Following a grand entrance last year in the minds of investors, the psychedelics investment hype continued in the first half of 2021 with even more companies hitting the big leagues.
The promise of novel psychedelic medicines has become a ringing endorsement for the investment storyline and the potential surrounding companies in the arena — so much so that the psychedelics market has seen a rush of new companies both large and small.
But what are the key moments of 2021 that investors should be aware of? The Investing News Network (INN) chatted with people evaluating the industry about the progress of the market so far this year.
Psychedelics market update: Companies reach major valuations alongside push for senior listings
The market was shaken in June by the long-planned entry of Atai Life Sciences (NASDAQ:ATAI), a psychedelic drug development company backed by tech mogul Peter Thiel, who also supported the launch of COMPASS Pathways (NASDAQ:CMPS).
Atai had a major debut with a markup of 30 percent in value on its first day of trading, closing at a price of US$19.45. At the time of this writing, Atai held a market valuation of US$2.4 billion.
Following the COMPASS Pathways listing in 2020, experts agreed that the NASDAQ might become the hub for the psychedelic drug makers. That theory has continued in 2021 with the addition of Atai to the exchange and the listing upgrades for both Mind Medicine (NASDAQ:MNMD,NEO:MMED) and Field Trip Health (NASDAQ:FTRP,TSX:FTRP).
“We are proud of the rapid progress we have made in a relatively short period of time and this accomplishment is a testament to the efforts of our employees and partners,” Hannan Fleiman, Field Trip’s president, said in a statement. The company reached the NASDAQ on July 29.
Psychedelics market update: First psychedelics ETF launches in Canadian market
Exchange-traded fund (ETF) firm Horizons ETFs Management (Canada) launched the first psychedelics ETF back in January after much demand from investors and partners.
The Horizons Psychedelic Stock Index ETF (NEO:PSYK) launched with 17 companies in the space, including a few pharmaceutical names involved in early stage research work with psychedelic compounds.
Over the year-to-date period, PSYK is down 0.24 percent in value. The fund closed at a price of C$8.30 at the half-year mark.
Steve Hawkins, president and CEO of Horizons ETFs, recently told INN investors have to be prepared for volatility in the industry despite all the excitement surrounding psychedelics at the moment.
“We’re still very excited about what psychedelics can do and the effect it can have on our entire social ecosystem with respect to curing people or helping people with their mental illnesses,” Hawkins said.
James Halifax, the host and face of the Psychedelic Investor YouTube channel, also warned investors about the instability in psychedelic investments currently. He pointed in particular to the fact that these companies are dependent on data from their trials.
“If (the clinical trials) come back negative, basically all these companies are going to $0,” Halifax recently told INN in a video conversation. “The entire valuation on them right now is based on the idea these (trials) will be successful.”
Psychedelics market update: The path forward for investing
At the onset of the year, Doug Drysdale, CEO of Cybin (NEO:CYBN,OTCQB:CLXPF), told INN investors need to be aware that novel drug development requires a significant amount of time and capital, “so investors should focus on those companies that are sufficiently capitalized and have a team with a strong track record to bring these treatments to market.”
The promise attached to psychedelic compounds has made it a requirement for investors to look at medical data and consider the development process for trials evaluating different uses for these drugs.
“It can be difficult trying to find a starting point, trying to figure out which companies are real and which companies aren’t real,” Halifax said.
For one investment expert, 2021 holds the chance for new investors to start learning about psychedelics and the companies wielding these drugs.
Matt Carr, chief trends strategist at the Oxford Club, previously told INN these are the very early days for psychedelics investments. As such, he expects 2021 to serve as a stepping stone year for the market after its coming out party in 2020.
Psychedelics market update: Investor takeaway
Psychedelics investments carry a significant amount of promise at the moment, and companies are facing the pressure of trying to improve mental health services for the public.
Looking forward, the lengthy clinical trial process will be a challenge for these companies. This year has given investors some milestone moments for key studies, but final results are still going to take time.
In the meantime, investors will have to be vigilant with the market and do their best to determine whether company valuations and finances line up with their clinical trial ambitions.
Don’t forget to follow us @INN_LifeScience for real-time news updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: 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.
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