In recent years, there has been growing interest in the potential for psychedelics to treat various mental health issues, such as depression, anxiety, post-traumatic stress disorder, addiction, and others.
A wave of clinical research has been conducted, demonstrating the efficacy of psychedelic-assisted therapies in treating these conditions, leading to a surge of interest from the medical community, regulatory bodies, and the general public.
Additionally, the increasing interest in the potential of psychedelics becoming an approved mental health treatment has also caught the attention of investors, who see a unique opportunity to invest in an emerging industry with the potential for significant growth.
According to a report by Data Bridge Market Research, the global psychedelic drugs market is expected to reach $9.8 billion by 2029, growing at a CAGR of 16.8% from 2022 to 2029.
Investors can participate in the psychedelic industry in several ways, including investing in companies that are involved in the research and development of psychedelic medicine, those that are producing and distributing psychedelics for therapeutic use, and those that are developing technologies and tools to support the administration of psychedelic-assisted therapies.
And as the legal and regulatory landscape continues to evolve and the potential of psychedelics in treating mental health disorders becomes more widely recognized, the psychedelic industry could lead the next bull market, which makes now such an interesting time to consider investing in the sector.
If you’re interested in exploring the opportunities that the emerging psychedelic industry has to offer, this guide will provide you with the information you need to get started.
From understanding why investing in psychedelics is becoming increasingly attractive to highlighting some psychedelic investments worth considering and providing insight into what the future of the psychedelic industry might hold, this guide will equip you with the knowledge and tools to navigate this exciting and rapidly evolving sector successfully.
Why Invest in the Psychedelics Industry
Investing in psychedelics is becoming increasingly attractive for several reasons.
Firstly, the potential of psychedelic-assisted therapies in treating mental health disorders represents a significant growth opportunity for the industry. As mentioned earlier, the global psychedelic drugs market is expected to reach $9.8 billion by 2029. This growth is expected to be driven by increasing awareness of the potential for psychedelic therapies in treating a range of mental health disorders and broader acceptance from the general public in using psychedelics in a controlled and clinical manner.
Secondly, the legal and regulatory landscape surrounding psychedelics is rapidly evolving. In recent years, several jurisdictions have either decriminalized or legalized psychedelics for medical or research purposes.
Case in point, in the US, the FDA has granted Breakthrough Therapy designation to several companies developing psychedelic therapies, indicating that the agency recognizes the potential of these therapies to address unmet medical needs.
Furthermore, several states have passed or are in the process of passing laws that decriminalize or legalize the use of psychedelics for therapeutic purposes, mainly off the back of various studies showing scientific proof that psychedelic therapies are a superior option to treat mental health issues.
Thirdly, the COVID-19 pandemic has further highlighted the need for effective mental health treatments. The pandemic has caused a significant increase in mental health disorders, such as depression and anxiety, and the limitations of traditional treatments have become more apparent. As a result, there is a growing demand for alternative and innovative treatments (such as psychedelic-assisted therapies).
Finally, investing in psychedelics provides an opportunity to make a positive impact on society. By investing in companies that are developing psychedelic-assisted therapies, investors can contribute to the development of treatments that have the potential to significantly improve the lives of millions of people suffering from mental health disorders.
When regulatory approval and wide public interest come together, it can make a powerful cocktail for exponential growth. The psychedelic industry has always struggled to break through the stigma and negative connotations that psychedelic drugs have traditionally held. However, the need for improved treatment methods combined with greater public interest and regulatory acceptance makes now an opportune time to invest in the industry.
How to Invest in Psychedelics
With the proliferation of psychedelics hitting the mainstream world, there has quickly become a wide variety of different investment opportunities for investors to consider.
However, with the industry being so new, investors should be careful about how they plan to gain exposure. Not every psychedelic company is worth an investment, and there are already some shining stars investors should be aware of.
To help our readers out, we’ve highlighted four psychedelic investment opportunities to consider:
Compass Pathways (CMPS)
Image Source: Compass Pathways
Compass Pathways is a leading player in the psychedelic drug industry that was founded by George Goldsmith and Ekaterina Malievskaia in 2015. The company’s roots can be traced back to a non-profit organization called The Compass Trust Limited, which was established to support research and development of psilocybin therapy for individuals suffering from end-of-life anxiety.
The company’s efforts in psychedelic research led to the development of COMP360, a psilocybin-based therapy that has shown promise in treating mental health disorders such as treatment-resistant depression and post-traumatic stress disorder (PTSD). In fact, Compass Pathways conducted the largest clinical trial in the history of psilocybin therapy with its phase 2 study evaluating COMP360 in treatment-resistant depression. The results of this study were very encouraging, with the company reporting statistically significant evidence that COMP360 can potentially be an effective long-term solution to treating depression-related illnesses.
Following the success of its clinical trials, Compass Pathways listed its shares on the Nasdaq stock exchange in September 2020. The company plans to advance the development of COMP360 into late-stage testing in 2022, which could potentially lead to the therapy being approved for the treatment of depression and PTSD in the near future.
COMP360 has the potential to be used in treating other mental health disorders as well. Compass has initiated a phase 2 study of the experimental therapy in treating PTSD at The Institute of Psychiatry, Psychology & Neuroscience (IoPPN) at King’s College London. Additionally, the company is conducting other investigator-led studies in areas like major depressive disorder.
Investing in Compass Pathways provides investors with exposure to an innovative company at the forefront of psychedelic-assisted therapy development. With a promising pipeline and a growing list of potential applications, Compass Pathways is poised to make a significant impact in the mental health space. In addition, the company is also working on building out their supply chain to not only create the psychedelic medicine, but also have a network of trained professionals and treatment centers to administer their compound to patients.
Numinus Wellness (NUMI)
Image Source: Newswire
Numinus Wellness is one of the most promising players in the up-and-coming psychedelic industry. Founded in 2018, the company is dedicated to developing proprietary psychedelic-centered therapeutic products and services through its laboratory and research & development processes.
Its clinic network comprises of Numinus Health, Mindspace Services, and the Neurology Center of Toronto, which all provide a wide range of mental health treatments, including Ketamine-assisted psychotherapy for depression, neurological care and psychotherapy, and counselling by registered psychologists.
In 2022, the company commenced a phase 1 clinical trial to evaluate NBIO-01, a naturally derived psilocybin extract. Further, the company has also announced its intention to conduct a clinical study on the use of methylenedioxymethamphetamine (MDMA) therapy to treat PTSD, with the support of the Multidisciplinary Association for Psychedelic Studies (MAPS).
Unlike some of its peers, Numinus Wellness is already generating revenue, which is growing at an impressive rate of 188.81% YoY, with gross margins at 8.38%. With a rapidly expanding presence, the company had one total wellness clinic at the start of 2021 and now boasts 12 wellness clinics and four clinical research sites at the beginning of 2023.
Looking forward, Numinus Wellness is projected to post revenue of $24M in 2023, $38M in 2024, and $63M in 2025, making it a potentially attractive investment opportunity for those looking to invest in the psychedelic industry but who want to invest in firms who are already generating revenue.
Horizon’s Psychedelic Stock Index ETF (PSYK)
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Horizon’s Psychedelic Stock Index ETF is another pure-play psychedelic opportunity, holding only companies that are directly involved in the manufacturing or distribution of psychedelic compounds. However, unlike other ETF’s, it is passively managed and follows the North American Psychedelics Index, which weights companies based on their market capitalization.
The ETF has a limit of 10% weight for any individual company, ensuring that the largest companies do not dominate the portfolio. Additionally, companies that only allocate a small portion of their capital to psychedelic medicines, such as Johnson and Johnson, can only be weighted at a maximum of 5% of the fund.
Although the ETF is rebalanced quarterly, smaller-cap companies may temporarily surpass larger ones between rebalancing periods. The ETF currently has $10.75 million assets under management and is invested in 11 different psychedelic stocks, including popular names such as Mind Medicine and Atai Life Sciences.
This is a great option for investors who want to limit their risk but still have exposure to the broader industry. Considering the psychedelic industry is so new, it will be hard to determine who the long-term winners will be. By investing in a low-cost ETF, investors can benefit from the growth of the industry without having to monitor specific companies.
Cybin Inc (CYBN)
Image Source: Businesswire
Cybin is a biopharmaceutical firm based in Toronto, Canada, that is focused on the development of therapeutic drugs based on psychedelic substances. Its innovative drugs aim to treat major depression, alcohol addiction, anxiety disorders, and neuroinflammation. Additionally, the company has developed a unique form of therapy called EMBARK, which combines psychedelics and psychotherapy.
As of December 31, 2022, Cybin had cash reserves totaling $22.5 million, which decreased to $9.349 million as of Q2 2023. The company is planning to cut down its workforce by 15% to improve operational efficiency and decrease its annual cash burn rate.
Despite the recent cost-cutting measures, the company continues to attract interest from investors and analysts alike. EF Hutton analyst Elemer Piros initiated coverage of Cybin with a Buy rating and a $3 price target on December 15. Piros noted that the company is working on developing new formulations and derivatives of psychedelic drugs, which have resulted in unique intellectual property.
Also, Cybin has gotten the attention of a few different hedge fund managers who believe the company is – through their combination of psychedelics and psychotherapy – creating a unique competitive advantage that will be hard to mirror by competitors.
Cybin has made significant strides in the development of therapeutic drugs and therapy, and with its innovative approach to the field, is poised for continued growth and success.
The Future of Psychedelic Investing
Image Source: WSJ
As the psychedelic investing industry continues to grow and evolve, it’s clear that there is still tremendous potential for growth and innovation. With ongoing research and the discovery of new therapeutic applications for psychedelics, we can expect more companies to enter the space, attracting more capital and fueling further growth.
One exciting trend in the psychedelic investing space is the emergence of new forms of psychedelic therapy. While current therapies are mainly administered through oral doses, injections, or inhalation methods, and other new delivery methods such as transdermal patches and nasal sprays are being developed, offering more efficient and precise dosing.
Another promising trend is the expansion of psychedelic research into new areas beyond mental health. Companies are exploring the use of psychedelics for treating conditions such as migraines, chronic pain, and inflammation. This has the potential to open up new avenues for growth for psychedelic firms into much larger and internationally based markets.
Finally, the integration of technology and data analytics is likely to play a significant role in the future of psychedelic investing. Psychedelic companies are starting to use artificial intelligence and machine learning to accelerate drug discovery and optimize treatment protocols. With the generation of more data from clinical trials and real-world patient experiences, investors will have more insight into the potential of psychedelic therapies and which companies are best positioned to capitalize on this emerging market.
Overall, the future of psychedelic investing is bright, with many exciting developments on the horizon. As the stigma around psychedelics continues to fade and their therapeutic potential becomes better understood, the industry will be ripe with innovation for years to come.
It’s hard to say with certainty where the industry will go in the next 2, 5, or 10 years, however, exponential growth seems all but guaranteed.
Risks of Investing in Psychedelic Companies
Despite the promising outlook for psychedelic investing, there are also risks that investors should be aware of.
One of the biggest risks is regulatory uncertainty. Psychedelic drugs are still classified as Schedule I substances under the Controlled Substances Act in the United States, which means they are illegal and have no recognized medical use. While there have been some changes at the state level to decriminalize and legalize certain psychedelic substances, the federal government still poses a significant legal risk to companies operating in this space. A change in government policies could result in increased regulatory scrutiny or even the shutdown of operations, which could negatively impact stock prices.
Another risk is the volatility of the stock market. Psychedelic stocks are often considered to be high-risk, high-reward investments, which means they can experience significant price swings in short periods of time. This volatility can be driven by a number of factors, such as changes in investor sentiment, fluctuations in company financials, or news events related to the broader industry.
Additionally, many companies operating in the psychedelic space are still in the early stages of development, with limited revenue streams or unproven products. As a result, they will not be profitable in the short term and may require additional funding through dilutive offerings, which can negatively impact existing shareholders.
Investors should also consider the competitive landscape of the psychedelic industry. As more companies enter the space and the industry becomes more crowded, it may become increasingly difficult for individual companies to stand out and capture market share.
Before investing in psychedelics investors should be sure to understand their risk tolerance, as well as how psychedelic stocks will fit into their broader portfolio before jumping into the industry.
Investing in the psychedelic industry can be both exciting and risky. While there is a great deal of potential for growth and innovation in this emerging market, it is important to consider the risks involved and to approach psychedelic investing with caution. As with any investment, it is crucial to do your research, diversify your portfolio, and be prepared to weather market fluctuations.
That said, the future of investing in psychedelic stocks looks promising. With increasing acceptance and interest in the therapeutic potential of psychedelics, we can expect to see continued growth and innovation in this space. As new companies emerge, more research is conducted, and new therapeutic applications are discovered, the potential for returns on investment could be substantial.
Psychedelic investing is not for the faint of heart, but for those willing to take on the risks, it could offer a unique opportunity to invest in an emerging market that is trying to make the world a better place, that also presents significant investment returns.
Though as with any investment, it is important to do your due diligence and make informed decisions based on careful consideration of the risks and potential rewards.