ATAI - 3 Next-Gen Drug Stocks Exploring Psychedelic Frontiers

2024-07-08 07:45:54 ET

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Although psychedelic drug stocks have lost some of their earlier momentum, significant research and advancements continue under the radar. Even high-profile figures like Elon Musk reportedly use ketamine for depression , highlighting the ongoing interest in non-standard treatment protocols often associated with psychedelic stocks (though ketamine itself isn’t a psychedelic, it does fall within the “alternative therapeutics” camp that psychedelic drug stocks often occupy). Likewise, Congressman Dan Crenshaw recently took to X to tout psychedelic drugs’ potential in PTSD treatment, proving that there’s real momentum behind psychedelic drug stocks.

Johns Hopkins University, for instance, is investing over $55 million in psychedelic research, joining a growing list of institutions exploring new frontiers in mental health treatment. Public support for psychedelic therapies is also on the rise. In 2022, more than half of the national population approved of such treatments for mental health issues, and this number is likely even higher today.

From an investment perspective selecting psychedelic drug stocks can be as challenging as navigating other heavily regulated sectors like biotech. Many of these companies are research-focused, with limited revenue streams and significant political risks that could impact operations. Despite these challenges, three psychedelic drug stocks stand out as the best in their class within this niche market.

Compass Pathways (CMPS)

Compass Pathways (NASDAQ: CMPS ) stands out as a leader among psychedelic drug stocks, attracting public and investor attention in a niche market. The company’s primary focus is on the potential of psilocybin (commonly known as magic mushrooms) to treat conditions like depression, PTSD, and anorexia.

Recently, Compass Pathways announced encouraging Phase 2 trial results for its main treatment protocol, COMP360, and plans to progress to Phase 3 testing . This protocol involves the administration of psilocybin in capsule form, combined with a series of therapeutic immersive experiences to treat PTSD. According to the FDA, COMP360 is a “ Breakthrough Therapy ,” indicating its potential to significantly improve existing treatments and allow for expedited clinical testing and approval processes.

In a strategic development, Compass Pathways has partnered with Greenbrook TMS (OTCMKTS: GBNHF ) to explore new delivery models for COMP360. Greenbrook’s expertise in nasal delivery systems suggests a potential innovation in administering this treatment, signaling a move towards broader productization and anticipated FDA approval.

ATAI Life Sciences (ATAI)

Shares of ATAI Life Sciences (NASDAQ: ATAI ) surged earlier this year following the announcement of a significant investment in Beckley Psytech , a smaller competitor. The $50 million cash infusion helps Beckley to advance its research on nasally-delivered 5-MeO-DMT and intravenous psilocybin derivatives. In return, ATAI snagged a 35% stake in Beckley, significantly expanding its treatment portfolio. While ATAI’s existing portfolio primarily focuses on long-duration treatments like standard psilocybin, this new investment diversifies its offerings with shorter-acting treatment protocols. This variety allows providers to tailor treatments more effectively, enhancing therapeutic safety and efficacy.

Despite being unprofitable so far, ATAI, like many psychedelic stocks, prioritizes research and development over immediate financial returns. The company boasts strong institutional investor support, including from Peter Thiel, which signals potential upside. The continued development of ATAI’s pipeline, bolstered by these strategic investments and cash infusions, ensures sustained research efforts without incurring debt, positioning ATAI for future growth among psychedelic drug stocks.

Seelos Therapeutics (SEEL)

Penny stock Seelos Therapeutics (NASDAQ: SEEL ) is admittedly on shaky ground. The stock made headlines earlier this year with a 1-for-30 reverse split aimed at boosting its share price above the critical $1 mark to remain listed on major exchanges. Since then, shares fell back below the $1 mark and delisting may be in Seelos’ future. Still, even if it eventually trades over the counter, there’s a lot of potential present — even if Seelos is a particularly speculative pick among the wider psychedelic drug stocks segment.

What sets Seelos apart from other psychedelic stocks is its dual focus on both mental and physical health treatments. The company is developing a ketamine-based protocol for treating suicidal ideation and PTSD, which has garnered considerable attention. Additionally, Seelos is exploring treatment options for neurological conditions such as Huntington’s Disease, ALS, and Alzheimer’s. This diversified approach might seem like the company is spreading itself thin. However, it also means that adding Seelos to your portfolio could provide a unique combination of biotech and psychedelic stock potential.

On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.

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