By Peter Mastrantuono
Psychedelic drugs, like psilocybin, LSD and MDMA (aka ecstasy), were once widely viewed as dangerous and without medical use, which is why they were outlawed by Congress in 1970. These drugs may conjure up images of Timothy Leary and the 1960s counterculture or, perhaps for a younger generation, the microdosing trend in the Silicon Valley community. Today, however, they are being seen in a much different light, and that’s gaining the interest of investors on the lookout for “the next big thing.”
Medical Uses of Psychedelic Drugs
Over the last ten years, the number of clinical trials involving psychedelic drugs has gone from just three in 2010 to 17 trials conducted in 2020, according to Nature, a journal of peer-reviewed research. 2021 appears to be on pace to surpass that number.
The medical uses being tested center on mental health disorders, such as PTSD, depression, alcohol-use disorder and anorexia nervosa.
As the growing attention on the potential uses for psychedelics suggests, these drugs no longer operate at the fringes of society. They are entering the mainstream of the scientific establishment, with a handful of cities and states looking to legalize or decriminalize their use for therapeutic or recreational purposes.
Johns Hopkins, for example, recently formed its Center for Psychedelic and Consciousness Research, which is primarily focusing its inquiries on the use of psilocybin for disorders from smoking addiction and depression to anorexia nervosa and Alzheimer’s disease.
The Investment Opportunity
The total addressable market for these drug therapies is massive. By one estimate, there are 40 million American adults suffering from anxiety disorders, including 7.7 million with PTSD and16.1 million with major depressive disorder. Americans with alcohol use disorder is more than 6% of all adults.
When viewed from a global perspective, the market is significantly larger. For instance, depression affects over 300 million people worldwide.
This may translate into a nearly $100 billion market by 2027.
There are a number of young, publicly traded companies that focus on developing psychedelic drug therapies, including MindMed (MNMD), Compass Pathways (CMPS), Bright Minds Biosciences (BMBIF) and Numinus Wellness (NUMI.V).
Big Pharma has been slow to get involved, held back by mixed research results and global legal hurdles surrounding these drugs, but interest is growing. Johnson & Johnson recently received FDA approval for its ketamine-related Spravato, which is targeted to adults with treatment-resistant depression.
Obviously, there is a speculative nature to investing in small companies with a single product focus, limited capital resources, an uncertain regulatory landscape and the prospect of Big Pharma companies eventually entering this space.
As a consequence, investments in such companies should only be made after careful research, with the help of an experienced financial advisor and in an amount that the investor is financially and emotionally comfortable losing.
Like any novel market, the winners and losers aren’t always readily discernible during early days. And, while many investors may end up disappointed as this market matures and consolidates, individuals suffering from mental health will be the true winners if psychedelic drugs can be fashioned into effective therapy solutions.
Peter Mastrantuono is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Peter worked for over 30 years in the wealth management industry, focusing on retirement planning, investing, asset allocation and financial planning.
