Johns Hopkins is committing to more than $55 million in psychedelic research funding. However, the hospital center is just one of many such facilities paving the way for new eras in mental health treatment. As recently as 2022, more than half the national population approved psychedelic treatment for mental health issues; we can only assume the stat has climbed higher.
Unfortunately, from an investment angle, picking psychedelic stocks to buy tends to be as tricky as any other fringe, regulation-dense framework like biotech. Psychedelic stocks tend to be research-focused with limited income opportunities and face constant risk of political wind shifts shutting down operations. Still, these three psychedelic stocks represent the best in class for the category.
Compass Pathways (CMPS)
Compass Pathways (NASDAQ:CMPS) is easily the top psychedelic stock, capturing the most public and investment attention in a fairly small field. The research company primarily focuses on psilocybin’s (magic mushrooms) efficacy in treating depression, PTSD and anorexia.
Last month, the company’s primary treatment protocol — dubbed COMP360 — reported strong Phase 2 testing results with safety concerns largely aligned with expectations. COMP360 includes capsulized psilocybin administration to treat PTSD alongside a therapeutic series of immersive experiences. COMP360 has already been dubbed “Breakthrough Therapy” by the FDA. That designation means regulators identified COMP360 as a viable alternative to existing therapies and confers a series of Fast Track authorizations to speed up clinical testing and ultimate approval.
In an exciting move, Compass announced a partnership this week with Greenbrook TMS (NASDAQ:GBNH) to “explore delivery models for investigational COMP360 psilocybin treatment.” Greenbook’s focus includes nasal delivery mechanisms, so the partnership could hint at expected FDA approval for the overall treatment and a move towards wider productization.
Atai Life Sciences (ATAI)
Shares in atai Life Sciences (NASDAQ:ATAI) spiked earlier this month as the company announced an investment stake in smaller competitor Beckley Psytech. The deal infuses Beckley with $50 million cash to advance current research protocols, including nasally-delivered 5-MeO-DMT and intravenous psilocybin derivatives. In exchange, ATAI gets a 35% stake in the firm and expands its treatment portfolio substantially. ATAI’s current portfolio focuses mostly on long-duration treatment, like standard psilocybin, whereas its new stake invests in shorter-acting treatment protocols. Offering patients a range of experience lengths helps providers tailor the treatment and enhance overall therapeutic safety.
Like many psychedelic stocks, ATAI is (thus far) perennially unprofitable as the firm emphasizes research and product development over quick cash grabs. But the psychedelic stock has a deep bench of institutional investor approvals, including Peter Thiel. The “smart money” hypothesis indicates an upside for ATAI. As the company keeps developing its pipeline, cash infusions from the same investment bodies keep research running and ensure the company doesn’t assume debt to keep the lights on.
Seelos Therapeutics (SEEL)
Former penny psychedelic stock Seelos Therapeutics (NASDAQ:SEEL) rocked markets last month as the company announced a whopping 1-for-30 reverse split to bring shares above the mandatory $1 mark. Reverse splits, especially when intended to keep the stock trading on main exchanges, don’t usually bode well for a company’s future. But this makes SEEL a wildcard psychedelic stock opportunity that could pay off if sentiment rebounds or the company realigns itself.
Seelos is unique among other psychedelic stocks in that its treatment efforts focus more on the material, rather than the mental, side of the health equation. The company uses a product containing ketamine as a treatment protocol to address suicidal ideation and PTSD. But, at the same time, Seelos is testing a range of treatment protocols to address Huntington’s Disease, ALS, Alzheimer’s and more. While this may seem an example of a psychedelic stock spreading itself too thin, adding SEEL to your portfolio offers external biotech upside along with its psychedelic stock potential.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.