Psychedelics stocks are becoming increasingly mainstream, in part due to changing social attitudes. Psychedelic drugs “are a loosely grouped class of drugs that are able to induce altered thoughts and sensory perceptions.” Recent medical research highlights that the use of psychedelics can have “positive effects on anxiety, depression, and existential distress with little side effects.”
On Jan. 1, 2023, Oregon will become the first state to allow psychotherapists to treat their patients with psilocybin. Psilocybin, otherwise known as magic mushrooms, occurs in nature and is often consumed for its hallucinogenic effects. It has also received strong tailwinds from the U.S. Food and Drug Administration (FDA), which designated psilocybin therapy as a breakthrough therapy.
Other states are likely to follow Oregon’s lead in terms of legalization. Meanwhile, investors are wondering whether a market for legal psychedelics might emerge in the near future.
A report from Data Bridge Market Research estimates that the global psychedelic drugs market will reach $6.4 billion by 2029. Such an expansion would mean a compounded annual growth rate (CAGR) of well over 13% between 2022 and 2029.
With that information, here are the seven best psychedelics stocks that boast explosive growth potential in this nascent industry.
|PSIL||AdvisorShares Psychedelics ETF||$3.88|
|ATAI||Atai Life Sciences||$4.28|
AdvisorShares Psychedelics ETF (PSIL)
52-week range: $2.50 – $10.70
Expense ratio: 0.68% per year
Selecting a single psychedelics stock to invest in may sound risky for most investors, given how young the industry is. Instead, they could consider buying an exchange-traded fund (ETF) to profit from the growth of this nascent segment.
The AdvisorShares Psychedelics ETF (NYSEARCA:PSIL) is an actively managed fund that offers exposure to the psychedelic drugs sector. This ETF primarily focuses on biotechnology, pharmaceutical and life sciences companies that generate most of their net revenue or allocate most of their assets to psychedelic compounds other than cannabis.
PSIL started trading in September 2021. The top 10 stocks in the fund account for more than 65% of the $10 million in total net assets.
The leading names on the roster include Cybin (NYSE:CYBN), Compass Pathways (NASDAQ:CMPS), Atai Life Sciences (NASDAQ:ATAI) and MindMed (NASDAQ:MNMD).
So far this year, PSIL has lost about a third of its value. Its price-to-book (P/B) ratio currently stands at 1.2x.
Atai Life Sciences (ATAI)
52-week range: $2.95 – $17.90
Atai Life Sciences (NASDAQ:ATAI) focuses on therapeutics to treat mental health issues, such as anxiety, depression or addiction. This clinical-stage biopharma company went public in June 2021. With significant support from venture capitalist Peter Thiel, Atai currently ranks as the largest psychedelics stock in the industry.
The psychedelic pure-play reported Q2 results on Aug. 25. The company does not yet generate revenue. Net loss per diluted share came in at 24 cents as compared to 37 cents in the prior-year period. Cash, equivalents and short-term investments ended the period at $312.5 million.
Atai Life Sciences boasts numerous programs in various phases of the clinical trial process. For instance, RL-007 is a promising candidate, currently evaluated in a Phase 2 clinical trial for the treatment of schizophrenia.
The company also partnered with Japanese Otsuka (OTCMKTS:OSUKF) to develop R-ketamine for treatment-resistant depression. This is a significant collaboration between a psychedelic-focused biotech and an established pharma company.
ATAI stock is down 44% year-to-date (YTD), despite a 10% increase over the past month. Shares are changing hands at 2.4x book value. Wall Street’s 12-month median price forecast for ATAI stock stands at $24.50.
Compass Pathways (CMPS)
52-week range: $6.54 – $49.51
U.K.-based Compass Pathways (NASDAQ:CMPS) is a mental healthcare company focused on the therapeutic applications of psilocybin, the active ingredient in psychedelic mushrooms. The company specializes in caring for treatment-resistant forms of various mental health disorders such as depression, post-traumatic stress disorder (PTSD) and anorexia nervosa. The company also provides a therapist training program for researchers studying psilocybin.
In early August, Compass reported Q2 financials. Net loss for this pre-revenue company was $21 million, compared to $17.5 million the previous year. Diluted loss per share was 50 cents, compared to 44 cents the year before. Cash and equivalents totaled $207.2 million.
Recently, the company launched a Phase 2 clinical trial of its psilocybin therapy for patients with anorexia. The trial will study the effectiveness of a combination of traditional therapy and psilocybin for 60 patients across four research facilities.
CMPS stock is down 30% YTD. Shares are trading at 3.3x book value. Analysts’ 12-month median forecast stands at $63.
52-week range: 39 cents – $2.88
Canadian pharmaceutical company Cybin (NYSEMKT:CYBN) went public in August 2021. It is developing a pipeline of psychedelic drugs to treat diverse mental health issues, including depression, anxiety and addiction.
Cybin announced Q1 financials on Aug. 8. The company does not yet generate revenue. Cash-based operating expenses totaled 11.2 million CAD. Non-cash expenses totaled 1.9 million CAD for a net loss of 13.1 million CAD. Cash and equivalents ended the period at 42.5 million CAD.
The pharmaceutical company has three active programs undergoing clinical trials, along with more than 15 patents focused on novel psychedelic compounds, delivery mechanisms and supportive treatment platforms.
Cybin has two psilocybin drugs in the pipeline to treat major depressive disorder and alcohol use disorder. CYB003 is the first novel psilocybin analog to be evaluated in a Phase 1/2a trial for the treatment of major depressive disorder. In May 2021, the company also gained approval to launch Phase 2 trials of CYB001 for depression.
CYBN stock has jumped 70% over the past month. Yet, it is still down almost 16% YTD. Shares are trading at 2.8x book value. Wall Street’s 12-month median price forecast for CYBN stock stands at $6.50.
Enveric Biosciences (ENVB)
52-week range: $5.29 – $187.00
Enveric Biosciences (NASDAQ:ENVB) specializes in the chemical modification of psychedelics for the treatment of a variety of ailments. The biotech play maintains a database of modified molecules known as the Psybrary. Additionally, its artificial intelligence tool, PsyAI, narrows down the enormous number of possible compound variations to those likely to be most effect to treat certain conditions.
In mid-August, Enveric reported Q2 earnings. Net loss was $2.8 million, compared to $908,000 the year before. Diluted net loss per share was $2.73, compared to $2.13 the prior year. Cash totaled $18 million.
Recently, the company announced the formation of a scientific advisory board comprised of experts in the central nervous system and mental disorders. This board will advise the company on its technological capabilities, research pipeline, candidate prioritization and emerging trends in neuroscience and technology.
So far in 2022, ENVB stock has lost around 88% of its value, hovering around 52-week lows. Its price-to-sales (P/S) ratio is at 1.26x.
GH Research (GHRS)
52-week range: $8.72 – $30.43
GH Research (NASDAQ:GHRS) is a clinical-stage biopharmaceutical company working on new treatments for psychiatric and neurological illnesses.
Management released Q2 results on Aug. 23. Since the biotech play is in the pre-clinical trial stages of its development medicine, no revenues are reported yet. Earnings per share (EPS) came in at $0.006 cents compared to a loss of 5.3 cents per share for the year ago quarter. The change occurred due to currency gains. The current cash position is $265.4 million, which will support the company into 2025, as reported by the management.
The psychedelic play is planning the investigational new drug (IND) application for its lead candidate GH001 product with the FDA. If successful, it would be used for treatment resistant depression (TRD).
GHRS is down about 36% year-to-date (YTD) and 30% over a 12-month period. The 12-month price forecast for GHRS stands at $45.50.
52-week range: $7.95 – $44.55
Our final stock, MindMed (NASDAQ:MNMD), is another clinical-stage biopharmaceutical company. Its primary focus is psychiatry, addiction, pain and neurology.
Mind Medicine announced Q2 results on Aug. 11. Net loss came in at $17.1 million, compared to $44.5 million for the same period last year. The cash balance was $105.7 million. Management believes that the cash is sufficient for operations through 2023 and into 2024.
On Aug. 25, MindMed announced the first patient dosing in its Phase 2b dose-optimization trial of MM-120. The pharmaceutical substance is an optimized form of lysergic acid diethylamide (LSD), to be used for the treatment of generalized anxiety disorder (GAD).
MNMD stock is down about 40% YTD and 71% for the last 52 weeks. Wall Street’s 12-month median price forecast for MindMed stands at $46.88.
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On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.