If we told you that psychedelic drugs might well make a great investment for the next ten years, we could already imagine the funny look you are giving us. However, things are moving, and this catchy title was no clickbait: psychedelic drug companies are entering the market "en masse", and we should not underestimate their growth potential.
Psychedelic drugs: a growing trend
Because 2020 was a great mess of a year, many trends were easy to overlook. One of them is the use of psychedelic drugs to treat mental health issues.
While psychedelics were banned as dangerous drugs from the US for a long time, some of them like psilocybin are garnering interest and are starting to get legalized for medical reasons. Many studies are starting to show that many psychedelics can be of great help to cure a wide range of mental issues, such as obsessive-compulsive disorders, PTSD, drug addiction, alcoholism, depression, eating disorders and anxiety. What was once the claim of a few hippies is starting to get proven in laboratories, and this has brought psychedelics to the attention of big pharmaceutical companies, with some heavily investing in these peculiar chemicals.
The number of research publications on the matter has exploded since 2010 (Source: FDA, Health Canada)
Many companies are starting to invest heavily, while many projects and start-ups are being founded around the theme. And, you guessed it, all those projects need outside capital from the public market, creating new opportunities for investors wishing to go a little off the beaten path. The effects are scientifically proven, and the laws are changing. This emerging investment opportunities might well turn into a shroom boom, so pay attention!
As you can see on this graph, the market is expected to have a continuous growth, reachinng almost $7 billion by 2027. (Source: Data Bridge)
The fight for mental health is more important than old, established ideas
If psychedelic stocks are trading like biotechnology stocks these days, it is partly because they offer the great hope of bringing a solution to many mental health issues. The awareness about mental issues has risen, and so has the number of patients, fueled by the pandemic. Sad news for the world, great news for alternative treatment methods such as psychedelic drugs.
- A societal cost: The increasing cost of mental health issue is becoming hard to ignore. Although there are solutions, there are over 100 million people who are resistant to traditional treatments for depression, which represents around a third of patients. A micro dosing of psychedelics might turn things around.
- Changing regulations: laws that used to be very forbidding are changing as well. In Canada, the state is starting to give exemptions to qualified doctors, nurses, social workers, and therapists, allowing them to possess and use psilocybin for personal training. In the US, the FDA declared psychedelics as a breakthrough therapy for severe depression.
- Mushrooming valuations: a product or solution is something people will want to pay for. Not only that, but as you know, investors love good stories. Legalizing psychedelic drugs to cure a growing social dilemma is, let us be honest, one hell of a story.
Some stocks are already performing well, with triple digit stock price performance year over year and valuations in the hundreds of million dollars, and even more.
Some psychedlics-related stocks are showing outstanding performance this year (Source: FDA, Health Canada)
How to choose my stocks to jump on the trend?
I am glad you asked. While there are many stocks to choose from – as you will see in the non-exhaustive list down below – the choice can be difficult, especially in a field so specialized as medicine. One thing that every investor should be aware of is the state of development of a drug. There are many IPOs going on, but it is worth having a closer look at companies that are further in the approval process, because it means that their solution is closer to a final approval and thus, more valuable. Bear in mind that not all companies have access to psychedelic compounds, have a clear idea of the disorder they are targeting, or have an actively running clinical trial.
The drug discovery process and stocks that are further in
The drug development process is essential to make sure the treatment is safe and effective. First, the drug is investigated and tested on animals to see how a living organism reacts to it. The composition, manufacturing process and formulation are then sent to the FDA in the US or Health Canada in Canada. If approved, the clinical trial phase can start. The company enlists volunteers, and the first tests are conducted and analyzed. If nothing went wrong, the test is approved and can move on to phase 2, where the drug will be used with a larger testing segment.
So far, only 4 companies are in phase 2 of the tests, while all the others are still a concept, or deep in phase 1. Let us look at the top 4 firms:
Compass Pathways (NASDAQ:CMPS)
Compath Pathways is a mental health company operating in the US and the UK. They are developing COMP360, a psilocybin-based drug aimed to cure depressive patients resistant to classical treatments. The total market for their drug will be of around $1.12 billion by 2024. They are currently the most valuable company in the market and raised $250 million for a $1.6 billion total valuation.
Mind Medicin Inc (OTCMKTS: MMEDF)
MindMed is a neuro-pharmaceutical company that develops psychedelic-inspired medicines. Their main priority is to address the opioid crisis by developing a non-hallucinogenic version of the psychedelic ibogaine. They are also working on a micro dosing division, studying the impact that LSD could have for adults with ADHD. More recently, they have added MDMA to their pipeline and are studying the effects it could have on mental health disorders. They have a current market cap of $1.451 billion.
Cybin Inc. (OTCMKTS: CLXPF)
Cybin Inc is also specializing itself in the microdosing of different psychedelic drugs. They are specializing in tuning technologies and delivery systems that would allow small dosages. They have a market cap of $234 million, and their total addressable market will be of around $5.8 billion by 2025.
Mydecine Innovations Group (CNSX: MYCO)
Mydecine Innovations Group is the only company that has a full CGMP certified pharmaceutical manufacturing facility with the ability to import and export, extract and analyse psychedelic compounds with the full approvement of health Canada. They were also the first company to offer naturally sourced psilocybin and made the first ever legal export of Magic Mushrooms. Their total market cap is of $83 million and their total addressable market should be of $10.6 billion by 2026.
Other psychedelic investment ideas
Of course, while these are the most advanced companies in the field, there are many other investment alternatives to choose from, whether they would be stocks or ETFs. Here is a non-exhaustive list.
Champignon Brands (OTCMKTS:SHRMF)
This company is focused on treating depression and PTSD. They are using psychedelics like ketamine, psilocybin and MDMA as potential solutions. These are all in preclinical trials so profits should not be around the corner for the next few years. But when they come it might be huge, as the PTSD global market is marching towards a $10 billion plus value.
Revive Therapeutics (OTCMKTS:RVVTF)
Revive is a CBD company, and works with the substance to develop rare inflammatory areas such as liver disease. They have also acquired psilocin pharma, giving them a foot in the psychedelic field. The company was testing with psilocybin-based therapeutics to treat mental health issues. This company has the advantage of betting on two quite different horses.
Ehave Inc. (OTCMKTS: EHVVF)
Ehave provides a solution to deliver evidence-based therapeutics intervention to patients. What they propose is a dashboard based on blockchain technology to provide better communication among health workers for better patient outcomes, while being extremely secure. The solution also allows patients to take control of their physical and mental health by carrying their medical records wherever they go.
Core One Labs (CSE:COOL)
Besides a very cool ticker symbol, Core One labs is developing a thin-film oral strip, which could become one of the potential novel delivery form for psychedelic medicines. They are working to develop intellectual property in this space.
Field Trip Health (CSE:FTRP)
The company is the development of clinics across North America. They opened their first ketamineclinic in Toronto and are now expanding in New York and Los Angeles. They also have a research division for psychedelics compounds. They also have an app to go alongside their treatments, offering patients advices and support such as meditation techniques.
NeonMind Bioscience (CSE:NEON)
With a focus on obesity and related illnesses, the company is testing different psychedelic products in clinical trials.
If you're looking for an investment with a foot in Europe, Pharmadrug is an international medical company who acquired Pharmadrug GmbH, a German medical cannabis distributor. They just entered psychedelics through the acquisition of Super Smart, as Netherlands-based retailer with a focus on magic mushrooms.
It's all about ketamine for PharmaTher. They are now developing treatments for Parkinson, depression, and general pain.
Tryp Therapeutics (CSE:TRYP)
They are going a little edgy, focusing on rare diseases and conditions which have not been met with any medical solution yet. Currently, they are working on the treatment of fibromyalgia, a disease characterized by musculoskeletal pain, fatigue, sleep, memory and mood issues.
Horizons Psychedelic Stock Index ETF (NEO:PSYK)
The first ETF tracking psychedelics-related stocks, which will begin trading on the NEO Exchange under the ticker "PSYK". It will be designed to replicate the performance of a basket of North American publicly listed life science companies that have a significant business activity in or significant exposure to the psychedelics industry.
Horizons ETFs to Launch World's First Psychedelics-Focused ETF, in Cision NewsWire
Why Investors Are Psyched About Psychedelic Stocks, in Visual Capitalist
Trends in Psychedelic Drugs Research and Four Stocks You Should Know About, in Intrado NewsWire
3 Psychedelic Stocks to Buy for HUGE Gains in the Shroom Boom, Investor Place
Psychedelics Stocks to Watch, in Investing News