Researchers are excited about the potential of psychedelics to help people cope with major depressive disorders as well as other mental health struggles. In recent trials, 71% of people who took psilocybin experienced a 50% decrease in symptoms after four weeks. Half of the study participants entered remission.
Cannabis and CBD, often used to treat anxiety, PTSD, addiction, and depression shows similar potential to help people cope with and overcome issues with mental health. Psychedelics work differently than cannabis, providing researchers with the hope that they’ve found a cure that “resets” the brain. Some say success comes after just one use.
Researchers at Imperial College London, Johns Hopkins University, and King’s College London are working with drugs like ketamine (prescribed off-label in clinics in Germany and the United States), MDMA, 5-MEO, and Sonoran Desert toad to learn more about how medical practices could use strategies like micro dosing to help patients with mental health problems.
Many investors are excited by the potential of the psychedelics industry. Evolving legislation and regulations, supportive public opinion, and the global need for accessible and effective mental health treatments make psychedelics an attention-getting sector.
The psychedelic healthcare market is growing, with some analysts predicting that the market will reach $10.75 billion by 2027. Big pharma is taking notice; Janssen launched Spravato, a nasal spray that delivers esketamine, which is chemically related to ketamine, in 2019. The alternative antidepressant drug market is expected to reach $15.98 billion by 2023.
MindMen is a New York-based biotech company backed by Canaccord Genuity, CIBC Capital Markets, and Eight Capital. The company raised $183.8 million since May 2019 to expand clinical trials and fund research and development.
The company is currently conducting clinical trials of multiple psychedelic substances, including LSD and MDMA at the University Hospital Basel Liechti Lab in Switzerland.
ATAI Life Sciences is a biopharmaceutical company that specializes in creating psychedelic medications. The company recently debuted on the Nasdaq, and share prices shot up 40% on day one of trading. The startup, backed by PayPal exec Peter Theil, has a valuation of $2.6 billion.
Compass Pathways (NASDAQ:CMPS), a major public psychedelic stock, recently announced that it had completed enrollment for a 2b clinical trial of psilocybin to learn more about whether it’s an effective treatment for depression. If their findings are positive, they’ll start phase 3 next year.
Even after a phase 3 trial, the company must receive FDA approval, which is tricky considering psilocybin’s status as a schedule I substance. The FDA has approved just one cannabis-based drug, Epidiolex by GW Pharma, in spite of recent marijuana-friendly legislation.
Compass Pathways had a $13 million net loss during the first three months of 2021. The company had zero sales but incurred expenses, using $51 million on day-to-day expenses. The company remains financially strong, with $180 million in cash and cash equivalents.
After the FDA designated a psilocybin-based depression treatment a “breakthrough therapy” and fast-tracked approval for COMPASS Pathways, the company’s market cap increased 71% on the first day of trading.
The psychedelic sector is enticing, but it’s important to remember that it’s new, and there are obstacles to overcome before pharmaceutical companies can turn a profit selling this type of drug. While proving the effectiveness of psychedelic treatments is important, it’s crucial for many other pieces to fall into place, as well.
Companies in the psychedelics sector are in early growth stages and aren’t generally producing revenue. Growth investors may see psychedelics as a sector with immense potential; much like cannabis just a few years ago.
The psychedelic drug market has a current value of about $5 billion. ResearchAndMarkets analysts predict its value will grow to nearly $11 billion during the next six to seven years, creating a compound annual growth rate of 12%.
While there is great potential for investors to make money in psychedelics, there’s more to success than companies getting a product to market. The federal government must legalize psychedelics before these drugs can become part of the mainstream. For now, many investors consider psychedelics riskier than biotech, which struggles with FDA approval, but not with legalization.
Oregon legalized psilocybin last year, and Washington, D.C. passed laws that decriminalized its use. California’s bill (SB 519) passed in June and plans to decriminalize ecstasy and psilocybin possession. Oakland, California, and Denver, Colorado has also made attempts at decriminalizing psychedelics.
In 1996, California was the first state to pass laws allowing the use of medical marijuana. It’s taken decades for the cannabis industry to gain widespread legalization, and it could take just as long, if not longer, for psychedelics to become commonplace in medical practices across the United States.
While legalization could become a reality in some parts of the country soon, widespread adoption of psychedelics could take much longer. A recent poll revealed that two-thirds of registered voters don’t believe that psychedelics have medical uses.
Even so, early-stage investors say that Ibogaine and psilocybin have a better chance at disrupting the $70 billion mental health market than cannabis. Major drug makers are eager to get in on the action. The U.S. Food and Drug Administration (FDA) approved Johnson & Johnson’s ketamine-based drug in 2019.
There are about 25 companies on the Canadian Stock Exchange in the psychedelics business, even though the substances are illegal in the country. Companies often seek government authority so they can conduct research.
Psychedelic companies aim to take a cut of the multi-billion dollar global pharmaceutical industry. Gaining exposure to the psychedelics sector via pre-IPO investing is a great option for many experienced investors. It’s also possible to add certain medical stocks to a portfolio to diversify into psychedelics.
Contact us (The Spaventa Group) today to learn more about investing in medical psychedelics and opportunities in the pre-IPO private market.