Psychedelics like magic mushrooms, LSD, and MDMA have completed the full race from being outrageously vilified by all to being accepted by the majority.
In the last year, companies around the world bet on the legalization of the psychedelic industry by establishing major production spots across the US and Canada. Sadly, the US and Canadian federal governments did not think it was time yet. Still, they acquiesced enough to permit a limited amount of research to establish if the drugs truly have medical potential.
We're in a period that people have termed "the psychedelic renaissance." Now, everyone is waiting to see if the various investment hot spots will be worth it by the end of this year. Although the psychedelic industry is relatively new, It can potentially open doors for investors and entrepreneurs all over the world.
Unveiling Psychedelics
Once scientific evidence showing the therapeutic potential of psychedelics was revealed, these substances became impossible to ignore. It also posed the need for new industry; the psychedelic industry. The first set of psychedelic companies announced themselves in 2020 and began scaling up their operations in 2021. Like with the cannabis industry, the pandemic opened the eyes of many to the potential of psychedelics and caused the budding industry to enter the mainstream.
Getting to experience creating this new industry from nothing has been incredible these past months for investors, entrepreneurs, and observers. Dozens of companies are currently processing psychedelic substances into effective medications. Reports say that these activities are being supported by major U.S. exchanges and legacy investment banks.
Achievements for 2021
Overall, the psychedelic sector overcame a series of challenges to attain the foundation it now has in the medical industry. It successfully shifted the paradigm and disrupted mental health treatment to draw attention to the drug's wonders.
Several Canadian and U.S. psychedelic companies have successfully listed on major exchanges like the NYSE and the NASDAQ. The industry also penetrated Wall Street, becoming known to thousands of retail investors scattered across the world. In the 2021 Q4 period, the U.S. already had at least 50 listed psychedelic companies. Of which nine are listed on the NYSE and NASDAQ.
These companies include Enveric Biosciences, GH Research, Atail Life Sciences, MindMed, Seelos Therapeutics, Compass Pathways, Cybin Corp, Pasithea Therapeutics Corp, and Field Trip Health, Inc.
Launching ETFs for psychedelics
About a year ago, the first psychedelics-focused exchange-traded funds were debited on Toronto's NEO exchange. The ETF, Horizons Psychedelic Stock Index (NEO: PSYK), was launched to focus on the relatively new industry. Less than six months after this launch, Defiance ETF launched the Defiance Next Gen Altered Experience in the U.S.
Due to the low-key state of the industry then, both ETFs remained passive and focused on tracking a periodically restructured index.
The only active ETF in the U.S. psychedelic sector is the AdvisorShares Psychedelics ETF, launched in September by AdvisorShares.
Capital Availability Made Possible By The Private Sector
As expected, many companies are getting involved in the industry to make a tremendous amount of profit. In 2021, dozens of psychedelic start-ups were listed as private entities on the exchanges. This caused an increased in-flow of capital.
CB Insights reported in November that the estimated equity funding in the sector as of October 31st was about $594 million. This figure was reached when over 40 different deals were struck. In 2020, this figure was less than $400 million. This year, experts predict that at least 55 other arrangements will be reached, generating over $720 million.
The report showed that about 50% of this private funding was committed to psychedelic research and development. This niche promises to be the most profitable in the medium term. Records also show that the psychedelic industry comprises hundreds of new startups, most privately funded—private companies number at least nine times as many as public-listed companies.
Investment banks have their toes dipped in but remain cautious. Another indication of the psychedelic industry's launch into mainstream finance is the presence of several investment banks and financial services firms snooping around the sector. Cantor Fitzgerald, Credit Sissies, Citigroup, Aegis Capital, Canaccord Genuity, RBC Capital Markets, Roth Capital, Cowen & Co, and Maxim Group, among others, now provide in-depth analysis on the leading psychedelic companies. The start-ups with the most favorable ratings are often categorized in the Buy or Outperform sections.
The Current State of the Psychedelic Industry
Researchers made substantial progress geared towards having a better understanding of psychoactive substances and their relations with the human body and mind. UT Austin, the University of Wisconsin, the UC Berkeley Center, New York University, and the Icahn School of Medicine have all been at the forefront of this research.
This academic research has fostered partnerships between capitalist organizations and educational institutions. Like the Mycedine innovation being handled by John Hopkins University, it is being funded by the company, the same way Atai is funding Harvard's Massachusetts research.
The media plays a vital role in publicizing the medical benefits of these new drugs. Major news outlets like the New York Times and the Washington Post have featured and published psychedelic psychedelics as cover stories. A Hulu miniseries, Nine Perfect Strangers, had psychedelics as its central theme.
The federal government's reluctance to decriminalize psychedelics is not shared by some state governments. Psychedelic substances have been decriminalized in Detroit, Seattle, and cities in California and Massachusetts. States like Texas, Florida, Colorado, Vermont, Connecticut, Maine, Missouri, and New York may be passing psychedelics legislation this year, following the introduction and passing of bills to allow the use and sales of psychoactive drugs.
Bottom Line
The encouragement of academic researchers, constant media presence and the introduction of regulations in some states mirror the financial tailwinds that are blowing through the industry. So many events, supported by groups and individuals interested in the budding ecosystem, coincided on large scales during 2021 that nothing less than this is expected this year. Hopefully, we will see an international psychedelic culture that values the drug for its therapeutic potential and not just for the economic profits it could bring in.
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