2020 marked the beginning of the psychedelics investment story as the capital markets fully embraced the alternative drug sector.
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The idea of investing in a psychedelic drug company may have sounded unlikely before 2020.
But now investors are enjoying the dawn of a new alternative drug market that is trying to capitalize on the medical benefits of psychedelic substances.
In 2020, investors saw the arrival of a number of new public companies that are exploring various pathways in the psychedelics space, primarily operating under the promise of new medicine.
It’s no exaggeration to say that 2020 served as the launching pad for psychedelics in the eyes of the capital markets. And that included us, as here at the Investing News Network (INN) we launched our own psychedelics-focused vertical.
Read on to get a sense of the psychedelics trends that are setting the stage for this promising new industry, with commentary from insiders and experts.
Psychedelics trends 2020: Markets get their bets ready as listings erupt
As mentioned, this year catapulted a fresh stock universe into existence as a variety of new companies went public across different exchanges.
While it wasn’t the first of the year, the listing of Compass Pathways (NASDAQ:CMPS) was one of the biggest landmark events for the industry in 2020. The company was the first psychedelics operation to list directly on the NASDAQ, opening the door for others to follow.
“It’s shown to the world what insiders have known for a long time — that this vision of bringing psychedelic medicine to the world isn’t a pipe dream, it’s very real and it’s happening now,” Michael Hoyos, co-founding partner, Americas, with the Conscious Fund, previously told INN.
Fellow companies also celebrated Compass Pathways’ debut as the arrival of a new era.
“Compass’ successful IPO is further evidence that psychedelics are gaining traction as a viable solution for treating mental health and addiction,” JR Rahn, co-founder and co-CEO of Mind Medicine (MindMed) (NEO:MMED,OTCQB:MMEDF), said.
During an online talk in the leadup to the Compass Pathways listing, Bill Stern, managing partner at Venture Group Capital, said the listing looked set to “change the industry dramatically.”
Dugan Selkirk, media relations manager for Vancouver-based private firm Universal Ibogaine, was not elusive about the significance of the NASDAQ listing. “The top blew off with Compass Pathways’ mega IPO in the US markets, which has put the wind back into the sails of the industry, and we see this pattern continuing with momentum into 2021.”
Jos Schmitt, president and CEO of the NEO Exchange, told INN he believes investors have to get over any stigma surrounding these substances, because he believes the opportunity is too great to pass up.
Back in March, when MindMed went public, the NEO saw Canada’s first official listing of a company operating in the psychedelics space.
A fellow securities executive previously told INN he was unsure when he first heard about the psychedelics investment shot. “I will admit, I was a bit skeptical at first,” said Richard Carleton, CEO of the Canadian Securities Exchange (CSE).
Carleton changed his mind after seeing the research that has been conducted and meeting with companies directly to discuss the sector.
The CSE is now the capital markets home of nearly 30 listings related to the psychedelics industry.
Psychedelics trends 2020: Pandemic highlights need for mental health alternatives
Florian Brand, co-founder and CEO of privately held ATAI Life Sciences, told INN he came into 2020 expecting a natural progression of the interest in therapies using psychedelics. But instead the executive found a significant jump in attention, thanks in large part to the focus on mental health created by the effects of a global pandemic.
Brand said the uncertainty surrounding COVID-19 has “precipitated an increased focus on mental health and the failures of our current standards of care.”
“We are seeing a paradigm shift in the public view and complacency for the norm of Big Pharma traditional, (and) in many cases dangerous and non-effective, treatments,” Josh Bartch, CEO of Mydecine Innovations Group (CSE:MYCO), told INN.
Psychedelics trends 2020: Executives ask for patience in face of growing buzz
“Had cannabis not come along, it probably would have been a longer road to be having some of these conversations,” Ronan Levy, co-founder and executive chairman of Field Trip Health (CSE:FTRP), previously told INN.
To a degree it’s understandable, as both are alternative drug markets exploring new uses in the face of strict regulations. But some members of the psychedelics industry have been quick to deter investors from believing psychedelics will see similar hype runs to those experienced in the cannabis industry.
This leaves the question of if investors should play the market or get ready for long-term bets only.
Payton Nyquvest, chairman and CEO of Numinus Wellness (TSXV:NUMI), previously told INN that anyone entering this space has to understand the long-term roadmap ahead. “There’s no quick pathway to be able to do this,” he said.
Brand said it’s the responsibility of psychedelics companies to fully research these compounds and learn their entire medical benefits, as well as the potential risks attached.
“Viewing psychedelics as a panacea is alluring, but in reality there’s risks we still need to quantify,” said Brand of ATAI Life Sciences. “It’s incumbent on us and others in the space to build out the data and support for safe and accessible treatment, and not let excitement get ahead of the hard work to build a sustainable, impactful industry.”
Drysdale told INN that in his view the most challenging aspect for the psychedelics market in 2020 was the pressure to gain credibility and attention due to the rush of companies going public.
“Psychedelics are leading with science, creating massive intellectual property (IP) opportunities, and both of these things rely on regulation holding the industry to standards and pace,” Kelsey Ramsden, president and CEO Mind Cure Health (CSE:MCUR,OTCQB:MCURF), told INN. “As a company who is in high-growth mode with fast-moving IP projects, being patient can be challenging.”
That sentiment of longevity for investments was echoed by Carleton, who said he sees the psychedelics market as a “pharma play.”
Hoyos told INN the industry needs to be careful to not repeat the mistakes made in the cannabis space, which led to a large part of the sector wanting to make a quick buck compared to growing steadily.
“For investing in the space, I think the full value will be realized in the longer term, but there will be opportunities for exit liquidity events a lot sooner,” Hoyos added.
Psychedelics trends 2020: Studies set path for changing perspectives
One of the biggest factors helping psychedelics is the launch and continuation of medical studies evaluating particular drug treatments based on psychedelics and boosting the legitimacy of the industry.
Timothy Ko, CEO at Entheon Biomedical (CSE:ENBI), told INN that 2020 will be remembered as a year in which the psychedelics industry established itself and came into the spotlight thanks to the work of those “who have historically utilized, researched and spoken for the value of psychedelic compounds.”
Investors will need to keep an eye on the development of several studies moving forward, as these will offer the most concrete answers on whose drugs are worth betting on. These studies, particularly those to obtain approval from the US Food and Drug Administration, are extremely lengthy and costly events for the companies in play.
“I think the challenge and gift of regulation resting in the balance of scientific proof is what will both make this a stable and rapidly growing investment sector,” Ramsden said.
Thanks to recognition from medical authorities, more investors are starting to look into what’s at stake with psychedelics.
Psychedelics trends 2020: Investor takeaway
The psychedelics industry found its groove in 2020 and discovered investors ready to listen and get involved. This growth in attention may be partially due to the effects of lockdowns and the uncertainty caused by COVID-19, but it is also backed by the medical research being conducted.
In 2020, investors discovered the enthusiasm for psychedelics goes well beyond college dorm rooms.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Cybin, Mind Cure Health, Numinus Wellness and Universal Ibogaine are clients of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.