Kratom Attracts Investor Attention After Regulatory Win – Bloomberg

Welcome to The Dose, Bloombergs newsletter about the cannabis and psychedelics industries.

Atectonic shift is taking place as previouslyunderground drugs are thrust into the mainstream.With The Dose, youll get a weekly chronicleof the biggest news about the companies and personalities that are shaping this change.

This week, guest writer Brody Ford offers a look at a substance used for pain relief that is attracting investors attention.

Investors in cannabis and psychedelic drugs often talk excitedly about their promise to take a slice of the $20 billion-plus market for opioids and fix a societal addiction crisis along the way.

Now, an under-the-radar drughas joined them as a potential disruptor. Itsalready drawing interest from Atai Life Sciences, a biopharma companyknown for putting psychedelic compounds into clinical trials. And a recent decision from the World Health Organization could help it gain further traction.

The drug is called kratom, and itsmade from the ground leaves of a psychoactive plant native to Southeast Asia. Kratom isalready a $1.3 billion industry in the U.S. with sales occurring online and in smoke shops, according to the American Kratom Association. Its also among the most commonly seized substances in the world among drugs classified as new by the United Nations.Millions of peopleuse it for pain relief, to alleviate the symptoms of opiate withdrawalor simply forrecreation.

U.S. agencies have sought to bankratom for years, but they have faced opposition from some members of Congress, including Democratic Senators Ron Wyden and Cory Booker. Users of the drug are also so well organized that theyve been known to send a flood of letters to their representatives in Washington any time there is movement on the issue.

Although kratom isnt bannedin the U.S., some states have their own restrictions and the Food and Drug Administration has seized dietary supplements containing the drug.

Kratom is illegal in six U.S. states while unregulated federally

Source: American Kratom Association

A closely watched World Health Organization panel decided Dec.7 that kratom didnt warrant a critical review,which could have led to UNrestrictions and a federal ban. The panel found that while the substance can be toxic in very high doses, it is difficult to link kratom to overdose deaths with much certainty.

Advocates say the decisionshould reduce stigmas and boost business opportunities. Jenn Lauder, the marketing and advocacy director for Kraken Kratom, one of the largest online kratomcompanies, said investment interest has surged andarecent industry convention in New York was crawling with venture capitalists.

I definitely think it opens doors for more companies, Lauder said. When people see this is potentially lucrative, thats always the final push they need.

Now, some pharmaceutical companies are looking to get into the game. Atai is developing a drug derived from kratom to treat pain and opioid-withdrawal symptoms. The company aims to begin clinical trials early next year, according to its chief scientific officer, Srinivas Rao.

Justover 2 million Americans a year consume kratom, with the highest rates occurring among users of opiates, according to a recent New York University study. Dafna Revah, co-owner of a nearly 50-store retail chain calledCBD Kratom, said the WHO panels decision should open doors for customers who were previously hesitant due to the pending assessment.

The American Kratom Association says growth has been limited by legal ambiguity. In most of the country, its sold as a dietary or herbal supplement. Six states have banned it outright, although no new statewide restrictions have occurred since 2016. Five states have passed industry-backed rules dubbed the Kratom Consumer Protection Actthat include age restrictions and quality standards.

Regulatory concerns keep away most mainstream companies. The FDAs jurisdiction to seize shipments creates major supply-chain riskssince almost all U.S. kratom is imported from Southeast Asian countries like Indonesia and Thailand. Earlier this year, 75,000 pounds of the substance wereintercepted and destroyed,and an FDA official said the agency would continue to take action against shipments.

Therisks havent stopped small companies from exploring the market.LFTD Partners, which largely focuses on cannabis and vaping, is in talks to acquire kratom companies, according to a spokesperson. Kratom-infused gum is being developed by Tauriga Sciences Inc.

Aspublic acceptance grows, Lauder sees kratom following the legalization path set by cannabis regulationsat the state level first and then a push forfederal recognition. In the past fiveyears, weve been able to move from being on the defensive to really going on the offense, she said.

8,583 Number of comments submitted in response to a notice that the World Health Organization would meet to discuss the benefits and harms of kratom

We continue to note that most publicly traded banks will likely avoid the marijuana industry until pot is federally legalized. State-chartered banks may fill the void,said Bloomberg Intelligence analyst Nathan R. Dean in a Dec. 14 note titled Marijuana Bank Bill Mostly Smoke, Mirrors Without Legalization.

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With assistance by Tiffany Kary

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Kratom Attracts Investor Attention After Regulatory Win - Bloomberg