Why Smaller Psychedelics Companies Should Start Catching Up To The Sector Leaders

This concentration parallels behavior in the broader markets. But does it make any sense in a rapidly emerging sector like the psychedelic drug industry, powered by massive capital infusions?

And these capital flows have been filtering down to even the smaller players in the industry.

The largest players in the sector, notably Compass and MindMed, have raised roughly 10 - 15 times as much capital as many of the intermediate companies in this space. But their market caps are 20X to 30X greater – with ratios even more skewed versus a couple of these other companies.

Part of this disparity can be explained by the influx in new public companies. Retail investor capital among the smaller players has become somewhat diluted, as those dollars are spread across a lot more companies.

The net result is that the market caps of five companies now totally dominate this sector. And this does not appear to make sense – given the impressive dynamics of the psychedelic drug industry.

A huge opportunity, increasing exponentially in size

It was clear when investors first began gravitating to psychedelic stocks that there was a big investment opportunity on the table here.

The Mental Health Crisis.

  • 1+ billion potential consumers of psychedelic drugs
  • Game-changing results in clinical trials of psychedelic drugs
  • Wide open treatment markets due to the current abysmal standard of care

But this opportunity keeps getting bigger and bigger and bigger.

The Mental Health Crisis is not just worsening. It is spiraling out of control at an exponential rateThe Mental Health Crisis: A Pandemic Becomes A Catastrophe

Already, as many as 1 in 4 people across the planet are now suffering from some form of mental health disorder, brought on by the numerous severe stresses associated with COVID-19 lockdowns.

Meanwhile, psychedelic drug R&D is branching out into other fields of medical treatment at an equally rapid pace. And this research is targeting many of the world’s largest medical treatment markets. Biggest Opportunities for Psychedelic Drugs OUTSIDE of Mental Health?

The investment opportunity in psychedelic drugs is expanding exponentially both vertically and horizontally.

Is there room in this space for only five winners?

It’s not a question that is even worthy of an answer – not in a sector still in its infancy that has seen over US$700 million of investment capital flood into the industry, in roughly just the last 6 months.

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Disclosure: The writer holds shares in MindMed Inc, Numinus Wellness, Cybin Inc, Mind Cure Health and Novamind Inc.

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Lorimer Wilson 2 months ago Contributor's comment

Another very interesting article, Jeff. Your readers might also be interested in my latest article (updated weekly) entitled "Psychedelic Drug Stocks Category Is +6% Month-To-Date" talkmarkets.com/.../psychedelic-drug-stocks-category-is-6-month-to-date. Keep up the great work!