Not long ago, cannabis equities were the toast of the sin asset world. Now into a second year of being taken to task, marijuana names have a long way to go win back investors’ trust. Likewise, psychedelic stocks have some work to do to prove to investors this nascent asset class is even worth the risk.
Psychedelics is a kind way of saying “drugs” or “narcotics.” That’s exactly what LSD, MDMA and “magic mushrooms” – three well-known members of the psychedelics space – are. For investors that think cannabis legalization is a thorny issue (it is), know this before jumping into psychedelic stocks. It will be some time before states legalize these drugs on par with marijuana. As for Uncle Sam, forget about it.
That doesn’t mean LSD, magic mushrooms and the like should be dismissed. Like marijuana, there are credible, legitimate uses here. Researchers at Johns Hopkins University believe psilocybin, the active ingredient in magic mushrooms be reclassified for medicinal use. That will allow it to be used to help patients quit smoking and treat anxiety and depression.
Yes, there’s some credibility to psychedelics and, potentially, investment rewards. Here are few ideas in this space to consider.
- Mind Medicine (OTCMKTS:MMEDF)
- Champignon Brands (OTCMKTS:SHRMF)
- Hollister Biosciences (OTCMKTS:HSTRF)
Psychedelic Stocks: Mind Medicine (MMEDF)
In theory, it’s not a stretch to say any psychedelic stock is “interesting” simply because this is still a nascent field. But Mind Medicine is legitimately captivating. The company is a neuro-pharmaceutical firm looking to leverage the psychedelic ibogaine to treat opioid addiction.
It’s not hyperbole to say opioid addiction is a crisis. According to the Centers for Disease Control and Prevention (CDC), in the 20 years spanning 1999 to 2018, there were 450,000 deaths from opioid overdose. In 2018, 70% of the 67,367 drug overdoes were from opioids.
MindMed’s addiction medication, 18-MC, is in Phase 1 human trials. It could enter Phase 2 trials by the end of the year. That’s of two-fold importance. First, the fact that the drug is in human trials is encouraging. Second, the possibility of 18-MC clearing the first phase and moving forward is the very definition of a catalyst for the stock.
Now, consider the following numbers. The opioid treatment market is valued at almost $3 billion, which is a big number for a company the size of MindMed, but a small figure in the scheme of other healthcare niches.
However, that $3 billion doesn’t jibe with the $78.5 billion in annual economic loss the U.S. suffers due to opioid deaths and addiction, according to the National Institute on Drug Abuse. The treatment market could and probably should grow. And, that could be a boon for MindMed if 18-MC proves successful.
Champignon Brands (SHRMF)
Vancouver-based Champignon Brands is engaged in another compelling area of psychedelics meeting everyday healthcare need. The company is producing medicinal mushroom-infused products. These are aimed at treating depression and post-traumatic stress disorder, as well as substance and alcohol.
It may be seen as “talking its own book,” but Champignon brings up a vital point on its website. Ketamine, psilocybin and MDMA received fast-track designations from U.S. and Canadian regulators for research and development in treating depression and post-traumatic stress.
In North America, that’s a $10 billion market.
While there’s an interesting story to be told here, Champignon isn’t without risk. For example, the company is the midst of a disclosure review with the British Colombia Securities Commission.
Second, a possible spin off the company’s consumer-packaged goods unit isn’t going to happen. Third, a term sheet with the Wellness Clinic of Orange County was scrapped.
Hollister Biosciences (HSTRF)
Hollister Biosciences has an established footprint in the cannabis space and it recently acquired AlphaMind Brands. This deal will help the buyer put together a “portfolio of certified legal mushroom-based natural health products.”
What makes Hollister interesting is the marijuana exposure, which can augment and dull some of the risks associated with the more volatile psychedelic market.
Hollister is producing and distributing cannabis products for medicinal and recreational use in its home market of California, the biggest domestic marijuana market. The company is selling to 350 dispensaries throughout the Golden State.
Moreover, a recent acquisition of Venom Extracts affords Hollister multi-state operator (MSO) status, putting it in the more lucrative area of the cannabis equity market.
All that with a psychedelic kicker and Hollister is still inexpensive based on price-to-sales. In fact, it’s one of the cheapest names among publicly traded MSOs.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.
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