This Decriminalization Drive Could Be Bigger Than The Cannabis Boom
FN Media Group Presents Financialmorningpost.com Market Commentary
New York, NY – May 6, 2020 – Millions across the globe are struggling with their mental health, and the COVID-19 pandemic is compounding a crisis that has been ignored throughout history. The U.S. alone spent $89 billion just on mental illness treatment in a single year in 2013, and the roof on those spending figures has disappeared. Mentioned in today’s commentary includes: Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB), Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON), Constellation Brands, Inc. (NYSE: STZ), Canopy Growth Corporation (NYSE: CGC) (TSX: WEED), Molson Coors Beverage Company (NYSE: TAP).
When the post-COVID-19 veil is lifted, mental healthcare spending will skyrocket further and the world will emerge in a mental health haze that demands an elixir. The market for this healthcare segment is again ripe for major innovation.
The innovation will likely come from psychedelics–such as psilocybin, the active compound in ‘magic mushrooms’–described by the Wall Street Journal as our return to nature that can help alleviate depression, anxiety and addiction.
And one disrupter will potentially be a little known company called Champignon Brands Inc (SHRM; SHRMF) the innovative startup that aiming to position itself one step ahead of the world’s mental health crisis.
With researchers closing in on the third decade of the “second wave” of psilocybin research, a consensus on the strong clinical potential of psilocybin is building among experts in psychiatry and psychopharmacology.
The psychedelics innovation is likely going to be massive, and Champignon Brands is looking to follow the examples of some of the biggest and most successful companies on the planet to dominate this brand new industry.
#1 The Decriminalization Drive
The Journal of Abnormal Psychology has blamed the increased use of smartphones and other digital media for increasing incidences of depression and suicide among adolescents and young adults; a view that is supported by the National Survey of Drug Use and Health (NSDUH).
According to the World Health Organization (WHO), 25% of the world’s population will be afflicted by mental health and/or neurological disorders at some point throughout their lives.
With growing resistance to current antidepressant medications, more and more people are shunning conventional treatments, which they have to take for the rest of their lives, for radical new therapies of the future such as psilocybin.
In 2018, researchers at John Hopkins University released a study analyzing the Psilocybin’s abuse potential, concluding that it should be rescheduled to Schedule IV, where most prescription benzodiazepines can be found.
Already, a growing number of jurisdictions have started to actively decriminalize Psilocybin and Psilocybin mushrooms. With Psilocybin decriminalization gathering momentum, it may not be long before the compound enters the mainstream mental health and wellness market.
#2 Early Mover Advantage
Companies like Champignon Brands Inc. are looking to secure advantage in the medical Psilocybin space. And it’s already got a leg up on the competition.
It owns an ecosystem from research and cultivation to formulations of cutting-edge premium products. But what’s particularly impressive about this $35M company (market cap) is the Total Addressable Market (TAM) that it has in its cross-hairs.
Psilocybin (Magic Mushrooms) has been shown in research to be effective in the treatment of a wide array of mental health conditions including Drug Addiction, Alcoholism, Depression,Migraines, PTSD and Smoking Cessation.
The global functional mushroom market Champignon is looking to penetrate is expected to reach $34.3 billion by 2024, registering a CAGR of 8.04% during the forecasted period (2019 – 2024). But most importantly, it will have the massive $4.5 trillion Global Wellness Industry at its feet. These are incredible growth runways that Champignon Brands Inc. try to readily exploit for years and decades to come.
The psilocybin trend could potentially mimic the cannabis boom. When marijuana was decriminalized, a wave of cannabis companies soared as a result.
Take Aurora Cannabis (ACB), for example. Aurora Cannabis is one of the biggest names in the burgeoning marijuana sector. With a market cap nearly one billion dollars, Aurora has carved out its position as a leader in the industry.
In an announcement from Aurora, the company stated that the deal “firmly establishes Aurora’s first-mover advantage in one of the world’s most populous countries, where more than 130 million people will have federally legal access to a range of Aurora’s non-flower medical cannabis products containing THC.”
Cronos Group (CRON) was another first-mover in the space. The Canadian firm, though primarily an equity investor, has made some major moves in recent years, wheeling and dealing with some of the hottest names in the sector. Because of its forward-thinking attitude, it has drawn the attention of many major mainstream players, including the company behind Marlboro, Altria Group.
On December 7th, rumors were finally confirmed when Cronos made the official announcement of a C$2.4 billion strategic investment from Altria. “Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth,” said Cronos Group’s Mike Gorenstein, Chairman, President and Chief Executive Officer.
Canopy Growth Corporation (CGC) too saw its stock soar following the decriminalization wave. After securing a major $4 billion investment from beverage giant Constellation Brands, it seemed like Canopy Growth was on the top of the world.
Though things have cooled down a bit since then after a downgrade from analysts of the Constellation Brands stock, Canopy has not stopped making moves in the market, most recently swallowing up renowned vaporizer producer Stor & Bickel Gmbh & Co., the creator of the iconic Volcano® Medic and the Mighty® Medic devices
Even giant beverage brands joined the race. Constellation Brands (STZ), a beverage conglomerate with a stake in everything from Corona to Modelo, shook up the pot world in August 2018 when it sank $4 billion into Canopy Growth Corp, buying itself a 38% stake.
Despite the recent departure of Canopy’s CEO Bruce Linton, the deal still looks like a good one for Constellation, which has big plans for rolling out CBD and THC-infused beverages. And the upset at Canopy barely dents an otherwise stellar period for Constellation, which saw its stock price jump 11% in the second half of 2019.
Molson Coors (TAP) is another iconic multi-national beer company, with brands that are recognizable across the United States and Canada. Not to be left behind in the marijuana boom, Molson Coors is also developing a line of non-alcoholic cannabis-based beverages with its partner, the Hydropothecary Corporation.
Molson Coors Canada president and CEO Frederic Landtmeters noted, “While we remain a beer business at our core, we are excited to create a separate new venture with a trusted partner that will be a market leader in offering Canadian consumers new experiences with quality, reliable and consistent non-alcoholic, cannabis-infused beverages.”
#3 100% Intellectual Property Ownership
Patents are the lifeblood of the biotech industry. Biotechnology is one of the most research-intensive industries, with companies in the sector typically investing between 40% and 50% of their revenues in research and development, compared to 13% in pharmaceuticals and 5% in the chemical industry. In many cases, IP rights can actually be the final product.
Normally, when you do clinical trials, the ideal is to own the resulting IP. Champignon is partnering with the University of Miami and Miller School of Medicine in its research work but will own 100% of the intellectual property, drug discovery, and resultant data.
Its Psilocybin Patent Portfolio will greatly help the company in the commercialization of GMO and vegan certified rapid onset treatments capable of improving health outcomes, such as depression and post-traumatic stress disorder (PTSD), as well as substance and alcohol use disorders. Even better: It can license its patented formulations to other companies as it deems fit.
#4 Smart Acquisitions
Acquisitions can make or break a company. With so much on the line, a smart takeover can send a company’s stock into the stratosphere, while a questionable buyout could absolutely destroy investors’ confidence in the company.
Tassili, a 100% owned subsidiary, is conducting preclinical studies and eventual human clinical trials, with the objective of demonstrating safety and efficacy of the combination of psilocybin in treating mTBI with PTSD or stand-alone PTSD; final results are expected in 2021.
Artisan Growers is another subsidiary 100% owned by Champignon Brands Inc.’s. Artisan Growers utilizes a variety of cultivation techniques and grow infrastructure to produce premium craft mushrooms.
Champignon also wholly owns Novoformulations. Novoformulations is presently working with ketamine, anaesthetics and adaptogenics, as well as a host of pharmaceuticals and natural molecules at a purpose-built good manufacturing practice (GMP) and pharmaceutical (DIN) licensed facility, located in Quebec, Canada, and an accredited pharmacy in Ontario.
At a current valuation of just $65M, straddling incredible growth runways and an idea whose time has finally come, this is a company to watch.
By. Meredith Taylor
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FORWARD-LOOKING STATEMENT. Statements in this communication which are not purely historical are forward-looking statements and include statements regarding beliefs, plans, intent, predictions or other statements of future tense. Forward looking statements in this article include: that governments will legalize and regulate psychedelic medicine; that the worldwide functional mushroom markets combined will be worth $34.3 billion in gross sales in 2024; that Champignon Brands Inc. (“Champignon”) can build an on-site research laboratory within the next 12-24 months; and rollout five additional clinics in the US by the end of 2020; can access the expertise of Champignon’s acquisition targets’ management teams to create and market depression and anxiety treatments; and that Champignon’s business will be profitable. Forward-looking information is based on the opinions and estimates of Champignon at the date the information is made, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Psychedelic medicine may not be legalized on the timeline as expected or at all; psychedelic medicine may not turn out to have as large a market as thought or be as lucrative as thought as a result of competition or other factors; Champignon may not be able to close on its announced acquisitions because of regulatory approval requirements or other reasons; that the acquisitions do not provide the expected benefits, business or expertise expected; that Champignon may not be as able to diversify or scale up as thought because of potential lack of capital, lack of facilities, regulatory compliance requirements or lack of suitable employees, partners or suppliers; none of Champignon’s treatments have passed clinical trials or received FDA or other health authorities’ approval; Champignon may not be able to raise funds and develop better treatments than competitors in the psychedelic medicine industry; actual operating performance of the facilities Champignon do not meet expectations; that competition quickly develops; that Champignon may not be able to retain key employees, partners and suppliers; costs may be higher than expected and profits therefore lower; and other risks affecting the Company in particular and the psychedelic medicine industry generally, including without limitation risks related to most agricultural crops, including crop failure and medical developments, including without limitation failure of human trials or rejection by medical regulators. The forward-looking statements in this document are made as of the date hereof and the Company disclaims any intent or obligation to update such forward-looking statements except as required by applicable securities laws.
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