Psychedelic stocks are trading so low right now that there is no better time to invest, according to one venture capital firm.
Investors have been given little to cheer about in the psychedelic space lately, with a lack of catalysts to move the nascent sector forward.
That’s hurt the Horizons Psychedelic Stock Index ETF, which is designed to provide exposure to the performance of North American publicly-listed life sciences companies focused on psychedelic medicines. The index has lost around 42% of its value over the past year, or about 13% year-to-date.
Heavy hitters like Cybin Inc. (NYSE-A:CYBN, NEO:CYBN), MindMed (NASDAQ:MNMD, NEO:MMED) and atai Life Sciences (NASDAQ:ATAI) have all felt the pain as well: over the last year, Cybin has fallen over 62%, MindMed (NASDAQ:MNMD, NEO:MMED) 69% and ATAI 39%. But things are starting to look up, at least for MindMed (NASDAQ:MNMD, NEO:MMED), which is up almost 50% so far.
Could that spur a rally for psychedelic stocks? According to at least one investor, the sector is due for a correction.
In an interview with Proactive, Negev Capital’s Ken Belotsky touted positive indications of things to come for psychedelic investors.
“It's the best time to invest in the psychedelic space, because most of the companies trade so low,” Belotsky said. “But the progress -- especially the quality of data in the clinical trials is so great that we, as investors, see the best potential to be there.”
It will take a lot more than optimism to move the share prices, however, and the ones that can make that happen are traditionally much more cautious. Biotech investors traditionally put their money into models that they can understand, and psychedelics are a different ballgame.
“The whole pharmaceutical market is pretty conservative and inert,” Belotsky said. “Biotech investors usually put their money into the companies that they think will be acquired by Big Pharma companies, and as of now, we don’t have any evidence that Big Pharma (is acquiring) any startups.”
Negev’s Psychedelic Medical Intervention Investment Fund is around US$30 million and invests in psychedelic companies in North America, the EU and Israel. Its portfolio includes names like atai, Awakn Life Sciences Corp (NEO:AWKN), Psyched Wellness Ltd (CSE:PSYC, OTCQB:PSYCF), Cybin, Bright Minds Biosciences Inc (CSE:DRUG, OTCQB:BMBIF) and BetterLife Pharma Inc (CSE:BETR, OTCQB:BETRF).
Belotsky, a partner at Negev, is hopeful that investors may soon start to see M&A activity from Big Pharma as soon as the summer, which should lead the funds to start rushing in.
It is likely that the early winners would be those companies exploring mental health therapies, such as MindMed and Compass Pathways (NASDAQ:CMPS).
Others could be firms like Braxia Scientific Corp. (CSE:BRAX, OTC:BRAXF), which runs a network of clinics and is developing novel drugs and delivery methods to reduce the burden of brain-based disorders such as major depressive disorder, or Lobe Sciences Ltd (CSE:LOBE, OTCQB:LOBED), which is focused on psychedelic medicines that deliver a patient-friendly treatment plan.
Another is Mindset Pharma Inc (CSE:MSET, OTCQB:MSSTF) and its patentable next-generation medicines to treat neurological and psychiatric disorders with unmet needs. The company is developing several novel families of next-generation psychedelic compounds, as well as an innovative process to chemically synthesize psilocybins in addition to its own proprietary compounds.
Revive Therapeutics Ltd (CSE:RVV, OTCQB:RVVTF), meanwhile, is pushing into psychedelic medicine with its novel transdermal microneedle patch to deliver MDMA, a unique delivery method that could expand on the therapeutic utility of MDMA for mental health and abuse disorders.
With the mental health crisis showing no signs of slowing down post-pandemic, psychedelics could very well play a role in treatment methods.
“Most people who need treatment seek out (therapy) for years and years,” Belotsky said. “By introducing psychedelic therapy to the traditional health care landscape, we can help billions of people worldwide to be healthy and happy.”
Contact Angela at angela@proactiveinvestors.com
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