The psychedelic stock sector may still be in its infancy, but positive factors are taking root and growth-minded investors would be wise to take notice.
In 2022, for example, two U.S. states — Oregon and Colorado — established dates to legalize specific psychedelic substances. In late 2023 and in 2024, more U.S. states are set to make their own rules in deregulating so-called psilocybin stocks.
On the downside, the first quarter of 2023 wasn’t kind to psychedelic stock investors, with many sector securities falling in the first three months of 2023, largely following the negative trends nagging most biopharma stocks.
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A rebound is already in place as investors pass the midpoint of 2023.
The industry is getting closer to delivering psychedelic substances that could find robust commercial use in key consumer areas like psychedelic therapy and high-end herbal medicine. With the field wide open, investors have a great opportunity to get in on the ground floor of what should be a vibrant and expanding psychedelic drug market by the middle of the decade.
What stocks should prosper the most in that timeframe? Here are some of the best psychedelic sector stocks generating a buzz among investors:
| Stock | Year-to-date performance as of July 10 |
| Atai Life Sciences N.V. (ticker: ATAI) | -15.8% |
| GH Research PLC (GHRS) | 28.1% |
| Compass Pathways PLC (CMPS) | 32.8% |
| Incannex Healthcare Ltd. (IXHL) | -27.1% |
| Mind Medicine Inc. (MNMD) | 83.2% |
| Seelos Therapeutics Inc. (SEEL) | 80.9% |
| Cybin Inc. (CYBN) | 57.2% |
Atai Life Sciences N.V. (ATAI)
Atai is already benefiting from a recent statement from the U.S. Food and Drug Administration laying out its first draft guidance on psychedelic drug clinical trials.
“By publishing this draft guidance, the FDA hopes to outline the challenges inherent in designing psychedelic drug development programs and provide information on how to address these challenges,” said Tiffany Farchione, M.D., director of the Division of Psychiatry in the FDA’s Center for Drug Evaluation and Research, in a June 23 press release. “The goal is to help researchers design studies that will yield interpretable results that will be capable of supporting future drug applications.”
The FDA’s move should be a signal to investors that Uncle Sam is taking psychedelic substance treatments for real. While Atai has had some setbacks in early 2023, the company is one of the early leaders in the psilocybin-based mental health disorder treatment market. Although ATAI is down 15.8% year to date as of July 10, the stock has gained over 44% since the FDA announcement.
GH Research PLC (GHRS)
GH Research is a bit of an outlier in the psychedelic drug sector, as it’s up 28.1% year to date and up 48.6% over the past three months, as of July 10. The company specializes in depression treatments with its proprietary 5-MeO-DMT therapies. Biopharma analysts seem to be bullish on the stock. Take H.C. Wainwright’s Patrick Trucchio, who on July 6 issued a “buy” call on GHRS, citing a price target of $45 per share. That would be quite a jump for GH Research shares, given its July 10 closing price of $12.45. The company had a strong cash position of $246 million as of March 31 and only a net loss of $10.9 million in the first quarter of 2023. That suggests the company is fast-tracking its depression treatment therapies and has the cash on hand to keep the pedal to the metal.
Compass Pathways PLC (CMPS)
In the past month, shares of this emerging biometric company delivered a jolt on behalf of investors, rising 24.1%, with Compass up 32.8% year to date as of July 10. Like GH Research, Compass specializes in synthetic psilocybin therapy for treatment-resistant depression, and it’s already expanded into specialty areas like anorexia nervosa and post-traumatic stress disorder.
On July 7, the company provided an updated timeline for its potential psilocybin-assisted therapy regulatory approval, which would occur in early 2027, dependent on successful late-stage clinical trial results coming out in 2024 and 2025. Additionally, a study released in late May showed more than 50% of Compass depression test patients demonstrated strong signs of remission within 18 months.
Incannex Healthcare Ltd. (IXHL)
Incannex, an Australian biopharma-based biosciences company, has stopped a five-month share-price slide, with its stock rising by 10.9% so far in July. Shares turned bullish after the cannabinoid and psychedelic compound medicine development firm announced its plans to buy APIRx Pharmaceutical USA LLC, a pharmaceutical medicinal cannabinoid product development company, for a reported $93.3 million. APIRx, with an intellectual property portfolio of 19 granted patents and 23 pending patents, should expand the Incannex drug therapy portfolio in key commercial treatment areas such as dementia, Parkinson’s disease, gastrointestinal diseases and addiction disorders.
The company should also benefit from a new psychedelic-assisted psychotherapy clinic that’s set to open in Melbourne, Australia, later in 2023. The new facility, called Clarion Clinics, will be the first dedicated psychedelic-assisted psychotherapy business in Australia. “We’re delighted to be at the forefront of an industry that has the potential to change the lives of thousands of people who have been living with conditions for which there have been no adequate treatment options,” Incannex CEO and managing director Joel Latham said in a May 5 press release.
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Mind Medicine Inc. (MNMD)
MindMed shares are up 34.3% over the past three months and have risen by a massive 83.2% year to date as of July 10. The New York-based company specializes in the development of novel product candidates to treat depression, anxiety, addiction and other mental health issues.
The FDA has already cleared Mind Medicine’s investigational new drug application for MM-120, a pharmacologically optimized form of LSD to treat generalized anxiety disorder. That treatment therapy is set for a phase 2 trial with topline readout data ready by late 2023, the company stated in a June guidance release. MindMed also noted “an expected cash runway through key clinical readouts and into the first half of 2025” in a June investor presentation.
Seelos Therapeutics Inc. (SEEL)
Seelos shares received a big boost in late June after the clinical-stage biopharma company announced it expects to complete a key study on the firm’s SLS-002 intranasal racemic ketamine treatment for suicidal behavior and ideation and severe depression. On June 22, the same day Seelos announced the study results should be available in the third quarter of 2023, its shares rose 6.6%. Taking a longer view, the company’s stock price is trending in the right direction, rising 33.7% over the past month and 80.9% year to date as of July 10. Analyst support remains robust, with Cantor Fitzgerald’s Charles Duncan issuing a “buy” call on June 23. Meanwhile, the analyst consensus on SEEL is a “strong buy” right now with a target price of $4.50 — that’s about a 266% rise from the stock’s July 10 closing price of $1.23.
Cybin Inc. (CYBN)
Cybin, a Canadian psychedelic drug developer that produces treatments for depression, anxiety and addiction, is gaining support from industry analysts. On June 30, H.C. Wainwright reconfirmed its “buy” rating on CYBN, calling for a $10 target price. That would be a significant price boost given the stock’s $0.47 closing price on July 10, and the stock is up 57.2% so far this year.
The company also issued some guidance on the pace of product growth, stating it has completed participant dosing on part two of three early-stage trials evaluating intravenous use of its proprietary DMT drug CYB004. (The therapeutic is being tested for anxiety and depression disorders.) Investors should keep a sharp eye on Cybin in the second half of 2023, with a raft of clinical study results rolling in.
“The second half of 2023 will be pivotal for Cybin as we expect topline clinical data readouts from both our Phase 1/2a trial of CYB003, our deuterated psilocybin analog, and from our Phase 1 trial of CYB004, our deuterated DMT molecule,” Cybin CEO Doug Drysdale said in a June 8 press release. The company also announced new levels of funding that “should provide Cybin with the cash runway needed to complete our value-driving clinical milestones and enable us to continue focusing on clinical execution with the ultimate goal of bringing improved therapeutic options to patients in need,” Drysdale noted.
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7 Best Psychedelic Stocks to Watch in 2023 originally appeared on usnews.com
Update 07/11/23: This story was previously published at an earlier date and has been updated with new information.
