The psychedelic pharmaceutical industry has become one of the most exciting areas of investment in the biotechnology sector, driven by growing research into the therapeutic benefits of psychedelic substances for mental health disorders such as depression, PTSD, and anxiety.⁽¹⁾

This burgeoning sector has attracted significant interest from investors looking to capitalize on potential medical advancements and evolving regulatory landscapes.

Number Six: GH Research (GHRS)

GHRS, along with Compass Pathways, Atai, and Relmada, is one of the larger psychedelic stocks, with a market cap of $616 million. While the company is not yet generating revenue (posting annual losses ranging from $20 to $45 million between 2021 and 2023), investors see potential in GH Research, notably because of the expectation that its treatment-resistant depression therapy is expected to complete Phase IIB clinical trials in Q3 of 2024. ⁽²⁾

GHRS has three Wall Street analyst forecasts, ranging from $39-40. This target represents a 233% upside relative to the stock’s recent price of $11.85. As of May 2024, one of the three firms providing analyst coverage on the stock, JMP Securities, recently lowered the stock’s price target to $39 from $50 but maintained an “Outperform” rating for the stock. ⁽²⁾

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Number Five: Seelos Therapeutics, Inc. (SEEL)

The company has two programs currently undergoing clinical testing. In September 2023, the company disclosed the results of its Phase II study evaluating the intranasal ketamine drug SLS-002 as therapy for the treatment of acute suicidal ideation and behavior in patients with major depressive disorder (MPD). Additionally, SLS-005 (intravenous trehalose, a sugar-containing two glucose molecules) is in Phase III trials to treat the neurological disease amyotrophic lateral sclerosis (ALS). It is in Phase II testing for the management of the neurodegenerative disorder spinocerebellar ataxia Type 3 (a rare genetic disorder that progressively inhibits muscle function).⁽³⁾

From an investment standpoint, Seelos is risky simply because of its small size, with a market cap of only $5.4 million and only one Wall Street analyst covering it (with a 12-month price target of $4). That said, successfully approving one or both of the company’s therapies would likely generate a considerable return for shareholders, potentially taking the share price to or near the $4 target. The stock recently traded at $0.33.⁽³⁾

Number Four: Cybin (CYBN)

As of March 2024, Cybin’s CYB003 molecule was granted “Breakthrough Therapy Designation” as the first “adjunctive psychedelic-based” therapy for Major Depressive Disorder (MDD) ever to receive this FDA designation. Cybin currently has at least 29 patents granted, with 158 patents pending.⁽⁴⁾

Based on three Wall Street analysts, Cybin has a price target ranging from a high of CAD $6.83 to a low of CAD $5.4. Having recently traded at CAD (Canadian Dollars) $0.14, Cybin’s, with the average price target, represents a massive 4,453% upside relative to its current price today.⁽⁴⁾

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Number Three: MindMed (MNMD)

One of its most promising novel drug candidates is an LSD-based therapy, MM120, currently in the clinical trial phase for the treatment of general anxiety disorder (GAD). According to MindMed executives, MM120 will likely be approved and launched soon. MM120 would be the first such therapy approved by the FDA since 2007, according to MindMed Chief Medical Officer Daniel R. Karlin, MD, MA, if approved for the treatment of GAD.⁽⁵⁾

Mindmed’s other therapies include an MDMA-based therapy for treating depression and potentially other mental disorders. In 2024, MindMed has garnered considerable attention from investors, rising 242% over the last six months and 173% year-to-date. It has six analyst price targets, ranging from a low of $16.01 to a high of $75.06, with an average of $34.83. It last traded at $10.⁽⁵⁾

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Number Two: Compass Pathways (CMPS)

Although Compass is one of the larger publicly traded companies focusing exclusively on psychedelic-based drug development, it is still pre-revenue, as its drugs still need to complete all stages of clinical trials. Its flagship therapy, COMP360, is currently progressing in Phase II and III trials, with updates expected later in 2024.⁽⁶⁾

Compass has attracted investment from well-known investors, including Cathie Wood’s ARK Management (owns a 3.17% stake), Dennis Purcell’s Aisling Capital Management (2.52%), and Putnam (0.38%).⁽⁶⁾

Price targets for CMPS shares (currently $8.53) range from a low of $22 to a high of $120, with an average of $49.⁽⁶⁾

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Number One: Atai Life Sciences (ATAI)

Atai is a leader in the space in regards to the breadth of its expertise and product pipeline within the world of psychedelics. Its product candidates include products derived or based on compounds including psilocybin, ketamine, MDMA (the compound in “ecstasy” and “molly”), salvia divinorum, DMT, and ibogaine, the compound in Iboga, a shrub native to West Africa, with powerful hallucinogenic effects and the potential to treat opiate addiction.^(7, 8)

Atai is attractive from an investment standpoint because of its partnerships and collaborations with various companies in the space, providing (direct and indirect) exposure to drug development work led or done by other firms. Its COMP360 psilocybin therapy, for example, is in development in partnership with Compass Pathways.⁽⁷⁾

Atai is also unique among this list of psychedelic stocks because it is already generating revenue (albeit limited) from its drug portfolio. The portfolio contains some FDA-approved drugs currently on the market.⁽⁷⁾

Atai has four Wall Street analysts offering one-year price targets, with a low of $6 and a high of $15. The average forecast of $10.67 represents a 410% upside relative to the current price of $2.09.⁽⁷⁾

Company	Ticker	Market Cap	Description
Atai Life Sciences	ATAI	$314 million	Developing 7+ drugs based on psychedelic substances, including ketamine and ibogaine.
Compass Pathways	CMPS	$562 million	Developing a psilocybin-based therapy, COMP360.
Cybin Inc	CYBN	$2 million	Developing two clinical-stage psilocybin therapies, CYB003 and CYB004, with other psychedelic candidates in preclinical testing.
GH Research	GHRS	$562 million	GH Research PLC is a clinical-stage biopharmaceutical company dedicated to transforming the treatment of psychiatric and neurological disorders.
Intra-Cellular Therapeutics	ITCI	$7.26 billion	Intra-Cellular Therapies, Inc. is a biopharmaceutical company that focuses on the discovery and clinical development of innovative, small-molecule drugs that address underserved medical needs in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms within the central nervous system (CNS). Its lead product candidate, ITI-007, is in clinical development as a first-in-class treatment for schizophrenia.
Mind Medicine	MNMD	$718 million	MindMed is a clinical-stage biotechnology company based in New York specializing in psychedelic and plant-based medicine therapies for the treatment of brain health disorders and mental illnes
Seelos Therapeutics	SEEL	$5 million	Clinical-stage biopharmaceutical company developing products for CNS disorders, including an intranasal ketamine spray.

Understanding Risk vs. Reward in Psychedelic Investing

Some of the world’s largest and most well-known pharma companies – such as Merck & Co and Abbvie – see the massive potential in psychedelic therapies and are actively allocating resources towards researching and developing such drugs.

From an investment standpoint, comparing a company like Merck & Co. to a micro- or small-cap stock is somewhat like comparing apples and oranges; a multinational pharma company with a large, diversified, profitable drug portfolio has a completely different risk-reward profile than a micro-cap focusing exclusively on developing a small number of clinical-stage psychedelic-based drugs.

There are also several large- and mega-cap stocks active in developing psychedelic therapies. These are not “pure-play” psychedelic stocks; they are diversified companies allocating a small percentage of their overall resources towards the field of psychedelic medicine. Investing in any of the following would provide some exposure to psychedelic therapies, but with a much lower level of risk, and reward potential, in general.

Interestingly, most of the stocks mentioned below are involved in the psychedelic medicine space by the nature of partnerships or joint operations with one or more of the smaller, “pure-play” psychedelic companies mentioned above.

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Notable Mentions: Mid-Cap to Mega-Cap Psychedelic Stocks

Johnson & Johnson (JNJ)

Regarding Johnson & Johnson’s connection to some of the emerging, “pure-play” psychedelic stocks, MarketWatch reported that some of the core team members from JNJ’s SPRAVATO team have joined Cybin (CYBN).^(2, 10)

Abbvie (ABBV)

With a market cap of $290 billion, Abbvie is an internationally recognized, highly regarded company. Its stock has performed very well over most of the years since its split from Abbot Laboratories in 2013. It pays a 3.7% dividend annually and has a price target range of $172-200, last trading at $163.79.⁽¹⁰⁾

Intra Cellular Therapies, Inc (ITCI)

Unlike many companies focusing exclusively on psychedelic drug development, ITCI has posted considerable revenue and year-over-year revenue growth: $83.4 million in 2021 and $250 million in 2022. The company is still operating at a net loss, with an upcoming earnings per share (EPS) estimate of $0.32.⁽¹¹⁾

ITCI has 13 Wall Street analysts providing a price target ranging from a low of $75 to a high of $120. ITCI last traded at $69.8. With its market cap of $7 billion, ITCI is between mega-cap stocks like JNJ and Abbvie, yet considerably more established than the micro- and small-cap peers. For this reason, and because of its portfolio of drugs outside of psychedelics.⁽¹¹⁾

The psychedelics sector offers a unique blend of high-risk and potentially high-reward investment opportunities. As the scientific community continues to uncover the therapeutic potential of psychedelics, and as society’s attitudes towards these substances evolve, the companies listed above are poised to lead the charge. Investors should conduct thorough due diligence and consider the unique challenges and opportunities of this exciting field’s changing regulatory, scientific, and competitive landscapes.