Psychedelic Stock Index ETF (PSYK) - Horizons - Innovation is our capital. Make it yours. www.HorizonsETFs.com
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Horizons
Psychedelic Stock Index ETF (PSYK)
Innovation is our capital. Make it yours.
www.HorizonsETFs.com
What are
Psychedelics ?
Within the last decade, there has been a significant re-evaluation of
the potential therapeutic benefits of psychedelics, and a movement to
research these substances and potentially use them for therapeutic use,
particularly in the treatment of mental health issues. This has created
a potentially compelling investment opportunity for Canadian investors
looking to get exposure to the early stages of the global psychedelics
industry.
For those interested, we highlight what psychedelics are, the potential
investing opportunities in psychedelic companies, and how investors
can get exposure to this industry through an investment in the world’s
first psychedelics-focused ETF, The Horizons Psychedelic Stock Index ETF.
“
PSYK “
Psychedelics are psychoactive substances that have the potential to alter perception and mood1. Plant-based psychedelics such as psilocybin — often known colloquially as magic mushrooms — have an ancient history of medicinal and therapeutic use2. While there was some research on psychedelics as therapeutics between the 1950s and early 1970s, United States legislation classifying psychedelic drugs as Schedule 1 drugs in 1970 (a category indicating high risk of abuse and no medical value) dried up research dollars3. Modern and controlled clinical studies are now assessing the psycho- pharmacological properties and therapeutic efficacy of these drugs to complement existing therapies4, particularly in their potential use in treatment of different types of mental illnesses, most notably severe depression. 1 Psychedelics, David E. Nichols & Eric L. Barker, US National Library of Medicine National Institutes of Health as at April 2016. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4813425/ 2 The Therapeutic Potential of Psychedelic Drugs: Past, Present, and Future, Robin L Carhart-Harris & Guy M Goodwin, Nature, as at April 26, 2017. https://www.nature.com/ articles/npp201784 3 Trip of a lifetime, Kirsten Weir, American Psychological Association, as at March 1, 2020. https://www.apa.org/monitor/2020/03/cover-trip 4 Psychedelic medicine: a re-emerging therapeutic paradigm, Kenneth W. Tupper, PhD, Evan Wood, MD PhD, Richard Yensen, PhD, and Matthew W. Johnson, PhD as at October 6, 2015. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4592297/
What are the Different
Types of Psychedelics?
• Psychedelics are noted for their potential to help with addiction, depression,
anxiety and post-traumatic stress disorder (PTSD).
• While psychedelics affect the brain in their own unique ways, LSD, MDMA,
and psilocybin can have an influence on pathways of serotonin, a neurotrans-
mitter responsible for regulating mood5.
• Psychedelic drugs are “controlled substances” under the Controlled Drugs
and Substances Act (CDSA).
• In the U.S., most psychedelics are Schedule 1 substances, including LSD,
MDMA, psilocybin, mescaline (peyote and San Pedro cactus), and DMT
(found in many plants, but most commonly an ingredient in ayahuasca).
Ketamine is a Schedule 3 drug.
• Schedule 1 substances are a more severe classification of narcotic, and
therefore carry more stringent penalties for possession and distribution.
• There are several psychedelics that are currently being evaluated by
companies for therapeutic use, especially for depression and anxiety.
• Psilocybin: Psilocybin, an ingredient in magic mushrooms, can produce
visual and auditory hallucinations, as well as changes in consciousness6. In
2019, King’s College London completed the first controlled clinical study of
psilocybin with placebos, demonstrating it could be a safe and effective
treatment and opening more doors for study7.
• Lysergic acid diethylamide (LSD): LSD can alter the user’s perception of re-
ality and distort their senses. In 2019, University of Toronto researchers found
in an anonymous survey of users that people who took small, non-hallucino-
genic amounts of psychedelics like LSD — called microdosing — reported
improved mood and focus.
• Ketamine: A fast-acting painkiller that can produce vivid feelings and a
feeling of mind-body separation8. Ketamine, in lower doses than used for
anesthesia, can potentially treat major depression9.
• Dimethyltryptamine (DMT): Derived from the bark of the Virola tree10,
DMT is being studied for its effect on treatment-resistant depression11.
On December 10, 2020, the world’s first clinical trial testing the efficacy of
DMT against major depressive disorder was approved by the12 UK Medicines
and Healthcare products Regulatory Agency (MHRA).
5
Altered Reality? An Update on Psychedelics in Canada, Morgan T. McDonald and Becky Rock, as at June 30, 2020. DLA Piper https://www.dlapiper.com/en/canada/insights/publications/2020/06/an-update-on-
psychedelics-in-canada/
6
Psychedelic Treatment with Psilocybin Relieves Major Depression, Study Shows, Hopkins Medicine, as at November 4, 2020. https://www.hopkinsmedicine.org/news/newsroom/news-releases/psychedelic-treat-
ment-with-psilocybin-relieves-major-depression-study-shows
7
Magic mushroom medicine passes first clinical safety trial, Financial Times, as at December 11, 2019. https://www.ft.com/content/39b2450a-1b72-11ea-9186-7348c2f183af
8
Ketamine, Centre for Addiction and Mental Health, as at January 18, 2021. https://www.camh.ca/en/health-info/mental-illness-and-addiction-index/ketamine
9
Ketamine for major depression: New tool, new questions, Harvard Health Publishing, as at May 22, 2019. https://www.health.harvard.edu/blog/ketamine-for-major-depression-new-tool-new-ques-
tions-2019052216673
10
Hallucinogens, Centre for Addiction and Mental Health, as at January 18, 2021. https://www.camh.ca/en/health-info/mental-illness-and-addiction-index/hallucinogens
11
Combatting resistant depression with DMT and digital therapy, Health Europa, as at October 1, 2020. https://www.healtheuropa.eu/combatting-resistant-depression-with-dmt-and-digital-therapy/103098/
12
World-First Clinical Trial Explores Safety and Efficacy of DMT for Major Depression, Technology Networks, as at December 10, 2020. https://www.technologynetworks.com/neuroscience/news/world-first-clinical-
trial-explores-safety-and-efficacy-of-dmt-for-major-depression-343822
The
Industry Today
The U.S. and Canada are slowly opening doors for
researchers to study psilocybin. In November 2020,
Oregon became the first state to legalize magic
mushrooms13, and Canada has granted exemptions
for health care workers to possess psilocybin14.
Clinical trials are ongoing, but psychedelics companies
are already generating excitement in the markets.
On September 18, 2020, Compass Pathways, which is
developing psilocybin therapy for treatment-resistant
depression, became the first company listed on a U.S.
stock exchange15 after the FDA named it a “breakthrough
therapy.” Meanwhile, Toronto-based MindMed, which is
developing therapies based on psychedelics like LSD
and MDMA, announced a $50 million bought deal public
offering on December 14, 202016.
The regulatory environment for the manufacturing and
distribution of psychedelics is not as well-established
as Canadian cannabis regulations. Our view is that,
if enough clinical research can be established to
demonstrate positive therapeutic usage, then some
companies may be able to achieve a Section 56
exemption to the Canadian Controlled Drugs and
Substances Act to use controlled substances if deemed
13
Oregon becomes first state to legalize magic mushrooms as more states ease drug laws in ‘psy- necessary for a medical or scientific purpose.
chedelic renaissance’, CNBC, as at November 4, 2020. https://www.cnbc.com/2020/11/04/oregon-
becomes-first-state-to-legalize-magic-mushrooms-as-more-states-ease-drug-laws.html
14
Canada Will Let Health Care Professionals Legally Use Psychedelic Mushrooms, Health Minister Says, If such an exemption could be granted it could quickly
Marijuana Moment, as at December 8, 2020. https://www.marijuanamoment.net/canada-will-let-
health-care-professionals-legally-use-psychedelic-mushrooms-health-minister-says/ result in very rapid growth of the industry in Canada17.
15
Compass Pathways (NASDAQ:CMPS) IPO Proves Psychedelic Medicine Investment Thesis,
WPSS Investments Newswire, as at October 1, 2020. https://www.globenewswire.com/news-
release/2020/10/02/2102708/0/en/COMPASS-PATHWAYS-NASDAQ-CMPS-IPO-PROVES-PSYCHE- For now, almost all of businesses involved in this industry
DELIC-MEDICINE-INVESTMENT-THESIS.html
16
MindMed Announces $50 Million Bought Deal Public Offering, Mind Newswire, as at December 14, are focused on clinical research as opposed to growing
2020. https://www.newswire.ca/news-releases/mindmed-announces-50-million-bought-deal-
public-offering-847758161.html and distributing psychedelics, which remain illegal in
17
Psychedelics and Canada’s Regulatory Landscape, McMillan, as at July 2020. https://www.mcmil- most jurisdictions.
lan.ca/showpublication.aspx?show=120682How Do I
Invest in the
Psychedelics Sector?
We believe an ETF is the best way to invest in the
psychedelics sector, because an ETF provides:
1. Instant Diversification
• ETFs reduce concentration/issuer risk, but can also limit the upside
potential of owning certain individual stocks
2. Efficiency
• ETFs provide single-trade exposure to many issuers, which can potentially
reduce trading costs and the need to monitor multiple positions
3. Liquidity
• ETFs can be bought and sold on a stock exchange throughout the
trading day
4. Sector Beta
• As the world’s first Index ETF tracking psychedelic equities, PSYK provides
a benchmark and beta to this emerging sector
5. Potential Yield
• PSYK can potentially provide a monthly yield through securities lendingOver 700 million
people are affected globally
with some sort of mental illness,
addiction or eating disorder *
US$2.5 trillion
Global US$800B direct and US$1.7T indirect economic costs from mental disorders**
US$467 billion
American direct and indirect economic costs of mental disorders***
C$51 billion
Canadian direct and indirect economic costs of mental disorders****
1 in 4 people
In the world will be affected be mental or neurological disorders at some point in their lives*****
ANXIETY ADHD ADDICTION DEPRESSION
$4.5B $9.1B $42B $4B
Global annual anxiety Global annual ADHD Global annual addiction Global annual depression
drug sales6 drug sales6 drug sales6 drug sales6
*https://www.ifpma.org/subtopics/mental-and-neurological-disorders/, as at January 26, 2021.
** https://investorbreakout.exchange/app/uploads/2020/11/Cybin-Inc.-Investor-Presentation-December-2020.pdf
***https://www.nimh.nih.gov/about/directors/thomas-insel/blog/2015/mental-health-awareness-month-by-the-numbers.shtml as at December 31, 2012.
****https://globalnews.ca/news/97038/mental-health-leaves-cost-canadian-economy-51-billion-study/, as at September 8, 2010.
*****https://www.who.int/whr/2001/media_centre/press_release/en/
6
Source: MindMed Holdings, as at January 11, 2021.Why
Now?
Recent permissive policies and exemptions have
been granted to Canadian and U.S. researchers to
investigate the clinical and therapeutic potential of
psychedelics that has not been previously allowed
in decades.
This psychedelic opportunity is expanding rapidly
and was valued at approximately US$2 billion in
2019. By 2027, it’s predicted that the sector will
reach a market capitalization of US$6.8 billion,
with a forecasted compound annual growth rate of
16.3% between 2020 and 202718.
It’s rare that investors get to take part in the early
stages of a new sector of the economy. PSYK
provide a simple and diversified way to get exposure
to this exciting potential growth opportunity.
Some large, global companies have started increasing
their investment on psychedelics research and
development: in 2019, Johnson & Johnson,
the world’s largest healthcare company, received
FDA approval for a ketamine-based nasal spray,
Spravato, in treating depression19. In May 2020,
18
Psychedelic Drugs Market Projected to Reach $6,859.95 Million by 2027, AbbVie, a U.S.-based publicly traded pharmaceutical
Financialnewsmedia.com News Commentary, as at June 3, 2020. https://www.
prnewswire.com/news-releases/psychedelic-drugs-market-projected-to-reach- giant, bought Allergan for US$63 billion, gaining
6-859-95-million-by-2027--301069861.html access to its ketamine-like treatment for depression.
19
U.S. Food and Drug Administration, FDA approves new nasal spray medication
for treatment-resistant depression; available only at a certified doctor’s office It received a breakthrough therapy designation
or clinic, as at March 5, 2019. https://www.fda.gov/news-events/press-an-
nouncements/fda-approves-new-nasal-spray-medication-treatment-resistant- from the FDA, which expedites the development
depression-available-only-certified and review of drugs20.
20
Researchers Seek to Better Understand Psychedelics’ Role in New Therapies,
The Globe and Mail, January 12, 2020. https://www.theglobeandmail.com/
investing/markets/stocks/ABBV-N/pressreleases/937409/PSYK The World’s First Psychedelics ETF The Horizons Psychedelic Stock Index ETF (“PSYK”) seeks to replicate, to the extent possible and net of expenses, the performance of a market index that is designed to provide exposure to the performance of a basket of North American publicly listed life sciences companies having significant business activities in, or significant exposure to, the psychedelics industry. Details • Ticker: PSYK • Management Fee:* 0.85% • Stock Exchange: NEO Exchange • Underlying Index: North American Psychedelics Index • Bloomberg Index Ticker: HPSYKTR Index • Currency: Canadian dollar (foreign exposure is not hedged) • Eligibility: All registered and non-registered investment accounts • Rebalanced: Quarterly *Plus applicable sales taxes. North American Psychedelics Index Constituents are listed on North American exchanges and are publicly listed life sciences companies focused on psyche- delic medicines, and other companies with business activities in the psychedelics industry. While securities may be listed on the TSX, NYSE or Nasdaq Global Market, many of these securities may trade on North American junior exchanges that include (but are not limited to) the: • TSX Venture Exchange • Canadian Securities Exchange • NEO Exchange • NASDAQ Stock Market • NYSE America The North American Psychedelics Index, the Underlying Index of the ETF, is designed to provide a measure of the performance of North American publicly listed life sciences companies focused on psychedelic medicines, and other companies with business activities in the psychedelics industry.
Methodology • Must be listed on a regulated stock exchange in Canada or in the United States • Float market-cap weighted index with maximum market-cap of 10% for any single issuer at time of rebalance/adjustment date • Constituent must be a producer and/or a supplier of psychedelic medicines; a biotechnology company that is engaged in research and development of psychedelic medicines; or a company that is part of the supply chain for, or a distributor of, psychedelics. • Minimum float market-capitalization of C$25 million • Minimum share price of at least C$0.10 CAD • Index rebalanced quarterly • The weight of any pharmaceutical company with a total market capitalization of $5B or greater, whose production, development or research of psychedelic pharmaceuticals represents less than 25% of their total revenue will be capped at 5%. In aggregate, all such pharmaceutical companies will also be capped at 20%. • Minimum 3-month-average daily traded value of at least C$125,000 • Size, liquidity and price criteria to remain in the index are lower once a security becomes an index member
For more information on PSYK,
including its top holdings, visit:
HorizonsETFs.com/PSYK.
Commissions, management fees and applicable sales taxes all may be associated with an investment in the Horizons Psychedelic Stock Index ETF managed by Horizons ETFs Management (Canada) Inc.
(the “ETF”). The ETF is not guaranteed, its value changes frequently and past performance may not be repeated. The prospectus contains important detailed information about the ETF. Please read the
prospectus before investing.
An exchange traded fund that is expected to invest in, and indirectly derive revenues from, companies in the psychedelics industry engaged in legal activities involving psychedelic drugs and
substances. While the medical and adult use of certain psychedelic drugs and substances are generally prohibited under U.S. federal law, despite this prohibition, a limited number of states have
either sought to decriminalize or authorize the medical use of certain psychedelic drugs and substances in limited circumstances. Clinical trials involving psychedelic drugs and substances are,
however, permitted, provided they comply with both state and federal laws applicable to such trials. The ETF will passively invest in companies engaged in legal activities involving psychedelic drugs
and substances in the U.S. where state and federal laws permit such activities. Such companies may also be involved in the Canadian legal psychedelics industry.
The ETF, through the ownership of life science companies in the psychedelic industry, may also have some exposure to the legal marijuana market in Canada, and the hemp industry and/or mari-
juana industry in certain U.S. states that have legalized marijuana for therapeutic or adult-use, which is currently illegal under U.S. federal law. However, the ETF will not be directly engaged in the
manufacture, importation, possession, use, sale or distribution of hemp or marijuana in either Canada or the U.S. Please read the full risk disclosure in the prospectus before investing.
There are risks associated with this product. PSYK is expected to invest in, and indirectly derive revenues from, companies in the psychedelics industry engaged in legal activities involving psychedelic
drugs and substances. While the medical and adult use of certain psychedelic drugs and substances are generally prohibited under U.S. federal law, despite this prohibition, a limited number of states
have either sought to decriminalize or authorize the medical use of certain psychedelic drugs and substances in limited circumstances. Clinical trials involving psychedelic drugs and substances are,
however, permitted, provided they comply with both state and federal laws applicable to such trials. Psychedelic drugs and substances in Canada are primarily regulated under the Controlled Drugs
and Substances Act (the “CDSA”), the Food and Drug Act and the regulations promulgated thereunder. The medical use of certain psychedelic drugs and substances remain illegal under Canadian
federal law unless discretionary exemptions are granted under the CDSA, while a limited number of other drugs and substances may be prescribed by a health care practitioner to patients under
their care. Adult recreational use of psychedelic drugs and substances remains generally prohibited under the CDSA. Commercial activities involving psychedelic drugs and substances are permitted
in Canada by parties who hold the required federal regulatory approvals and licences; however, distribution and sales opportunities for psychedelic drugs and substances are heavily restricted at this
time. PSYK will passively invest in companies engaged in legal activities involving psychedelic drugs and substances in Canada and the U.S. where applicable laws permit such activities. PSYK will
not be directly engaged in the manufacture, importation, possession, use, sale or distribution of psychedelic drugs or substances in either Canada or the U.S.
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