The psychedelics space continues to benefit from strong tailwinds. Here are the two biggest ones, so far this year:
1) On July 16, Eli Lilly (LLY) announced it is buying the psychedelics company
AtaiBeckley (ATAI), which is developing DMT and MDMA (ecstasy) therapies for treatment-resistant depression and social anxiety disorder. Lilly is the company behind Prozac.
2) Back in April, President Donald Trump signed an executive order to accelerate the development of psychedelic drugs as treatments for psychiatric disorders like depression and post-traumatic stress disorder. The order tells the Food and Drug Administration (FDA) to fast-track research on psychedelics. It also calls for the Department of Health and Human Services to use $50 million to match state investments psychedelics research.
Mechanism of Action
Psychedelics like LSD, psilocybin, ecstasy and various hallucinogens may work in part by quickly prompting neurons to create new connections. People with treatment-resistant depression and other psychiatric disorders may not have enough plasticity in the brain, and psychedelics may change that. Increasing neuroplasticity may disrupt rigid negative thinking patterns and enhance emotional openness during therapy.
Psychedelics may also disrupt what researchers call the Default Mode Network (DMN). This is the brain network responsible for self-reflection, mind-wandering, and the ego. In people with depression, the DMN is often overactive, locking people into chronic rumination. Psychedelics temporarily suppress this network and act like a reset button.
Note that psychedelics are not at-home self-therapies. Instead, they are administered in a structured framework known as psychedelic-assisted psychotherapy. Researchers generally exclude patients with family histories of schizophrenia and psychosis since, like cannabis, psychedelics may induce these disorders in people with genetic predispositions.
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A Psychedelics Winner
At Cabot, we were already in this space ahead of the two catalysts above, and we have done well. I suggested GH Research (GHRS) in the predecessor publication to Cabot Insider Edge on February 25, 2026, at 15.41. It was recently up 79%.
Based in Dublin, Ireland, this company’s lead pipeline candidate is GH001, an inhalable formulation of mebufotenin, a psychedelic found in various plants and the Colorado River toad. GH Research is evaluating the experimental drug in a Phase 2b clinical trial targeting treatment-resistant depression (TRD) and in a Phase 2a trial targeting bipolar II disorder.
GH Research’s other pipeline candidate is GH002, an intravenous formulation of mebufotenin. The company completed a Phase 1 study of GH002 for the treatment of TRD.
Given that the stock is up 79% since I suggested it in February 2025, I consider it more of a hold now.
However, in the latest issue of Cabot Insider Edge, I introduce two psychedelics stocks that look attractive at current levels. And I explain why AtaiBeckley looks attractive even though it popped on the Lilly takeover news. It looks like investors may be mispricing some of the long-term payouts by Lilly in the takeover.
For more details on why, and the two most attractive names in this space, subscribe to Cabot Insider Edge here.
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