In today’s Money Morning…it’s Canada that is really leading the charge…the first of many — and some government incentive to boot…can mind-altering substances delivery mind-bending returns?…and more…
For any long-time readers, you may recall I made a somewhat bold prediction last September. Publishing an article in Money Morning titled ‘This Is 2020’s Most Important IPO‘.
A piece that delved into the emerging market of psychedelic drugs, and their newfound clinical success. As well as the (at the time) recent listing of Compass Pathways PLC [NASDAQ:CMPS]. A billion-dollar company that is researching and developing psychedelic drugs for mental illnesses.
If you want to read up about them, then I suggest you check out my previous article here.
Because today, I want to talk about the rising interest in this field. One that, only a few months ago, was almost impossible for investors to gain exposure to. At least, for everyday retail investors.
But now, that has all changed.
Much like the pot stock boom of the past, we’re seeing an underground uprising. With plenty of tiny and speculative stocks suddenly coming out of the woodwork.
And, just like the early days of pot stocks, it’s Canada that is really leading the charge. At least in terms of sheer volume of psychedelic stocks.
For Aussie investors looking to stick to the ASX though, investing in this cutting-edge trend wasn’t possible. Or at least, it wasn’t until this week…
The first of many — and some government incentive to boot
On Monday, a fairly small pot stock known as Creso Pharma Ltd [ASX:CPH] made an interesting announcement.
The company outlined a recent acquisition of Halucenex. A small Canadian-based company that would align with Creso’s long-term goals.
Now, consolidation and takeovers aren’t anything new when it comes to pot stocks. We’ve seen plenty of businesses join forces in the past to become more formidable competitors. Some of which have led to great success, while most just lead to a short-term lift in interest.
Creso’s latest takeover was a little different though, as the name suggests.
Halucenex isn’t concerned about cannabis; their focus is exclusively on psychedelics. Including ongoing research into these often restricted drugs, and their growing use in psychotherapy treatments.
In fact, the company even owns and operates its own clinical therapy sessions. With a particular focus on PTSD in army veterans. A subset of patients that is in dire need of better treatment outcomes.
And psychedelic drugs — like magic mushrooms (psilocybin), MDMA, and ketamine to name a few — could be the key.
So, with that in mind, Creso is technically the first psychedelic stock on the ASX. Making a rather risky first step into this weird and experimental market.
Turns out though, they probably couldn’t have timed it better.
On Wednesday, two days after Creso’s announcement, the federal government declared it would start funding research into psychedelic drugs. Committing $15 million for further investigation into what Greg Hunt is calling ‘innovative therapies for mental illness’.
Clearly the government is still a little shy to advocate for research and use of what are still technically illicit drugs. But, for investors, this initial $15 million in research grants should be seen as telling.
After all, despite being a relatively small sum, it is still five times the amount the government has ever pledged to cannabis research. With a woefully inadequate $3 million commitment back in 2019.
So, for that reason alone, it is clear that Greg Hunt is more interested in this new range of psychoactive substances over cannabis. Which makes sense when you consider the fact that this government has always talked big about tackling mental health. Especially in the wake of the coronavirus pandemic.
Prior to COVID, Morrison already upped mental health funding to $1.5 billion. Then, following the spread of the virus and lockdowns, he committed a further $1.1 billion for immediate support.
Clearly they are aware of this massive healthcare issue. And this splash of cash also proves they’re aware of psychedelics’ emerging success in treating said issues.
For that reason, I think Creso may just be the first of many more psychedelic stocks to come.
Can mind-altering substances deliver mind-bending returns?
Naturally, for investors like yourself, this begs the ultimate question: Is there any money to be made from these psychedelic pioneers?
Well, I obviously can’t guarantee anything.
But I can tell you that it is an increasingly popular investment trend. Just like pot stocks before it.
For this reason, some estimates suggest that by 2027 it could become a US$6.85 billion market in North America alone. Clocking in annual growth of 15.8% or more.
After all, we’re only just beginning to scratch the surface of what these drugs may be able to do. As a report from Data Bridge Market posits:
‘Growing acceptance of psychedelic drugs for treating depression is also increasing market value as the psychedelic drugs has repetitively proven its high rates of effectiveness for treatment for nicotine dependence, alcohol dependence, anxiety associated terminal illness and chronic PTSD as compared to other antidepressants.
‘Currently, different research studies are taking place that are expected to provide a competitive advantage for new and innovative therapeutic manufacturers with competitive psychedelic drugs and methods to develop, define psychedelic drugs, and various other opportunities in the U.S. psychedelic market.’
In other words, the early indication is that these banned substances are extremely potent. Not only in terms of their ability to send people on a mind-bending trip, but also in terms of breaking down bad habits or detrimental thinking.
And while it is too early to draw any hard conclusions, the possibility for further treatments could extend far beyond as well.
So, there is clearly a lot of potential in this market. And because of that, we’ve seen psychedelic stocks in Canada go nuts already.
Take a look at this sample of returns collated by Visual Capitalist:
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| Source: Visual Capitalist |
Those are some tantalising gains. Just a taste of the kind of excitement and potential that surrounds these stocks. Just like it did for cannabis a few years ago.
And as of this week, Australian investors have gotten their first taste as well. Which is why, just like the pot stock boom of yesteryear, I believe the ‘mush(room) rush’ as some are calling it, is on its way.
A trend that I will definitely be keeping an eye on. But one that I think you cannot afford to ignore either.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
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