It’s nearly impossible to predict how large a new market will become. Everyone who thought blockchain as a service (programming, not Bitcoins) would be the investment opportunity of the decade ended up wondering what went wrong. Short answer: IBM, Microsoft and big tech ate that lunch, along with private companies like DeLoitte and R3.
The antidepressant drug market is projected to reach $28 billion this year.
In contrast, there was fintech, which didn’t sound nearly as sexy. With PayPal in existence for two decades and MasterCard and Visa hitting the half-century mark, who expected alternative systems to take off? Who expected PayPal to have a second life, soaring as if it was a new IPO, and Square (Venmo) stock to go up 700% in three years?
Now we are looking at an emerging psychedelic market and wondering again… how big will it get?
Most people seem to think the best model for answering that question lies in the early Canadian pot stocks. Say a nice 300%, 400% or 1200% upside.
But there’s good reason to think pot stocks are not the best comparison—and maybe even setting our sights too low.
The Canadian pot stock craze was about smoking dope for fun. And while many people will use psychedelics recreationally, there’s a bigger opportunity in psychedelics for wellness.
Making It Medical
Psychedelic Science Review recently came up with numbers that make a strong case for comparing the psychedelic potential to pharmaceuticals rather than entertainment.
Worldwide, more than 300 million people suffer from a major depressive disorder. The antidepressant drug market is projected to reach $28 billion this year (2020).
But here is what is important about those numbers. Despite the billions spent treating depression, about a third of patients under treatment are resistant to current drugs.
This is a market ripe for new answer and psilocybin and other hallucinogens could be the best answer. A handful of labs such as those at Johns Hopkins University and Stanford have been researching hallucinogens for mental health applications for many years. They are getting good results and publishing convincing studies.
There are at least two ways this could develop. It is possible that suppliers could dominate in a business model where medical professionals such as doctors, psychiatrists and psychologists use these drugs in guided therapy sessions. They could also prescribe microdoses for patients to use at home.
This approach would be analogous to an agribusiness, that grows and supplies standard hallucinogens. That would be a lot like the Canadian pot market.
Another possibility is the route that the Life sciences start-up COMPASS Pathways is taking. Compass is working on a derivative, a prescription formulation. That route makes the psychedelic market more like the pharmaceuticals market.
Compass is working steadily and surely on this path. It began stage IIb clinical trials in Europe and the US last year to investigate psilocybin’s as a therapy for treatment resistant depression. The company received a US patent on its drug candidate this past January.
If the drug satisfies the regulatory requirements set out by the FDA and the European medicines agency (EMA), the accredited investors who are in now could see a quick payoff. If all goes well, Compass could make a psilocybin-assisted therapy available as a treatment option by 2021.
Compass Pathways has been considering an IPO, but is moving cautiously. We would expect that to heat up as the next trial phase gets good results. It’s a moment to watch for. As
Robert Reffkin, CEO and co-founder of Compass has said on CNBC’s Squawk Box, “Look, we’re likely going to have an IPO. But we’re fortunate, given our capital base, that we have flexibility in timing.”
In other words, with deep pocket investors like Peter Thiel backing it, Compass doesn’t need to come out cheap. But Thiel and pals will want to see their own money multiply, so be on the lookout for an IPO and give it serious consideration when it happens.