Psychedelic stock prices are on the rise. Have we finally hit the bottom? That’s what every psychedelic medicine investor wants to know.
As someone working in the space, and someone who’s preached about the potential disrupting effects psychedelics will have on the mental health industry, I’ve had my fair share of questions sent my way during this extended market funk.
And quite the funk it’s been.
Starting in early 2021, talk of a market downturn and potential recession began to affect the markets. Tech and biotech markets were the first to feel it, as investors started moving money towards “safer” investments. This is often how it goes; the more speculative sectors are hit the hardest as markets begin to prepare for the worst.
February 2021 saw the beginning of a downward trend that disproportionately affected biotech stocks — and psychedelic medicine is, in the eyes of the wider market, one of the more speculative biotech sectors.
There were positive flashes (MindMed’s springtime NASDAQ uplist gave the industry a nice boost), but it was short-lived and by the summer of 2021 prices began their descent and we’ve faced a slow-moving bloodbath ever since.
- The Horizons “PSYK” ETF, a handy benchmark for the psychedelics industry, is down over 70%, from $8.60 on July 1st 2021, to its recent low of $2.40 in mid-May 2020
- Compass Pathways, the first company to list on the NASDAQ and the firm with the most advanced clinical trial, is down 84% in less than a year (in Oct 2021 Compass was trading at $42 in anticipation of its upcoming Phase 2b trial results, on May 11th of this year it hit $6.76)
- Fan-favorite MindMed is also down 84% from its June 2021 prices, $4.90 vs a low last week of $0.76 (CAD prices on the NEO). The number gets even worse if we go back a few months more to April 2021 and its NASDAQ-induced all-time high of $5.99.
Prices were down, but the psychedelic medicine industry was still strong
During this time, true believers and industry analysts have tried to remain focused on the facts. Despite the carnage, nothing much had actually changed in the sector. If anything, the industry was stronger than ever.
Clinical trials run by bigger players were advancing into Phase 2 and even Phase 3. Small and medium firms were advancing from speculative preclinical work to FDA-approved Phase 1 trials. Patents and IP portfolios were getting stronger. And there was a slow but steady increase in both regulatory and legislative support for psychedelics, not to mention the almost daily positive coverage in the mainstream media.
So it was just a matter of time. Of patience. Of diamond hands.
I recently spoke with Elemer Piros, analyst at Roth Capital, to discuss the state of the industry and market.
“When we issued a review in March of 2021, we had approx 20 clinical trials ongoing with these drug candidates. Today we have 40 plus trials, including Phase 1, 2 and 3. So all phases of development are covered, which will ensure that we’ll have news flow during the next 12 to 24 months. Which will be meaningful, especially if we are dealing with more advanced clinical trials.”
It seems there was a perfect storm of difficult market conditions hitting a new psychedelics industry that had just finished a big run-up in prices. A lot of early-stage and VC investors weren’t necessarily long-term investors, and with people worried about the state of the market, recessions potentially coming, COVID, inflation, etc — they started to pull their money.
But with FDA trials advancing to new stages, will we get a new crop of longer-term biotech investors who had been waiting for the industry to reach Phase 2 and Phase 3? Will this cause a new and steadier influx of capital from the market?
“Yes there were some amazing IPOs that performed wonderfully. But then there was profit taking. And if you look at their ownership today, it’s again just a handful of the original investors. Now we are waiting for some regrouping. But there are some signs in the NASDAQ and even in the biotech indexes that there is some leveling off. If inflation has peaked, I think the overall appetite to own equities, even speculative equities, will start to increase.”
So have we hit the bottom? Prices are showing that maybe we have
It seems that perhaps the shift we’ve been waiting for has finally started to happen. The last few weeks have seen some consistent upward movement, with some firms making up serious ground.
- MindMed opened today at $0.93, up 22% from its lows in May
- Atai is up 37% ($3.13 on May 11th vs $4.29 yesterday)
- Compass Pathways has almost doubled from its recent lows (hitting $13.00 today vs $6.76 on May 11th)
Good news. Very good news considering how long we’ve had to walk this desert.
And like the previous price decline, much of this is due to greater market conditions. Inflation fears have diminished. The NASDAQ is climbing. Biotech prices are increasing as well.
So what to take away from all of this? First, a bit of hope and optimism. We deserve it after 15 months of daily beatings.
Second, a confirmation. That it’s indeed not us. It’s you. The psychedelic medicine market is doing its thing, moving itself forward at a steady pace. It’s the surrounding market conditions that are the issue in this relationship. Volatile, indecisive, fearful to commit.
This industry has always been a long-term play, with a window measured in years not months. Short-term predictions are a fool’s errand, especially in this kind of space. So we will continue to be patient, a psychedelic tortoise slowly winning the race.
But in the meantime, this good news is definitely welcome. A stronger market means easier access to capital, which means companies can not only survive but continue to grow and move this whole endeavor forward.
Stay tuned for more.
