Psychedelic drugs like psilocybin are a game changer in the world of mental health sciences. There is a growing body of evidence that suggests psilocybin has the potential to help treat anxiety, depression, and post-traumatic stress disorder (PTSD). As scientific interest in psilocybin grows, so too does the attention of investors; many of whom cannot help but see the market similarities between psychedelics, pharmaceuticals, and the cannabis industries.
Indeed, the functional non-psychedelic and gourmet mushroom markets as a whole is poised for explosive growth over the next few years. By 2024 the market is expected to grow to $34.3 billion in sales according to ResearchAndMarkets.com. Recognizing the huge opportunities in these other fungi markets, dozens of companies have sprung up hoping to cash in on the psychedelic mushroom space, like Compass Pathways (NASDAQ: CMPS).
As one of the more high profile companies investigating psilocybin-based therapies, Compass has been enjoying the investor spotlight for the last several months, especially after recently announcing an upsized IPO of more than $127 million. With high profile backers like PayPal billionaire Peter Thiel, Compass has become the company du jour of the psychedelic space, but regulatory uncertainty and issues of scaling still haunt the company’s path to market.
As evidenced by the decades-long disconnect between state and federal cannabis laws, both lawmakers and regulators are slow to embrace substances that carry the social stigma of the War on Drugs, even when there is a large body of evidence suggesting therapeutic potential.
Even if Compass is able to bring a substance to market, it will be subject to heavy restrictions and a long scheduling process, which will significantly stymie any market rollout. In their IPO filing, the company admits as much.
“In addition, the scheduling process may take significantly longer than the 90-day deadline set forth in the CSA, thereby delaying the launch of our investigational COMP360 psilocybin therapy in the United States,” reads the filing.
Further, standing in the way of Compass’ dreams of market primacy is the issue of scaling. The company’s primary source of psilocybin comes from laboratory synthesis, which is prohibitively expensive. Due to the high cost of synthetic psilocybin production, Compass charges their customers anywhere between $7,000-$10,000 USD per gram, averaging out to around $13.20 per milligram.
In comparison, whole-mushroom extraction is significantly cheaper, costing around $0.76 per gram to extract psilocybin, assuming the source of the mushrooms are from a black market dealer. Now, if you can legally produce your own mushrooms, the costs only continues to decline.
Currently, the only company in the world that can legally produce pharmaceutical-grade psilocybin from whole-mushroom extraction is Mydecine Innovations Group (CSE: MYCO). Equipped with a Health Canada Schedule 1 Controlled Drugs and Substances Dealer’s Licence, Mydecine can not only produce whole-mushroom psilocybin extractions, but they can also transfer, sell, and export the substance as well.
While Compass seems to be mired in regulatory uncertainty south of the Canadian border, Mydecine is quietly conducting, in collaboration with the Dutch Royal Army, the world’s first clinical trials into the efficacy of psilocybin in treating Post-Traumatic Stress Disorder. Leading these efforts is a science team with a surprisingly deep bench of experts, including a seven-time Nobel Prize nominee and the former chair of the NATO research group on military mental health training.
Though Compass may have a head start, Mydecine has a much clearer path to market; due in no small part to the lack of regulatory uncertainty surrounding Mydecine’s efforts and the company’s ability to produce psilocybin at significantly lower prices. With a solid foundation moving forward, Mydecine seems poised for growth. The question is, will investors take notice?