Cannabis investors looking for the next big thing need to take a look at psychedelic stocks. Not only is the industry growing rapidly, but a promising young biotech, led by a Facebook billionaire, just filed to go public.
Hot on the heels of cannabis, psychedelic mushrooms are quickly gaining credibility for their medicinal value.
Researchers and users are discovering that psilocybin, the psychedelic compound found in “magic mushrooms,” can be a highly effective treatment for depression.
This information is giving birth to a new industry, psychedelic pharmaceutical drugs. Analysts expect this industry to grow sharply in the coming years. Here are some more details from microsmallcap.com.
The psychedelic drugs market is projected to grow at a CAGR of 16.3% over the next eight years to reach $6.85 billion by 2027, according to Data Bridge Market Research. The key factors that will fuel this growth include the increasing prevalence of depression and other mental health disorders in the U.S. and a growing acceptance of psychedelic drugs for the treatment of depression.
This bullish growth projection has investors asking an important question…
How do I invest?
How To Invest in The Psychedelic Industry
One way to invest is with large pharmaceutical companies entering the industry.
Johnson and Johnson (NYSE: JNJ) and Abbvie (NASDAQ: ABBV) have recently expanded into psychedelic drugs. However, these companies are so large that even successful results in psychedelic drugs won’t move the share price much.
Another way to invest is with smaller biotechs that specialize in psychedelic drugs.
Mind Medicine (NEO: MMED, OTC: MMEDF) is a young biotech headquartered in New York, New York, with a market cap of just $100 million. The company has six clinical trials happening or planned using psychedelic substances.
Champignon Brands (CSE: SHRM, OTC: SHRMF) is another promising young biotech headquartered in Vancouver, BC., with a market cap of $47 million. Champignon is also developing and commercializing psychedelic drug treatments for depression, anxiety, and substance abuse.
However, the best way to invest could be an exciting biotech that just filed papers to go public.
- Is backed by a Facebook billionaire investor.
- Specializes in psychedelic drugs.
- Estimated to be worth between $500 million and $1 billion.
- Received breakthrough status from the FDA in 2018 for a psychedelic drug study.
Compass Pathways is a UK-based startup that is backed by billionaire Peter Thiel, an early investor in Facebook and one of the founders of Paypal (NASDAQ: PYPL).
Compass was founded in 2016 to explore the use of psilocybin, the psychoactive ingredient in psychedelic mushrooms, as a medical treatment for depression and anxiety.
After raising capital through private channels for the last few years, Compass is looking to raise additional capital by going public in the U.S.
On Friday, Compass filed with the Securities Exchange Commission (SEC) to raise $100 million in capital and trade on the NASDAQ with the symbol CMPS.
According to Bloomberg, recent capital raises have valued Compass around $500 million. As you can see, this is no small-time operation. After going public Compass will be the largest pure-play stock in the psychedelics industry.
That relatively high value is being driven by a big win that compass scored in 2018.
Compass Wins FDA Breakthrough Therapy Status
Back in 2018, Compass established itself as a pioneer in psychedelic drugs. That’s when the U.S. Food and Drug Administration (FDA) gave Compass “breakthrough status” on its psychedelic therapies that will enable the company to fast track drug testing and development.
Here are some more details from the press release.
COMPASS Pathways, a life sciences company dedicated to accelerating patient access to evidence-based innovation in mental health, has received Breakthrough Therapy designation from the US Food and Drug Administration (FDA) for its psilocybin therapy for treatment-resistant depression.
The FDA designates a drug as a Breakthrough Therapy if preliminary clinical evidence shows that it may demonstrate substantial improvement over available therapy. Breakthrough Therapies are supported by the FDA throughout the clinical development programme to ensure as efficient a process as possible.
Winning breakthrough status from the FDA gives Compass an advantage over the competition and should help the company speed up the lengthy research and testing process.
Despite the Promising Outlook, This is a High-Risk Industry and Stock
Despite the promising outlook, the young psychedelic drugs industry is high risk with plenty of challenges ahead.
Similar to cannabis, psychedelic drugs are still classified as schedule 1 by the FDA, implying it has no medical value. Obviously this is incorrect, but for the time being, the U.S. laws are outdated.
Compass has no commercialized drugs or revenue and reported an annual loss of $25 million last year.
The cost to develop and commercialize new drugs in the U.S. is quite expensive, usually costing at least $1 billion.
However, despite the challenges, this is an exciting new industry with the potential for plenty of growth. If the industry does well in the next few years, early investors would be rewarded the most.
The Big Picture on Psychedelic Drugs and Compass
Psychedelic drugs are emerging as an effective treatment for depression, anxiety, and substance abuse. The industry is in its early stages and companies are beginning to invest millions into researching and developing drug treatments.
Compass is an early leader in the sector, scoring breakthrough status from the FDA in 2018. Shares are set to go public in the next few months and I’ll be watching this company closely!
About the Author & Cannabis Stock Trades
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.
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