There are key differences between investing in cannabis and in psychedelics.
Just as Colorado has been a leader in the legal marijuana market, so too is the state at the vanguard of legalizing psychedelic drugs. In 2019, Denver became the first U.S. city to decriminalize the hallucinogenic mushroom compound psilocybin, and in November voters will decide on a ballot initiative that would make Colorado the second state to legalize the drug for medical use. Oregon did so in 2020. Other states are moving in that direction too, bringing up the question of whether a market for state-legal psychedelics might emerge the way one has for cannabis products. Although there seems to be plenty of room for growth, there are differences between the two drug markets, and investors will need to tread cautiously. Here are seven psychedelic stocks to watch.
GH Research PLC (ticker: GHRS)
One difference is that there likely won’t be a recreational market for psychedelics like there is for cannabis. Psychedelic medicines can be effective for treating post-traumatic stress, addiction, treatment-resistant depression and other mental health issues after one or very few treatments, notes Josh Kappel, partner at Vicente Sederberg, a law firm that does work in the cannabis and psychedelic spaces. “There just isn’t the same repeat customer like with cannabis or many prescription drugs,” he says. Still, “anything that has the power to address our nation’s mental health crisis is going to be massive. Enter GH Research and many other biopharmaceutical companies focusing on psychedelic compounds as medicine. The company is developing and testing three 5-MeO-DMT therapies for treatment-resistant depression. The psychedelic 5-MeO-DMT is a close relative of DMT, known as dimethyltryptamine.
Atai Life Sciences NV (ATAI)
Zappy Zapolin, chief visionary officer with Psycheceutical, says the psychedelic market is significantly larger than cannabis because of its promise in treating mental health and addiction issues. “Psychedelics are being recognized as purely medical; they are not facing the same pushback that cannabis gets because of its recreational use,” he says. Kunal Sawhney, CEO of Kalkine Group, adds that as public opinion becomes more positive, psychedelic stock investment in the last couple of years has become mainstream, with many drug makers going public. One of them is Atai. After its “big splash” debut on the Nasdaq exchange last year this clinical-stage biopharmaceutical company “corrected a lot but now is showing resilience,” says Sawhney. The company focuses on acquiring, incubating and developing therapeutics to treat depression, anxiety, addiction and other mental health disorders. It is developing a ketamine compound for treatment-resistant depression, an ibogaine compound for opioid use disorder, and an MDMA derivative for post-traumatic stress disorder.
Cybin Inc. (CYBN)
This psychedelic-focused biopharma company is developing a psilocybin treatment for frontline health care workers suffering from mental distress. It also has two psilocybin analog drugs in the pipeline to treat major depressive disorder and alcohol use disorder. Financial author Sabine Saadeh says that changing social attitudes about psychedelics and time for medical breakthroughs and increased ethical treatment of patients will help boost the stock prices of Cybin and Atai. “Psychedelic treatments in controlled environments with compassionate and ethical medical professionals will have a positive impact in a world reeling from stress and depression,” she says.
Compass Pathways PLC (CMPS)
Saadeh also points to CMPS, another company working with psilocybin. Its first major initiative is its COMP360 psilocybin treatment. The company recently said it launched a phase 2 trial of the drug, administered with psychological support, in people with anorexia nervosa, for which there currently isn’t an approved pharmacological treatment. Compass has already completed a phase 2b clinical trial of the psilocybin therapy for treatment-resistant depression and is running a phase 2 clinical trial of the therapy for post-traumatic stress disorder. “Psychedelic stocks have an enormous upside potential,” Saadeh says.
Mind Medicine Inc. (MNMD)
Mind Medicine is a biopharmaceutical company that says it’s working to “deliver on the therapeutic potential of psychedelics and other novel compounds to address unmet patient needs in the fields of psychiatry, addiction, pain and neurology.” One of its lead product candidates, a form of LSD the company is developing to treat generalized anxiety disorder, is in phase 2 trials. The company in May announced favorable safety and tolerability of a phase 1 trial of a non-hallucinogenic relative of ibogaine the company is developing to treat opioid withdrawal. It’s also working on a type of MDMA to treat symptoms of autism spectrum disorder. “The company is an emerging player in the psychedelic health care market,” says Sawhney.
Psycheceutical Bioscience Inc. (BWVI)
This psychedelic drug company has attracted the attention of Kevin Harrington of the TV show “Shark Tank” as an investor and strategic advisor. The company’s technology allows the delivery of compounds across the blood-brain barrier while bypassing the GI tract and liver, eliminating hallucinogenic effects and reducing exposure to drug toxicities and side effects. “The patents allow Psycheceutical to remove the psychedelic effect, and other negative side effects, like nausea and lethargy,” says Zapolin. “This opens up the market to elderly patients, adolescents, and people who are afraid of the experience but still want the neurogenic benefits.” In addition to its own drug development, the company also licenses its patents to other companies. BWVI, formerly Blue Water Ventures International, trades in over-the-counter markets.
Seelos Therapeutics Inc. (SEEL)
Seelos Therapeutics is a psychedelic company focused on the development of therapies for central nervous system disorders and rare diseases. It has four clinical-stage programs, including two that involve ketamine. One of those is for people with major depressive disorder exhibiting acute suicidal ideation and behavior. This is an area in desperate need of treatments as there isn’t a currently approved therapy. Current treatment regimens include hospitalization and anti-depressants that carry a risk of increased suicidal thoughts, the company says. The other ketamine drug is for treatment of complex regional pain syndrome.
7 psychedelic stocks to watch:
— GH Research PLC (GHRS)
— Atai Life Sciences NV (ATAI)
— Cybin Inc. (CYBN)
— Compass Pathways PLC (CMPS)
— Mind Medicine Inc. (MNMD)
— Psycheceutical Bioscience Inc. (BWVI)
— Seelos Therapeutics Inc. (SEEL)
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Update 07/29/22: This story was published at an earlier date and has been updated with new information.