Winners, Losers In Psychedelic Investing

Using huge amounts of money to invest in a business with no products seems like a fool’s errand. 

But in the psychedelics world, that’s just what’s going on. Big money from billionaires like Peter Thiel and others is pouring in because of big predictions for future growth hopefully fueled by a big shift in mental health remedies and therapies.

Big.. hopes..

But all of that bigness doesn’t hide the fact that there is still a lot of guesswork in the psychedelics side of the biotechnology business that is not for the faint of heart investor. And some investors who have been riding the rollercoaster of a psychedelics stock market hoping for some sign of steady growth look away one week, not interested, then take another look when another big money announcement hits.

Psychedelics are intriguing, it’s good for all mankind.. but it’s fraught with financial landmines and market hiccups.

One biotech news company said that, when the pandemic hit, every biotech IPO was generating value. But the momentum didn’t last. Stock prices of newly public biotech companies tumbled in 2021, caused by clinical and regulatory setbacks, macro-economic forces, and an increasingly negative investor.

So if it was that hard for biotech companies to survive, many who had actual products to sell and had a research-to-market system in place, did that mean that investing in psychedelics companies, with so many more unknowns than the standard biotech company, should not even be on an investor’s radar?

One thesis for investing in psychedelic stocks goes like this: Over the next 5-10 years, psychedelic medicines and the companies that produce them will utterly disrupt the pharmaceuticals market, particularly when it comes to mental health care. Therefore, those who invest in the sector early will make a great return on investment. “The potential 2028 market for psychedelics is a knee wobbling $52.36 billion,” according to the thesis.

You hear that figure as an investor and it’s usually “Where do I sign up?” But it’s tough because you have to be aware of the variables. Science. Mental health. Brain chemistry. Long clinical trials. FDA. DEA.

This is a science-driven industry. There are generally no shortcuts to drug development, but there are accelerated programs for fast track and breakthrough therapy approval from the FDA. 

There is a lot at stake in drug development. Any drug development, including capital costs and expenditures on drugs that fail to reach the market, has been estimated to range from less than $1 billion to more than $2 billion.

On top of that, psychedelics therapies are still in the experimental stage, using guided sessions and other assisted methodologies as they ask a patient to trust their minds to a total stranger wielding a substance that takes them through visual and aural twists and turns that some people don’t want to experience. 

Will it have broad appeal? That’s another question that an investor needs to consider.

The usual adjustments and business gyrations still haunt this emerging industry—resignations and reassignments and science team building—especially science team building, since this can provide a quicker pathway to clinical studies.

But recently, there are other, more alarming signs that the industry can be a bit shakier than some believe it to be.  Core One Labs (CSE: COOL) (OTC: CLABF), whose science team developed DNA sequences that produce enzymes replicating the biosynthetic pathway used by psilocybe mushrooms, just acquired Awakened, a psychedelics research and technology company, in February. Good moves, both. 

But that wasn’t enough to keep Core One afloat. It is looking to be acquired. “Acquisition or investment by a major pharmaceutical company could be mutually beneficial,” the company reported in a press release. 

Mind Cure Health (CSE: MCUR) (OTCQX: MCURF) reported that it was halting its psychedelic medicines research, following a “strategic review” undertaken by the company. The review determined that “the additional capital required to execute the Company’s business plan is unlikely to be found under the current and foreseeable market conditions and that none of the strategic alternatives available to the Company necessitated ongoing developmental expenditures.”

The industry is sagging. The Horizons Psychedelic Stocks index (OTC: HPSYF)—which include psychedelics industry leaders MindMed, Cybin, Compass Pathways and others—shows a steady, and somewhat steepening decline, since October, 2021.

While the bad news piles up, there is still good news that trickles in as well. For example, Compass Pathways (Nasdaq: CMPS) partnered with King’s College London to launch a psychedelic research center. 

Startups are not shying away, such as Real Brands (OTCQB: RLBD. Real Brands Inc. is a multi-brand owner, formulator, extractor and manufacturer of branded hemp-derived CBD products. The company is initiating expansion to become a premier provider of medical psychedelics and will be working on getting DEA licensure for psychedelics. 

Another recent addition to the psychedelics space is Mota Ventures Corp. (OTCPK:PEMTF) (CSE:MOTA), with the acquisition of Verrian Ontario, which will provide the company with addiction medicine experts, R&D facilities and a 110,000 square foot pharmaceutical manufacturing facility in Radebeul, Germany.

Novamind, Inc. (CNSX: NM)(OTCQB: NVMDF) and Red Light Holland Corp. (CSE: TRIP) (OTC Pink: TRUFF) both reported increased revenue. Red Light generated revenues of $622,247 for the quarter resulting in a gross profit of $232,792, an increase of $75,822. Novamind delivered total revenue of $2,452,540 in the quarter ending December 31, 2021—an increase of 32% over the previous quarter.

What the industry has going for it more today than even a year ago is increased visibility from media—The Economist, Wall Street Journal, Scientific American and other mainstream publications are picking up their coverage of the industry. 

That helps to create more discussion about how to help the mental health of the world—along with a slowly building relaxing of some government rules and laws about some psychedelics in both the United States and the UK. 

Attitudes are changing about psychedelics—an investor can genuinely bank on that.

Investors can take comfort in that there are companies out there trying to help them understand the psychedelics landscape and get in early to test the waters. 

For example, Origin Therapeutics is an actively managed investment issuer providing investors with diverse exposure to the psychedelic industry. “There is a tremendous amount of innovation taking place in the psychedelics sector,” said Origin Therapeutics CEO Alexander Somjen on the company website. “Investors want to get in on it—but for many, it is only possible to access companies that are already publicly traded, which means that a lot of that initial opportunity to participate in the earliest stages of growth has passed.”

Origin Therapeutics plans to invest in a diverse range of psychedelic companies that encompass different areas of growth in the industry. This could include early-stage drug development companies, clinics, and other ancillary companies that help to push the industry forward, such as those companies focused on education, marketing, and building awareness around the psychedelics industry.

There are more historic and encouraging scientific breakthroughs such as when the Multidisciplinary Association for Psychedelic Studies (MAPS) released results of Phase 3 trial investigating MDMA-assisted therapy in May 2021, which is just the ticket for an investor looking at a long run in psychedelics. 

Seasoned investors know that a big, long, super profitable run can happen. The volatility of the stocks will calm. But no one can soundly predict when the goodwill outweigh the not-so-good as the industry develops, and declare that the growing pains of this emerging industry have been healed.