As many investors know, the legalization of cannabis sparked a massive rush of capital into the cannabis industry and created a wide variety of exciting investment opportunities. Right now, a similar phenomenon is happening with the so-called “psychedelics” which include substances such as psilocybin, the active ingredient in magic mushrooms.
Throughout most of American history, many mind-altering substances have been illegal. However, since cannabis started becoming legal in many U.S. states, first for medical use and then for recreational use, the strict stance on certain narcotics seems to be relaxing.
As many investors know, the legalization of cannabis sparked a massive rush of capital into the cannabis industry and created a wide variety of exciting investment opportunities. Right now, a similar phenomenon is happening with the so-called “psychedelics” which include substances such as psilocybin, the active ingredient in magic mushrooms.
The psychedelic industry is set to experience rapid growth. In fact, in 2020, the psychedelic industry was worth just $2 billion. But, by 2027, it is expected to grow to $10.75 billion. This growth rate could even outpace the growth rate of the cannabis industry.
Which States Have Decriminalized Psychedelics?
There are a number of psychedelics that have recently been the subject of law changes. For example, psilocybin mushrooms have recently been decriminalized in the state of Oregon, and several cities, including Denver, Colorado; Oakland and Santa Cruz, California; Ann Arbor, Michigan; Somerville, Northampton, and Cambridge, Mass; and Washington D.C. Decriminalization is how the move towards legal cannabis started, and we expect psychedelics to follow a similar path.
In addition to psilocybin mushrooms, a number of other psychedelics have either been decriminalized or made legal for medicinal or therapeutic use in various states. For example, ayahuasca has been decriminalized in Oakland, California. Certain native American tribes have been permitted to use peyote and mescaline for religious ceremonies due to the Religious Freedom Restoration Act.
Ketamine, another psychedelic substance that relieves pain while inducing a trance-like state in patients, has been approved for medicinal use in all 50 states. This substance is not only used for pain relief and as an anesthetic, but it is also being used in the psychology field to treat conditions like depression, suicidality, OCD, migraines, and PTSD.
In addition to medicinal use, some psychedelics have also become popular in places like Silicon Valley to help stimulate creative thinking. In particular, many people are experimenting with psychedelic “microdosing.” Microdosing is the process of consuming very small amounts of a psychedelic substance like psilocybin in order to enhance creative thinking.
Top Psychedelic Investments to Consider
Currently, there are at least 50 publicly-traded stocks that are involved with the creation or administration of psychedelic substances. As the regulations for psychedelics become more relaxed, here are some of the top 5 investment opportunities to keep your eye on in the psychedelic industry.
ATAI Life Sciences NV (ATAI)
ATAI Life Sciences is a clinical-stage biopharmaceutical company based in Germany. The company went public in 2021 and had a number of high-profile early-stage investors such as legendary investor Peter Thiel. ATAI focuses on developing products that help to treat a wide variety of mental disorders. Many of these products are derived from psychedelic substances such as ketamine.
Right now, ATAI has eight drug candidates that are in clinical testing. So, if even one or just a few of these are approved, then it could be extremely positive for the company. In addition to Peter Thiel, ATAI Life Sciences has also been invested in by Cathie Wood, who bought shares of the company for her ARK Genomic Revolution ETF.
The IPO price for ATAI was $15. Currently, the stock is priced at $3.11. So, ATAI has had a rough first year as a publicly-traded company. But, the company has a lot of potential for growth. In fact, Loop Capital recently gave ATAI a “Buy” rating and put set a price target of $18 for the stock.
Compass Pathways PLC (CMPS)
Compass Pathways PLC is a mental healthcare company founded in London in 2016 that develops innovative treatments for mental health issues like depression. The company is testing a psilocybin-based therapy for treating treatment-resistant depression, PTSD, and anorexia nervosa. The way that the treatment works is that the patients take the drug in a controlled setting and then they speak with a therapist during the experience.
The goal of this treatment is to help heal the trauma that could be at the root of mental health conditions and to rewire the brain to be healthier. There have been a number of other clinical trials such as those conducted at the University of California in San Francisco, that have shown positive results in using MDMA, or ecstasy, to treat PTSD.
Compass Pathways went public in September 2020. At the time of the IPO, the stock price for CMPS was $17. The price of the stock has been very volatile since its debut. It went as high as $61 at one point, but it also went as low as $9.42. As with many companies in the pharmaceutical and medical industries, long-term success will depend heavily on the company’s ability to create effective treatments that have clinical trial data to prove their efficacy. So, if Compass Pathways can get good clinical trial data and have its products and treatments approved, the company could be poised for strong growth. This will be especially true if psychedelic treatments continue to rise in popularity in the mental health field.
Seelos Therapeutics (SEEL)
Seelos Therapeutics is a clinical-stage biopharmaceutical company based in New York City, USA. The company is focused on generating novel therapeutics to help treat unmet medical needs for patients with central nervous system (CNS) disorders and rare diseases.
After being founded in 2016, Seelos merged with Apricus Biosciences in January 2019. Now, both companies are united into one entity that trades under the ticker symbol SEEL.
Seelos Therapeutics currently has four programs that are in clinical testing. Some of the health conditions that Seelos is developing drugs for include amyotrophic lateral sclerosis (ALS), Sanfilippo syndrome, Parkinson’s disease, and suicidal ideation.
The company is currently testing an intranasal ketamine drug in a phase 2 study that will treat suicidal ideation and behavior for patients with a major depressive disorder. If this study shows positive results, people with severe depression and who are suicidal might soon have new treatment options available to them that could potentially improve their condition and reduce the possibility of suicide.
Incannex Healthcare Ltd. (IHXL)
Incannex Healthcare Ltd. is a drugmaker based in Australia that is currently developing several different cannabinoid and psychedelic compounds. The company is currently testing cannabinoid products that can treat a variety of diseases, such as sleep apnoea, lung inflammation, rheumatoid arthritis, traumatic brain injury, inflammatory bowel disease, and more.
In addition to generating cannabis products, Incannex is also researching the use of psilocybin-assisted psychotherapy to help treat generalized anxiety disorder. For this work, Incannex has partnered with the Clinical Psychedelic Research Lab at Monash University to research generalized anxiety disorder.
In addition to being listed on the Nasdaq in America under the ticker symbol IXHL, Incannex Healthcare is also listed on the Australian Stock Exchange with the ticker symbol, ‘IHL.” So, investors have multiple ways to get their hands on this stock.
The IXHL stock has a great deal of volatility. Its initial Public Offering price was $16. Since then, the stock has gone as high as $90 to as low as $3.85. Currently, the stock is trading at around $4.20. This price could prove to be a steal if the psychedelic industry grows anywhere near as fast as the cannabis industry does. The fact that this company is developing both psychedelic and cannabis products helps to increase its versatility and growth potential.
Conclusion
Whereas psychedelics used to have a bad reputation as a dangerous type of drug that could potentially harm a person’s brain, this perception appears to be changing.
Psychedelic drugs have been around for many years. They were extremely popular in the 1960s and 70s and were favored by many rock stars and free spirits. In fact, famous guitarist Carlos Santana even performed his entire set at Woodstock under the influence of mescaline.
It appears that certain psychedelics, especially when used at lower doses, may have a variety of uses in medicine. These drugs are much better understood than they were in the 1960s. Due to the tremendous amount of research that is currently happening with psychedelics and the many emerging clinical uses, it is a good bet that the psychedelic industry will continue to grow. Now could be the right time to invest early in this interesting niche.
Of course, the growth of the psychedelic industry will be heavily impacted by regulations. For now, laws appear to be trending towards a relaxed status for psychedelic drugs. Most likely, this will continue if clinical studies keep showing positive results for psychedelics when it comes to treating health conditions. There are many people who are against these types of drugs, just as there are who are against cannabis- but times change, and oftentimes, the rules change when public perception shifts. So, a great deal of change could be on the horizon for the laws regarding psychedelic drugs, creating plenty of investment opportunities in the process.
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Here at The Spaventa Group, we help investors get access to such opportunities with our venture capital investment services. If you are interested in learning more about how you can use our VC investment solutions to invest in promising industry companies that have not gone public yet, then feel free to get in touch with us today.
