How to invest in psychedelics
The heightened opportunity recently attached to psychedelic drugs has made market players ask themselves how to invest in psychedelics.
The promising research associated with psychedelic medicine has generated interest in the potential for these products as treatments for mental health issues or even addiction to opioids.
Early projections for the space, including a data report from a Canadian exchange, have pegged the magic mushroom industry with the potential to reach a US$7 billion value by 2027.
The capital markets have opened the doors to this sector as a new wave of public companies pursues effective methods of medicine and product development to offer growth in this developing arena.
Here the Investing News Network (INN) provides investors with a closer look at ways to invest in psychedelics, what to look for when starting in the space, and the early trends that were seen so far in this nascent capital markets industry.
Ways to invest in psychedelics: Canadian markets offer early stage investment
The Canadian space has already seen a significant number of public listings related to the market for psychedelic stocks, as well as existing public businesses trying to get a piece of the pie.
The Canadian Securities Exchange (CSE) has long established itself as a hotbed for up-and-coming companies in growth-stage areas. It has been no different with psychedelics, and the exchange already offers a collection of stocks for investors to examine.
During an online video conversation, Richard Carleton, CEO of the CSE, said he’s held discussions with both companies and investors that are keenly interested in investment opportunities for the space.
The exchange executive stressed that investors need to keep an eye on the disclosures offered by companies operating businesses that may not be universally legal. This is something that the CSE got experience doing during the cannabis boom — the exchange began asking marijuana companies to fill out detailed forms indicating the risks associated with their businesses.
Carleton compared the two industries, saying while cannabis has raised millions of dollars in Canada to launch “the most exciting new consumer packaged goods industry in generations,” the psychedelic stocks investment space is more akin to pharmaceuticals and takes a much more established medical approach to its business models.
A report put forth by the Toronto-based NEO Exchange shows nearly US$150 million was raised in the first half of 2020 for private-stage funding. The sum was raised by six names in the psychedelics space: COMPASS Pathways, ATAI Life Sciences, Mind Medicine (MindMed) (NEO: MMED), Field Trip Psychedelics, Numinus Wellness (TSXV: NUMI), and Orthogonal Thinker.
MindMeld and Numinus have already reached the public markets with flashy debuts in Canada.
“We are looking for like-minded investors who share our belief that new approaches and new ways of thinking are needed to supplement existing options,” Numinus CEO Payton Nyquvest said in a statement following the public launch of his firm.
Within the NEO, the opportunity attached to psychedelic stocks investment has been recognized as critical for the future of the up-and-coming Canadian exchange.
“The psychedelics space shows incredible promise and NEO is ready and willing to help bring that potential to fruition,” Jos Schmitt, president, and CEO of the NEO wrote in a letter attached to the exchange’s public report on psychedelic investments.
Ways to invest in psychedelics: Current investment landscape
As it stands, the investment arena for psychedelics offers an early-stage entry for investors, with a crop of companies already trading with healthy volumes.
Currently, investors are seeing brand-new companies purely focused on the psychedelics business come out of the private stage and into the capital markets, as well as existing firms looking for assets or buying diversifying options with promising companies involved in psychedelics.
From the batch of new companies, the majority have put forward business models based on the psychedelic research of novel medicines, which like established pharmaceutical products will require heavy inspections and reviews.
The message of a pharmaceutical-like industry was echoed by the first major debut of a psychedelics firm on the NEO, MindMeld.
JR Rahn, co-founder director, and co-CEO of the firm, previously told INN his company is squarely focused on the medical aspect of the psychedelic drug industry.
MindMeld reached the public markets as a way to raise capital in its pursuit of high-end medicine drug products aimed at treating opioid addiction.
“We don’t see a future in recreational psychedelics,” the MindMed executive said. “The only future that we see is psychedelics medicines being passed through the (US Food and Drug Administration).”
The connection to the pharmaceutical space was reinforced with the launch of the first psychedelics exchange-traded fund — while it includes mostly psychedelics-focused companies, it also has some exposure to big-name pharma stocks doing research on psychedelics.
The wellness and improvement trend in the space is widespread, with the rest of the psychedelic drug investment stories relating to modern clinics offering novel treatments for people struggling with mental health issues. In design, these clinics offer a fresh method of treatment for patients.
During an online webinar, Dr. Michael Verbora, medical director with Field Trip Psychedelics, said the company’s flagship clinic in Toronto offers ketamine-assisted psychotherapy for depression, anxiety, and in some instances even post-traumatic stress disorder (PTSD).
Last February, Field Trip completed a private placement funding worth US$8.5 million.
Ronan Levy, executive chairman of Field Trip, credited the sum raised to a mixed array of international investment figures, such as academics and investment funds.
“(The investment) speaks profoundly to the level of interest, excitement, and importance that people around the world are placing on the advancement of psychedelics and the role they may play in improving mental health, performance, general wellness, and happiness.”
Ways to invest in psychedelics: Investor takeaway
The lofty expectations for the industry come as it has attached itself to the potential for becoming a go-to treatment available for patients dealing with mental health issues such as anxiety and depression; some even aspire to see it as an opioid addiction solution.
During his webinar, Verbora credited the interest in this space in part to a shift in the cultural acceptance and opinion of psychedelic medicine and psychedelic treatments.
This change has brought forth excitement from the public markets, particularly in terms of the investment opportunity attached to this sector.