appears to be close behind.
Administration and application of psychedelic drugs divergesfrom previous approaches to the use of medication for treatment ofmental health disorders. This point of divergence changes theeconomics of cost recovery for clinical trial expenses after beingissued a DIN. Drug products traditionally used in treatment ofmental health conditions are taken daily and unsupervised at dosageranges intended to suppress symptoms of mental illness and tominimize overtly psychoactive effects. In contrast, in clinicaltrials MDMA and psilocybin are typically administered a smallnumber of times at strongly psychoactive flood doses in asupervised therapy setting. Similar approaches will be followed inapplications using flood doses of LSD, and for use of MDMA andpsilocybin for other therapeutic indications. Clinics thatcurrently administer racemic ketamine off-label for treatment ofdepression follow a similar model.1
The long duration of the effects resulting from a flood dose ofmost psychedelics increases the time required from therapists,often in specialized clinic settings designed to maximize thebenefits of the psychoactive effects of psychedelics. Compared withprevious approaches to management of mental health conditions,psychedelic assisted therapy uses a lower amount of drug substanceand involves a greater amount of time spent with therapists. As aresult, a much greater portion of the value chain foradministration of a psychedelic drug product is captured bytherapists relative to the manufacturer of the drug product.Microdosing psychedelics, which is generally definedas taking about five to ten per cent the dosage of a flood dose,presents a potential commercialization pathway for a drug productto be taken regularly and without supervision.
Mental health is a serious problem globally. This problem islikely exacerbated by the current global pandemic. Based onscientific evidence, psychedelics are likely to play a significantrole in correcting this problem. Particularly in the last ten yearsor so, there has been growing attention on psychedelics and theirpotential therapeutic applications. World-class academicinstitutions and sophisticated, well-financed public companies arestudying the potential benefits of LSD, psilocybin, MDMA, ibogaineand DMT for indications including end of life depression, treatmentresistant depression, PTSD, eating disorders, Alzheimer'sdisease, substance use disorder and others. Commercializationefforts are underway and we can expect to see MDMA, psilocybin andpotentially other psychedelics used as APIs in drug productsholding a DIN.
While it is natural to draw a comparison to cannabis,psychedelics are not the next cannabis. Cannabisproducts are a commodity-based and highly regulated category ofconsumer packaged goods (CPG). Cannabis has a well-definedadult use market that was built on a multi-participant commercialmedical cannabis industry. Cannabis is also commonly used on adaily basis. Robust consumer demand for cannabis products supportsan industry including cultivation, processing, retail sale and allthe picks and shovels needed to maintain consumeraccess to cannabis products.
In contrast to cannabis, there is no psychedelics industry at least not today. Rather, psychedelics are a disruptorfor health care delivery and pharmaceuticals. Cannabis is a singleheterogeneous commodity in high demand for manufacture of CPGs. Incontrast, psychedelics are a diverse group of chemicals that varywidely in their effects.2 Also contrasting with acommodity-based CPG industry, psychedelics for use in a therapeuticcontext are typically used sparingly and can currently becommercialized only as drug products regulated under the FDR.
There is plenty of noise circulating around psychedelics. Whiledrug products holding a DIN and including a psychedelic substanceAPI are likely to disrupt how therapy is delivered, there is nomedical access program in Canada similar to the Marihuana forMedical Purposes Regulations for any psychedelics and theremay never be. We believe that the market, and the strengths thatdistinguish the leaders, will be very different for psychedelicscompared with cannabis.
BordenLadner Gervais LLP's Cannabis Industry Focus Group has aproven track record of helping companies in the cannabis ecosystemachieve their goals. We have leading regulatory, capital markets,intellectual property, corporate and commercial subject matterexperts in the cannabis industry. Our focus group is national inscope and includes professionals across many disciplines.
We work with leading processors, retailers, technologycompanies, cultivators and others in the cannabis industry. Wecarry significant technical expertise alongside our legalexperience. We understand the cannabis industry and are passionateabout helping the legislative purpose of the Cannabis Actsucceed.
Psychedelics are not cannabis. That said, overlapping legal andtechnical expertise positions our Cannabis Industry Focus Group forsuccess in supporting clients working with psychedelics.BLG's entrepreneurial and leading approach to legal practiceis a perfect match for working with clients operating in thepsychedelics space. Our Cannabis Industry Focus Group has developeda strong practice advising clients focused on innovation, finance,drug substance and precursor manufacture, clinical work and dataanalysis in relation to psychedelics. We are also representingclients on key pro bono efforts to broaden access to psychedelicsfor medical purposes.
If you are considering directly entering, investing in,partnering into or otherwise pursuing a business plan that includespsychedelics, we would be pleased to speak with you to assess howour expertise can benefit your project.
1.Spravato (esketamine) is a drug productinitially approved in Canada on May 19, 2020 that includes a nasalspray formulation of esketamine for treatment of depression. Asindicated in the Spravato product monograph, and analogouslyto off-label administration of racemic ketamine by health carepractitioners to patients suffering from depression,self-administration of the Spravato product by patientssuffering from depression is intended to be completed only underthe direct supervision of a healthcare professional withpost-administration monitoring.
2.Examples include LSD, psilocybin, MDMA, DMT,harmaline, salvinorin A, mescaline, 2C-B and other 2,5 substitutedphenethylamines, DOM and other ring-substituted amphetamines,ketamine, mitragynine, ibogaine and many others.
The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.
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