Magic mushroom stocks aka psychedelics stocks are a relatively new and emerging sector in the stock market. These healthcare companies focus on the research, development, and commercialization of hallucinogens like psilocybin (the compound found in magic mushrooms) for medicinal and therapeutic purposes.
Fact is, the potential of psychedelics for treating mental health issues such as depression, anxiety, PTSD, and addiction has been gaining recognition, with the legal and regulatory environment around psychedelics rapidly evolving.
So much so that the market for psychedelic drugs is projected to grow significantly in the coming years, with some estimates predicting that it could reach a value of $8.31 billion by 2028. This hype led to a surge in publicly listed magic mushroom stocks in 2021.
However, the tides have turned in 2022. Magic mushroom stocks took a hit as interest rate hikes and an unfriendly macro environment brought on a bear market where investors started to become more fearful.
Most of these magic mushroom stocks are now trading way below their IPO prices. If you are thinking of gaining exposure to some ‘cheap’ magic mushroom stocks, this article will give you a headstart.
5 magic mushroom stocks to watch
| Mushroom Stock | Stock Code | What are they working on? | % from IPO price | Price to Earnings |
| atai Life Sciences | ATAI | psilocybin, MDMA, and ibogaine, for the treatment of mental health disorders. | -89% | -2.7 |
| COMPASS Pathways | CMPS | synthetic psilocybin for treatment-resistant depression (TRD) | -42% | -3.7 |
| Cybin | CYBN | psilocybin, and DMT for the treatment of mental health disorders. | -89% | -2.4 |
| Mind Medicine (MindMed) | MNMD | LSD, MDMA, and Ibogaine for treatment of mental health disorders. | -36% | -1.4 |
| Seelos Therapeutics | SEEL | Ketamine, trehalose, gene therapy for ALS, MDD and Parkinson’s Disease. | – | -1.3 |
ATAI Life Sciences (NASDAQ:ATAI)
atai Life Sciences focuses on developing drugs that are based on the active ingredients found in psychedelic substances such as psilocybin, MDMA, and ibogaine, for the treatment of mental health disorders. In June 2021, atai Life Sciences went public and raised ~$225 million.
The company is conducting clinical trials to evaluate the safety and efficacy of these drugs for the treatment of depression, anxiety, addiction, and other mental health conditions.
The company has formed partnerships with a number of leading universities and research institutions, and it has also acquired several other companies in the psychedelics space.
atai Life Sciences was backed by Peter Thiel and is considered one of the leading companies in the emerging psychedelics sector. It has raised over $300 million in funding to date, and is poised to play a significant role in the development of new psychedelic therapies in the years to come.
COMPASS Pathways (NASDAQ:CMPS)
COMPASS Pathways focuses on developing innovative therapies for the treatment of mental health conditions. The company is best known for its work on psilocybin, the active ingredient in magic mushrooms – their first program focuses on the use of psilocybin therapy for treatment-resistant depression.
The company has developed the COMP360 proprietary method for producing high-quality synthetic psilocybin and is conducting clinical trials to evaluate its efficacy for treating treatment-resistant depression (TRD). COMP360 was designated as a Breakthrough Therapy by the US FDA which could accelerate the drug’s development and regulatory approval process. It is currently undergoing Phase 3 clinical trials.
COMPASS Pathways went public in September 2020, raising $146.6 million in its initial public offering (IPO) on the Nasdaq stock exchange. The company has also raised significant funding from private investors and partnerships, including a collaboration with the world-renowned academic medical center, Sheppard Pratt, to develop new mental health therapies.
COMPASS Pathways is widely considered a leader in the emerging field of psychedelic medicine, and its work has garnered significant attention from both the media and investors. With its innovative approach to drug development and focus on unmet medical needs in the mental health space, the company is well-positioned for future growth and success.
Cybin (NYSEAMERICAN: CYBN)
Cybin Inc. is a Canadian biotechnology company developing psychedelic-based therapeutics for the treatment of mental health conditions such as depression, anxiety and addiction.
Cybin’s research and development efforts are centered on two main psychedelic compounds, psilocybin and DMT. The company is conducting pre-clinical and clinical studies across 3 active drug programs to evaluate the safety and efficacy of these compounds as potential therapies for various mental health conditions.
In 2020, Cybin acquired Adelia Therapeutics, a US-based company that specializes in the development of novel psychedelic molecules. This acquisition allowed Cybin to expand its portfolio, research capabilities and ability to develop new psychedelic compounds for therapeutic use.
In addition to its research and development activities, Cybin is also focused on building partnerships with academic institutions and industry leaders in the field of psychedelics. The company has partnerships with institutions such as the Toronto Centre for Psychedelic Science and the Centre for Psychedelic Research at Imperial College London.
Cybin went public in August 2020 and is currently listed on the NEO Exchange in Canada and the NYSE in the USA. The company has also raised significant funding through private placements and strategic investments.
Overall, Cybin is another emerging player in the psychedelics industry that has attracted attention for its innovative research and development efforts.
Mind Medicine (MindMed) (NASDAQ: MNMD)
Mind Medicine (MindMed) focuses on developing psychedelic-based therapies for the treatment of mental health disorders such as anxiety, depression and opioid use disorder.
MindMed’s research and development efforts are centered on the use of psychedelic substances such as LSD, MDMA, and Ibogaine as potential therapeutic agents. The company is conducting clinical trials to evaluate the safety and efficacy of these substances.
MindMed has also formed partnerships with leading institutions in the field of psychedelics, including the University Hospital Basel in Switzerland and the University of California, San Francisco.
The company went public on the Canadian NEO Exchange in March 2020 and subsequently listed on the Nasdaq stock exchange in April 2021. It underwent a 1:15 reverse stock split in Aug 2022, but that did not help in reviving its share price.
MNMD reported positive results from a Phase 2 trial of LSD recently on 14 April 2023.
Seelos Therapeutics (NASDAQ:SEEL)
Seelos Therapeutics Inc. is a clinical-stage biopharmaceutical company focusing on the development of innovative therapies for the treatment of central nervous system (CNS) disorders, such as Parkinson’s disease, amyotrophic lateral sclerosis (ALS), and post-traumatic stress disorder (PTSD).
Seelos is developing a pipeline of potential therapeutics that target various mechanisms of CNS disorders, including inflammation, oxidative stress, and mitochondrial dysfunction. The company’s lead drug candidate, SLS-002, is a nasal spray formulation of ketamine, a well-known dissociative anesthetic and psychedelic drug. Seelos is evaluating SLS-002 in clinical trials as a potential treatment for acute suicidal ideation and behavior in patients with major depressive disorder. In addition to SLS-002, Seelos has several other drug candidates in its pipeline.
Seelos went public through a merger with Apricus Biosciences in 2018.
Risks of investing in Magic Mushroom stocks
Do remember that investing in psychedelics stocks does come with risks. Here are some risks that you should be aware of:
- Regulatory risk: Psychedelic drugs are still illegal in the US (and most other countries). As such, regulatory approval for the use of psychedelic drugs as therapeutics is uncertain and could be delayed or denied altogether.
- Clinical trial risk: Psychedelic drug development is still in its early stages, and there is limited clinical data available to support their efficacy and safety. There is a risk that clinical trials may not meet their endpoints, or that adverse events may be discovered during the clinical trial process, leading to delays or termination of the trial.
- Intellectual property risk: The patent landscape in the psychedelics industry is still evolving, and there is a risk that competitors may develop similar or superior drugs and therapies that could impact the commercial potential of companies in the industry.
- Market risk: The psychedelics industry is still in its early stages, and there is a risk that the market may not develop as quickly or as robustly as anticipated, or that demand for psychedelic drugs may not be as high as expected.
- Operational risk: Psychedelics companies are often small and may have limited resources, which could impact their ability to successfully execute on their business plans and bring their drugs to market.
Magic Mushroom ETF, maybe?
As a new and emerging healthcare sector, it will be difficult to pinpoint a winning company in the magic mushroom or psychedelics space.
Instead of picking the best magic mushroom stocks, you may want to consider gaining exposure through psychedelic ETFs instead.
The biggest psychedelic ETF at the point of writing would be the AdvisorShares Psychedelics ETF (PSIL) that has an AUM of $6.19M. It charges an expense ratio of 1% but would give you exposure to a basket of magic mushroom stocks.
If you’re new to ETFs, don’t miss this ETF guide.
Should you invest in Magic Mushroom stocks?
The sector is still in its early stages, and there is a lack of established players in the market. Furthermore, the legal and regulatory landscape surrounding psychedelics is constantly evolving, and there is a risk of regulatory changes that could negatively impact the sector.
Despite these risks, the psychedelics sector is certainly worth watching for investors who are interested in emerging industries with significant growth potential. If you are considering investing in psychedelics stocks, it is important to do your due diligence and carefully research the companies and the market before making any investment decisions.
