What a difference a year makes.

Twelve months ago, we were reporting on a spectacular rally in the final quarter of 2021. Companies were starting to go public in larger numbers. And the industry had been raising a ton of capital toward year-end.

In 2021, the industry has moved much further ahead. Many more companies have gone public. Yet psychedelic stocks have been pushed down to improbable if not simply absurd valuations.

There is no rationality in this equation. However, the 21st century’s algorithm-driven trading in markets is becoming increasingly erratic. The tide comes in and the tide goes out. Right now, it’s low-tide with psychedelic drug stocks.

Stock performance:  F

This grade is in no way an indictment of the public companies themselves. As the remainder of our review will show, “execution” has not been an issue for this industry.

Nor has capital-raising. Nor has finding top talent to add to management. Nor has identifying additional opportunities in drug R&D, clinic operations, and IP development.

The industry has been moving full-speed ahead. But markets have slammed the stocks into reverse.

Unlike last year, we don’t have a graphic providing a long list of investment winners. Instead, a recent article identified some of the stellar value opportunities created by the slump in share prices.

(Click on image to enlarge)

In 2020, we were reporting on stock winners. In 2021, we’re alerting investors to outrageous value propositions.

Share prices have been pushed to very lean multiples of the cash positions for these public companies. A few are trading at not much more than cash.

That’s how the market is supposed to price dying companies or companies in dying industries. It’s not how emerging life science companies should be priced that are literally revolutionizing the treatment of mental health.

What makes this big news for investors is the Mental Health Crisis. Two billion people with untreated or poorly treated mental health disorders. The biggest commercial opportunity in life sciences of the 21st century.

Psychedelic medicine is the future. Conventional mental health therapies are the past. Yet, at present, psychedelic stocks are being priced like the providers of these obsolete conventional mental health therapies.

In 2020, Psychedelic Stock Watch graded the industry an “A” for stock performance. In 2021, stock performance clearly earns a failing grade, but conversely, current pricing for these companies is an “A+” opportunity for investors.

Raising capital:  B+

Institutional and accredited investors have continued to show a robust appetite to finance these public companies for all facets of the industry: drug R&D, clinic expansions, and IP development.

Public and private companies in this emerging industry have now raised well over $2 billion. Most of that capital has been added to balance sheets just in 2020 and 2021.

Once the dust settles, the total amount raised in 2021 may exceed 2020’s robust total. However, capital raising in 2021 was focused in the first half of the year – and much of those financings were on the back of late-year stock momentum in 2020.

As a result, Psychedelic Stock Watch is lowering last year’s grade from “A+” to “B+”.

Psychedelic drug R&D:  A+

In 2020, Psychedelic Stock Watch awarded the industry an “A” for drug development. This was largely derived from the strength of a few of the most-prominent clinical trials now underway with respect to psychedelics-assisted therapies.

Leading the parade was the outstanding results from the Phase III clinical trial of MDMA-assisted psychotherapy for PTSD by the Multidisciplinary Association for Psychedelic Studies (MAPS).

In 2021, the industry has been upgraded to an “A+” for drug development. This letter grade is earned on the basis of both additional excellent results and the accelerating depth of drug development in the industry.

Compass Pathways (US: CMPS), part of the atai Life Sciences network of R&D partnerships, reported very encouraging results from its Phase IIb clinical trial of its psilocybin-assisted therapy (COMP360) for Treatment Resistant Depression (TRD).
 

• One-third of these hard-to-treat patients went into remission from a single therapy session.
• There was no indication of treatment-emergent adverse events (TEASs) being causally connected to the COMP360 therapy.
• Therapy results were equally strong for patients currently on SSRI antidepressants, meaning that patients don’t need to be weaned off of these (often addictive) drugs before commencing COMP360 therapy.

Ireland-based GH Research (US: GHRS) announced perhaps more-impressive results for its own Phase IIa clinical trial for TRD. A stunning 7 out of 8 patients in the trial (87.5%) went into remission after a single therapy session.

Seelos Therapeutics (US: SEEL) released positive Phase IIa results for its ketamine-derived treatment for Acute Suicidal Ideation Behavior (ASIB) among sufferers of Major Depressive Disorder (MDD).

Another partner of atai Life Sciences (US: ATAI) also released positive Phase IIa results. Numerous additional Phase I/Phase II clinical trials were commenced in 2021 by public companies including atai, MindMed Inc (US: MNMD / CAN: MMED) and Numinus Wellness (CAN: NUMI / US: NUMIF).

Other important developments in drug R&D came via new acquisitions and partnerships.

Awakn Life Sciences (CAN: AWKN / US: AWKNF) acquired the IP from a completed Phase II trial of a ketamine-based therapy for Alcohol Use Disorder. Then it brought in the doctor who led that research to spearhead its own (future) Phase III clinical trial off of that research.

Mydecine Innovations Group (CAN: MYCO / US: MYCOF) announced a new partnership with Johns Hopkins University to conduct a seamless Phase II/III clinical trial for smoking cessation using MYCO’s own drug candidate.

Smoking cessation is one of the largest potential treatment markets. Johns Hopkins is a leader in psychedelics-related R&D.

Meanwhile, industry R&D continues to branch out into numerous other treatment markets, both inside of and outside mental health care. Traumatic brain injury, chronic pain, obesity and sexual dysfunction are just some of the other multi-billion-dollar treatment markets where research can quickly advance into more human clinical trials.

Clinical results continue to be impressive. Many more drug trials are being launched. And the overall depth of drug R&D is increasing exponentially. A fully-earned “A+”.

Mental health clinic operations:  A

A new category in our review is the increasingly important treatment side of this industry.

In 2020, for most of the year investors only had access to two public companies with a strong “clinics” component in operations: Numinus Wellness and Field Trip Health (US: FTRP / CAN: FTRP).

In 2021, the number of public companies focusing on these mental health clinics has been increasing as fast as the clinic operations themselves are growing.

Companies like Novamind Inc (CAN: NM / US: NVMDF), Levitee Labs (CAN: LVT / US: LVTTF), Delic Holdings (CAN: DELC / US: DELCF), Awakn Life Sciences, and KetamineOne Capital (CAN: MEDI / US: KONEF) have dramatically increased investor options here.

Strong margins. Rapidly expanding networks. Yet the valuations for these clinics companies may even be more compressed than the industry overall.

Huge growth potential. Unbelievable value propositions. These are generally well-capitalized companies with strong balance sheets. Several of these companies could quickly move to positive cash flow just by dialing back their rate of expansion.

Most investors in the psychedelic drug space will want at least some exposure to these companies. We rate this branch of the industry a solid “A” in 2021.

Media/public opinion:  A

In 2020, Psychedelic Stock Watch bestowed an “A+” in this area. After 50 years of War-on-Drugs propaganda concerning psychedelics, major media organizations began accurate and enthusiastic reporting on the potential of psychedelic drugs and psychedelic medicine.

Dozens of articles appeared in major publications. Complimenting this, we have also seen a major shift in public attitudes toward psychedelic medicine and psychedelic drugs in general.

Assigning a letter grade for 2021 is somewhat more problematic. On the one hand, the quantity of media coverage on the psychedelic drug industry continues to increase rapidly. In both major outlets and ancillary media sites, we see multiple new articles being published on psychedelics virtually every week.

On the other hand, the quality of media coverage has been less-than-inspiring. With the Corporate Media now reporting its news as a herd, “coverage” of particular news items involves one assessment of the news – followed by a hundred other sites parroting it.

In the case of the psychedelic drug industry and psychedelic medicine, some of that coverage has simply been lazy, for lack of a better term. Important nuances have been missed, with the result that the general public sometimes fails to be properly informed of the exciting potential of psychedelic medicine.

A particularly notable example came early in the year with mass media coverage of a New England Journal of Medicine article, covering a clinical study on the use of psilocybin to treat depression.

The numbers in the study were clearly superior for the psilocybin therapy vs. antidepressant therapy. However, (due to the “margin of error”) all that the scientist conducting the study could state with statistical certainty was that the psilocybin therapy was at least as effective as antidepressants.

The media hacks who reported on this article stated that psilocybin therapy worked “as well as” antidepressants – mere equivalency. This was a crucial failure in reporting given that antidepressants are notoriously unsuccessful in treating most depression.

It’s great for the industry that the mainstream media continues to increase its coverage of psychedelic medicine. But it’s equally important that these multi-billion-dollar media corporations report accurately on this emerging industry.

While media coverage may have been uneven, public support for psychedelics steadily advances. In Canada, 80% of the people simply want to see psilocybin legalized for medicinal use. In the United States, growing support is leading to voter-driven initiatives to loosen the laws around psychedelics in numerous states.

For 2021, media/public opinion receives an “A”.

Regulatory thaw:  C+

During 2021, Western governments did an enormous amount to make mental health worse with their endless Covid lockdowns and assorted “restrictions”. Sadly, these same governments expended virtually zero energy in addressing the Mental Health Crisis.

As Psychedelic Stock Watch chronicles regularly, over 2 billion people suffer from treatable (but generally untreated) mental health disorders. Worse, the number of sufferers has been increasing exponentially since the start of the Covid-19 pandemic.

In the United States, the number of Americans affected by depression has nearly quadrupled to 80 million people. Drug overdose deaths soared by 30% in 2020 alone.

The Suicide Epidemic in the U.S. military is now 20 years old. During this time, over 115,000 veterans have taken their own life.

The Suicide Epidemic among the general public is now (at least) 8 years old – and rapidly worsening. Currently, one American dies from suicide an average of every 10 minutes.

How mind-numbingly ignorant are both the White House and Congress with respect to the horrific Mental Health Crisis in the United States?

The U.S. Surgeon General finally noticed that all is not well in mental health this year. He said he was intent on preventing a “public health crisis” in mental health in the United States.

Unless the Surgeon General has his own time machine, he’s at least 20 years too late. Instead, this negligent and incompetent public health official needs to learn about the Mental Health Crisis that he and the rest of the federal government have ignored.

Then he needs wake the senior citizens of Congress from their naps and inform them about this horrific-and-worsening catastrophe in the United States. Then he needs to educate them on psychedelic medicine – literally the only hope to address this crisis in mental health.

In Canada, medical “exemptions” for the legal use of psilocybin have been increasing incrementally. But it’s only baby steps, with a crisis that is totally out of control and a general public that fully supports legalizing psilocybin today.

At the state level in the U.S., we actually see some signs of political urgency regarding psychedelic drug legal reform. Increasing numbers of states are at least “studying” the potential of psychedelic medicine, if not proactively moving to increase medical access.

Overall, while the psychedelic drug industry continues to push forward aggressively on solutions for mental health, federal governments remain in their own War on Drugs time-warp. Unwilling to acknowledge their past, egregious errors on drug policy. Seemingly incapable of moving forward on ultra-critical drug reform.

Because of this intransigence from governments, the psychedelic drug industry is stuck with a “C+” in 2021 in the area of legal drug reform.

The future looks even brighter for psychedelic medicine

Last year, Psychedelic Stock Watch boldly concluded its review with the assessment that “better days” were ahead for psychedelic stocks.

That still remains true, although certainly those better days didn’t come this year. What is unequivocal is that the future for psychedelic medicine itself continues to get brighter.

While the Covid pandemic (sadly) continues to create much larger mental health treatment markets, the psychedelic drug industry continues to expand and develop at a very impressive pace.

One of these days, stock prices will catch up to industry realities. For those investors wanting to capitalize on this disconnect between price and value, it is unlikely there will be a better time to do your buying.