Canadian psychedelic stocks were the cannabis stocks of 2021. They exploded onto the scene late in 2020, popping up among Canadian stocks, and already have their psychedelics ETF (exchange-traded fund): Horizons Psychedelic Stock Index ETF (TSE:PSYK). The fund has fees of 0.99% annually and total assets under management of $14.75M.
2020 was a challenging year for mental health as people struggled with anxiety, depression, and PTSD. Psychedelics could play a key role in potentially helping millions of people cope with mental health issues. There is a tremendous business opportunity in this space.
Unsurprisingly, investors like Peter Thiel, of PayPal and Facebook fame, have invested in psychedelic firms and shroom stocks. While all of us might not have Thiel's money, that shouldn't be a reason not to invest in this space.
We will look into some of the top Canadian mushroom and psychedelic stocks you can look at today for potential outsized gains. It's essential to remember that psychedelic companies are in the very early stages of their business cycle. Many companies are not even at the clinical stage of testing.
If you want to invest, do so with only a tiny portion of your portfolio if it fits your risk tolerance.
Keep in mind that these psychedelic stocks are NOT in any particular order.
What are the top Canadian psychedelic stocks today?
- Mind Medicine (MMED.NE)
- Numinus Wellness (TSEV:NUMI)
- Compass Pathways (NASDAQ:CMPS)
Mind Medicine (MMED.NE)
MindMed (MMED.NE or MNMD) says on the company's website that it helps "patients unlock the healing power of the mind through Psychedelic Inspired Medicines."
The company is pre-revenue right now and recently underwent a reverse split. It has a diversified pipeline of clinical programs targeting significant unmet medical needs.
The company states that 1 in 5 U.S. adults are diagnosed with a mental health disorder and health disorders that MindMed aims to treat cost the U.S. economy hundreds of billions of dollars.
The company currently has no drugs in phase 3 of trials, but its MM-120, used to treat generalized anxiety disorder and ADHD, is near completion of phase 2 trials. The drug is a pharmacologically optimized form of LSD and is showing powerful early-stage results.
In fact, according to the company, there was a greater than 30% reduction in anxiety and depression symptoms among those who were given the drug.
On the investing side, the company's balance sheet is strong, which is critical when we look at a pre-revenue bio company. At the time of writing, Mind Medicine has $211M in cash equivalents on the balance sheet and only $36M in current liabilities.
Yes, the company has collected most of this cash from share offerings, with shares outstanding more than doubling over the last few years. Still, investors need to be comfortable with dilution at this stage of the company's business cycle.
Shark Tank mogul Kevin O'Leary invested in the company in 2021, stating that psychedelic drugs like magic mushrooms, LSPD, and other psychedelic compounds "far exceed" cannabis potential.
Mind Medicine is one of the most promising psychedelic stocks in the country today. The company does not produce any revenue and does not know when it will produce revenue, if it all, but if its products make it to market, there is massive upside potential here. Just don't ignore the risks.
Numinus Wellness (TSE:NUMI) develops proprietary, psychedelic-centred, therapeutic products and services through its laboratory and research & development processes.
The company's clinic network comprises Numinus Health, Mindspace Services, and the Neurology Center of Toronto. Its services include Ketamine-assisted psychotherapy for depression, neurological care and psychotherapy, and counselling by registered psychologists.
The company has 12 wellness clinics and a clinical and psychedelics research lab at the time of writing. It states that there is a total addressable market of over $380B and that current systems are not fit to handle the growing need for mental health treatment.
Numinus was the first public company in Canada to receive a license to produce and extract psilocybin from mushrooms and the first to complete a legal harvest of psilocybin mushrooms using this license.
Numinus also possesses a dealer's license from Health Canada to import, export, possess, test, and distribute MDMA, psilocybin, psilocin, DMT, mescaline, LSD, and Ketamine. Numinus holds a cannabis testing license from Health Canada, allowing them to provide third-party analytics and testing services for revenue generation.
Unlike Mind Medicine, the company is generating revenue. Revenue that is growing at a pretty rapid clip. The company is seeing growth in excess of 35%, and gross margins are, at the time of writing, over 42%.
There is no doubt the company is rapidly expanding its presence. In early 2021, the company had one total wellness clinic. Now, as of the start of 2023, it sits with 12 wellness clinics and four clinical research sites.
Although revenue generation is small, it is at least there and growing relatively quickly. The company is seeing strong organic growth and is expected to post revenue of $24M in 2023, $38M in 2024, and $63M in 2025.
Compass Pathways (NASDAQ:CMPS)
Compass Pathways (NASDAQ:CMPS) is based in the UK and the US. Its priority is developing a new model of psilocybin therapy in which psilocybin is administered with psychological support.
Its focus is on treatment-resistant depression, or TRD, a subset of depressive disorder, or MDD, comprising patients who are inadequately served by the treatment paradigm. It has developed a proprietary, high-purity polymorphic crystalline formulation of psilocybin, COMP360.
The biggest USP for Compass is that it has been proven to be a promising treatment option for depression, specifically treatment-resistant depression. However, this also means that Compass drugs will come into play only once other treatments have been tried and failed.
This could be seen as a risky bet for newer investors, even in the volatile psychedelic space. That said, the global depression drugs market was valued at nearly $16B in 2020, and is expected to grow to $21B by 2030.
Its COMP360 drug has completed phase IIb trials for TRD, the most extensive psilocybin therapy clinical trial, and is now in Phase 3. Regarding post-traumatic stress disorder, the drug is still undergoing phase 2 trials. Considering mental health disorders cost the world $16 trillion in damages every year, there is large-scale potential for these drugs.
Much like Mind Medicine, Compass Pathways has very little revenue. Analysts do not expect the company to generate any revenue in the next few years. With EBITDA losses expected to be north of $100M annually over the next few years, there is no doubt we will see more equity raises or debt from a company like Compass.
The company has cash and equivalents of $143 million at the end of 2022, but the cash burn here is a lot.
Analysts have given the stock a target price of $41, a significant upside from current levels. This could be a bet with massive payouts. The difficulty right now in 2023 is that the market is very risk-off, and a company like Compass may take a while to break out if it ever does.