How Are Psychedelics Companies Generating Revenue Before Legalization?

The eventual legalization of psychedelics is a fact that’s no longer under doubt, and Wall Street made sure to clear any remaining uncertainty with the successful IPO of Compass Pathways at NASDAQ last September.


Although the future seems grand for the industry, it might be sensible to remember that most psychedelics companies today work under business models based on the forthcoming approval of some form of psychedelics-based therapy, which today is still a projection.


Operating under future expectations puts psychedelics companies in a delicate position, since large revenues are not expected to come in until after legalization.


However, today’s legal landscape already offers some alternatives for these companies to start generating revenue in the form of ancillary services, legal related products and other endeavors.


Functional mushroom products, digital therapeutics platforms, ketamine clinics…Each business plan comes with its own ideas on how to generate income to ease an otherwise overwhelming reliance on external capital.

Investor Enthusiasm Won’t Last Forever

The progressive social and political acceptance of psychedelics has permitted an influx of capital that the space had never seen before. These investments are key to the advancement of ongoing research, which is the only pathway towards getting psychedelic drugs approved and into the market.

But relying exclusively on external capital can be a risky strategy when considering that revenue from the production and sale of psychedelic compounds could not be coming in for at least a few more years.

As opposed to traditional pharma companies, psychedelics companies are generally less than half a decade old and don’t have prior money-making operations to support new drug development.

As the cannabis industry shamefully showed in late 2019, if positive regulation is delayed and companies don’t fulfill their grandiose promises in due time, investor confidence can drop rapidly and lead the industry into a game of survival, where only those with enough cash-in-hand can stay afloat. 

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Alternative Sources of Revenue

Some companies in the psychedelic sector have chosen to explore parallel operations to keep the wheel going until regulation provides a fertile landscape for the development of a large-scale legal industry.

Supplying Psychedelics for Research

As research on psychedelics becomes more and more widespread, some companies have eyed research institutions as possible customers.

Susan Chapelle, Executive Vice-President of Havn Life Sciences (CSE:HAVN), told us that there are over 273 studies on psychedelics going on at the moment, and they all need a GMP supply of these drugs. 

Her company is working on developing a methodology for manufacturing natural psilocybin that can become the standard once the markets open up. But in the meantime, Havn Life is looking to drive revenue by becoming a supplier of natural psilocybin for research purposes.

“We’re not playing in the pharmaceutical market,” says Chapelle. “We’re simply working on becoming a supply chain, on developing the methodology to grow psilocybin mushrooms and supply the clinical trials that are currently underway.”

Today, most studies being done on psilocybin use lab-synthesized psilocybin, instead of a naturally-occurring version of the drug. 

However, as Chapelle says, this is not the most common way in which psilocybin is being consumed across the globe and how it was used throughout history. In her view, a trend towards researching naturally-occurring psilocybin is bound to sweep in, and those researchers will need a supply of certified GMP products.

Mydecine (CSX:MYCO) is also looking at this approach. The company recently landed a Health Canada Schedule 1 Dealer’s License to provide naturally-sourced psilocybin for therapeutic research.

“Mydecine is currently offering its supply of naturally-derived psilocybin for our own internal research initiatives,” said CEO Joshua Bartch. “We will start to expand our supply to other third-party research organizations once our in-house needs are fully met.” 

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Selling Functional Mushrooms As Consumer Packaged Goods

Companies involved in the research of psilocybin-producing mushrooms have spent a great deal of time, effort and capital to build facilities that can produce and study these mushrooms.

It almost seems absurd not to exploit these capabilities in mycological research to explore other types of legal, non-psychoactive fungi that have gained impressive market traction in recent years.

Functional mushrooms are rare species of fungi that are poised to grant an impressive range of health benefits like enhancing cognitive function, boosting immunity, improving daily energy, reducing inflammation and more.

Lion’s Mane, Reishi, Cordyceps and Chaga are some of these mushroom species, which were included in Whole Foods’ list of top-10 trends for 2018 in the form of powders, bottled drinks, coffees, smoothies and other drinkables.

As opposed to psychedelic mushrooms, functional mushrooms have a very straightforward path to market as consumer packaged goods. In the US, they’re regulated as dietary supplements, which means that they can be produced and sold legally as long as they’re not claimed to have specific therapeutic actions in their labels.

Cybin Corp (NEO:CYBN), a company developing psilocybin-based pharmaceutical products, has announced plans to enter the medicinal market of mushroom-based nutraceutical products with a wholly-owned subsidiary called Nature’s Journey Inc. Earlier this year, Champignon Brands (CSE: SHRM), New Wave Holdings (CSE:SPOR) and Mydecine also announced similar plans.

Read: Cybin Corp Goes Public on the NEO Exchange

Mind Cure (CSE: MCUR) has already started commercialization of a line of functional mushrooms called Moonbeam. Havn Life has received Health Canada approval for a line of seven functional mushroom products, which will launch in 2021.

As serious, science-driven research organizations, psychedelics companies are able to dive into the science of functional mushrooms formulations with greater depth than companies who are solely focused on these products.

Want to know more about the growing number of publicly traded psychedelic stocks? Check out this comprehensive guide that explores all the major players in the space: The Ultimate 2020 Guide to Publicly Traded Psychedelic Stocks

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Ketamine Clinics

For a psychedelic experience to be meaningful and therapeutic, “set and setting” and post-experience integration are as important as the psychedelic compounds themselves.

Specialized psychedelics clinics are expected to be the main channel through which patients will access psychedelics-assisted therapy after these drugs come into market.

However, some companies in the psychedelics sector have decided to act sooner rather than later and began opening psychedelics-assisted therapy clinics which, for the time being, base their treatment on Ketamine, a legal dissociative drug commonly used in anesthesia.

These clinics serve a dual purpose. Firstly, they help companies establish a footprint in key markets and locations. By being early executors of psychedelic treatment, these clinics can be up and running in order to seize the market as soon as therapy with classic psychedelics is approved.

At the same time, these clinics became major hubs for data collection, which gather valuable information that can help perfect the treatments and is fed back into drug development efforts.

But these clinics can also be a source of early revenue on their own. Ronan Levy, executive chairman of Field Trip Health (CSE:FTRP), told us that their ketamine-assisted psychotherapy clinics become cash-flow positive in their first year and can generate significant margins. The company has opened three clinics in Toronto, New York and Los Angeles and plans to be operating a minimum of 75 new clinics in North America within the next three to four years.

“We currently own and operate 4 outpatient mental health clinics that have been successfully generating revenue since 2016 and don’t rely on the legalization of psychedelics,” told us Novamind CEO Yaron Conforti.


Read: Field Trip Health Opens Fourth Psychedelic-Enhanced Therapy Center in Chicago 


Earlier this year, Champignon Brands announced the purchase of a ketamine clinic in Los Angeles and just last week, Awakn Life Sciences announced the opening of its first ketamine clinic in the UK city of Bristol. 

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Digital Therapeutics Platforms

Digital health platforms can help enhance psychedelic treatment by complementing -and even replacing- face-to-face therapy with remote sessions, health tracking devices and apps that can influence patient decisions after treatment.

In late November, MindMed (NEO:MMED) announced the launch of a new digital medicine division, as the company’s first venture beyond psychedelics R&D.

ATAI Life Sciences, who recently announced the closing of a $125 million Series C Round, is also exploring these methods, with Introspect, a digital health company designed to complement companies under its umbrella.

But DTx as an engine for revenue does not rely on the legalization of psychedelics. As society learns of the benefits of psychedelic medicine, many users are eager to try it for themselves, and might not be willing to wait until these drugs pass the threshold into legality.

This has led to a recent surge in self-administered experiences, evidenced by a rise in the offer of DIY mushroom growth kits and other forms of illegal or legally-grey methods of achieving psychedelic experiences.

As most research points out, half of the value of the psychedelic experience lies in receiving the right professional counseling. The current illegality of psychedelics leaves a whole in the market, where people having psychedelic experiences on their own in illegal jurisdictions are not able to access integration therapy to bring medically-valuable sense into their experiences.

Mydecine has set out to seize this market with the launch of Mindleap Health, a platform that connects patients with medical professionals that can provide integration counseling through a purpose-built app.

Field Trip is also testing the digital waters. In September, the company launched Trip, a mobile app built to accompany users in their self-exploration and consciousness expansion practices, including intention setting, mood tracking, guided journaling, and psychedelic integration. The app has been free since its launch, but the company is looking to build an audience and eventually run subscription-based services and other ways of monetization.


For the latest updates and deepest insights into psychedelic due diligence, grab your FREE ticket to Psychedelic Capital: The World’s Premiere Psychedelic Investment Conference. 

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Natan Ponieman

Natan Ponieman

Natan Ponieman is a journalist covering cannabis and psychedelics, as they intersect with finance, culture, science, politics and spirituality. His work has been featured in Forbes, Entrepreneur, Yahoo Finance, Benzinga, Leafly, High Times and many others.
Natan is also a creative director with 10+ years developing creative concepts for TV commercials, web content, print, social media, brand events and interactive installations.