Four Ways to Cash in on the $29.6 Billion Psychedelic ‘Shroom Boom
The number of stocks in the psychedelics space, no pun intended, is expanding like all good universes.
There are already more than 50 publicly traded companies pursuing the billions in new market opportunities in the hallucinogen-based treatment market – a “New Biotech” opportunity I like to refer to as the ‘Shroom Boom.
A lot of these companies are innovative cousins to conventional biotech firms. Like their better-known counterparts, these upstarts are pursuing new drugs, compounds, therapies, and treatment protocols, to arrest or even cure mental illnesses, substance abuse, pain, PTSD, and even chronic brain disorders. The big difference: These ‘Shroom Boom ventures are incorporating psychedelics in their research and trials.
I’ve also identified “pick-and-shovel” companies whose path to sales-and-profits relies on sourcing and manufacturing psychedelics or building infrastructure, like clinics and training therapists.
Here are four companies I like. Two cover the research, trials, and biotech potential of psychedelics. The other two are pick-and-shovels plays that have ID’d innovative ways to apply their trade on this new trend.
In the entire realm of biotech, it’s one of the most-exciting and biggest-profit opportunities I’m watching.
The “New Biotech” Market That’s Set to Explode
Want to understand my excitement? I took a deep dive into this burgeoning market yesterday, which you can read here. But I want to revisit the insane growth potential the psychedelics market holds.
According to Data Bridge Market Research, the market for psychedelic drugs could grow from about $2.01 billion last year to $6.86 billion in 2027 – a compound-annual growth rate (CAGR) of 16.3%. ResearchAndMarkets Inc. says this opportunity will zoom from $4.75 billion last year to $10.75 billion in 2027.
But these forecasts are actually understating the market potential here; it could easily be twice as large – and maybe more.
Among the mental illnesses being targeted by the psychedelic drug makers are afflictions like anxiety, depression, ADHD, and addiction.
The markets for just those four maladies represent an aggregate opportunity of $29.6 billion – a total that’s more than double the $10.75 billion ResearchAndMarkets forecast.
Add in other diseases – and all the ancillary services – and you’re talking about a market that’s huge. And one we want a piece of.
Charting a Course
First up is the biggest company in the psychedelic’s universe, COMPASS Pathways PLC (NASDAQ:CMPS).
COMPASS, a U.K.-based, company with a current market cap of almost $1.5 billion, was recently granted two patents by the U.S. Patent and Trademark Office (USPTO).
The patents cover oral formulations of COMPASS’s synthetic psilocybin in the treatment of major depressive disorder (MDD), which includes treatment-resistant depression (TRD).
COMPASS’s COMP360, a synthetic high-purity crystalline psilocybin, received breakthrough therapy designation from the U.S. Food and Drug Administration FDA in 2018. And just last month, it received a U.S. patent for the company’s synthetic formulation, and other pharmaceutical formulations containing crystalline psilocybin, along with methods of treating MDD with its psilocybin.
Its second U.S. patent – also received last month – includes “claims to oral dosage forms of psilocybin and methods of treating major depressive disorders with those forms.”
COMP360 is in a Phase IIb clinical trial to treat patients with treatment-resistant depression. If the trial is successful, COMPASS, with patent protection, will have a huge first-mover advantage over any competitors.
As true of any “biotech” company, reaching the market with an FDA-approved commercial drug would ignite Compass’ stock price. Phase II is the second step in the three-phase approval process.
COMPASS has already taken investors on a wild ride. At a current price of roughly $35.50, the company’s stock is well below its high-water mark north of $61. That puts it down near its support level in the neighborhood of $31 to $32.
I like taking a stake at these levels.
Mind Over Matter
Next up I like Mind Medicine (Mind Med) Inc. (NASDAQ:MNMD), a New York-based biotech company developing psychedelic medicines and therapies to address addiction and mental illness.
MNMD at about $3 a share, has a market cap of over $1 billion.
What I really like about Mind Med is that it has one of the broadest, most-diversified pipelines of psychedelic drugs in clinical development. And that includes programs using substances such as psilocybin, LSD, MDMA, DMT, and an ibogaine derivative called 18-MC.
Mind Med’s non-hallucinogenic LSD micro-dosing program – known as “Project Flow,” for treatment of ADHD – is in Phase IIa trials, and has passed initial safety testing.
Its LSD experiential (hallucinogenic) therapy – known as “Project Lucy,” for treating anxiety – is currently also in Phase IIa trials.
And its ibogaine-related 18-MC (non-hallucinogenic) therapy – known as “Project Layla,” to treat addiction – is also in Phase II trials.
Besides those trials, Mind Med has partnered with University Hospital Basel in the research of applications of LSD-assisted therapy in the treatment of cluster headaches.
And there’s more.
Mind Med initiated the first phase trials of an LSD-neutralizer drug which could “abort the hallucinogenic effects of LSD within 20 to 30 minutes.”
That’s a lot of good stuff in the pipeline – and is why I added Mind Med on my list of psychedelic stocks to own now, especially as the stock’s come down to the $3 level, where it should see some support.
Small Change, Big Profits
In the pick-and-shovels aisle, I like two of what I refer to as “buck-and-change” stocks – a term I use to spotlight shares you can grab for a dollar and some change … or sometimes just with the change in your pocket.
“Buck-and-change” stocks are cheap because they’re up-and-comers. The ones I like are companies with true explosive potential. And I like to grab those stocks when they’re downright cheap – like the two I’m going to tell you about here.
Novamind Inc. (OTC: NVMDF), a $34 million-cap company that’s trading at roughly 92 cents a share, is a perfect example.
Novamind operates two divisions: Cedar Psychiatry and Cedar Clinical Research. On the psychiatry side, the company just announced it’s doubling the number of Cedar Psychiatry Clinics it operates.
That big bump comes six months ahead of schedule – which I like. And the four new centers we’ll see opened between July and September will more than triple patient-visit volumes – from 20,000 last year to 65,000 by the end of 2021.
The new centers represent the initial phase of the company’s national expansion plan.
The range of treatments at Novamind’s centers – all of which are experiencing two-week wait times for new appointments – include ketamine-assisted psychotherapy, cognitive-behavior therapy, and transcranial magnetic stimulation.
Novamind’s psychiatry patients are offered participation in the company’s Cedar Clinical Research studies and trials. The Clinical Research division also manages and hosts third-party clinical trials and participates in institutional review board studies.
The company also offers access to “safe and legal psychedelic experiences” and advanced research for psychedelic medicines.
The 52-week range of NVMDF is 70 cents to $1.90. The average daily volume is less than 10,000 shares, but I think it’s well-worth accumulating a small position in NVMDF down at these cheap levels.
The fourth stock in the quartet of psychedelic music makers I like is Numinus Wellness (OTC: LKYSF), another “buck-and-change” stock trading for, literally, just change.
Numinus, with a market-cap of $153 million and a stock price of about 75 cents, sees an average daily volume of more than 730,000 shares, which makes this buck-and-change stock very liquid for its size.
Like Novamind, Numinus operates through two divisions: Salvation Botanicals, its lab services side, and Numinus Health, where it conducts “supportive therapies” treating mental health and substance abuse.
Numinus was the first company in Canada approved to legally extract psilocybin and the first company to receive a license for the cultivation, production, and extraction of psilocybin from mushrooms.
It also has import-and-export licenses for DMT, psilocybin, MDMA, and other psychedelics.
The “kicker” in all that Numinus does is its partnership with Opti Health Corp, a vertically integrated mushroom grower. In concert with Numinus, Opti Health developed a “uniform, all-natural psilocybin capsule” derived from a mushroom clone the companies just submitted to Health Canada for approval.
An all-natural psilocybin capsule will find a huge clinical audience.
So, yeah, I’d take a bunch of change and buy a bunch of Numinus stock.
In fact, these four ‘Shroom Boom stocks will let you create a personal psychedelics portfolio – one that will leave you seeing stars … or, at least, a lotta green.
Until next time,