The use of psychedelic drugs to treat mental health conditions is not a new concept. In fact, during the 1950s and early 1960s, a small group of avant-garde psychiatrists pioneered research that illustrated the therapeutic benefits of psychedelics, but these efforts were discontinued due to sweeping political and societal changes that led to the criminalization of psychedelic drugs in the U.S.
Over the past two decades, researchers have been slowly rediscovering the value of psychedelics in mental health treatment, with the most rapid progress being within the last three years. Covid-19 has been a driving force behind this renewed interest in this category because mental health concerns remain a critical issue across the country, with 4 in 10 American adults reporting symptoms of anxiety or depressive disorder during the pandemic, up from one in ten from January to June 2019. From celebrities touting the benefits of microdosing, to the onslaught of new clinical trials, start-ups, and pharmaceutical companies announcing drug development plans, psychedelics have become de-stigmatized, and even decriminalized in some regions, as they begin to enter into the mainstream.
This progress then begs the question: What’s next for this burgeoning sector?
With the groundswell of positive sentiment and research in the pipeline, the medicinal psychedelic drug industry could be on the cusp of realizing its full potential, creating opportunities for savvy investors to tap into this growing segment on the ground floor. Below is an overview of the psychedelic drug space, along with a look at what’s ahead from a clinical standpoint, to help investors make informed decisions about how to access this exciting category in a way that aligns with their risk profile and investment goals.
The Evolution and Explosion of Psychedelic Drugs
Psychedelics have a long history of use in traditional medicine for their perceived ability to promote physical and mental healing. First discovered in 1938, the psychedelic properties of lysergic acid diethylamide (LSD) were not uncovered until 1943. From there, scientists and government intelligence agencies took an interest in these drugs due to their hallucinogenic properties, with a particular focus on using drugs like LSD as a “truth drug.” By the 1950s, research into the efficacy of psychedelics in the treatment of mental disorders flourished, gaining widespread acceptance from the scientific community. As these types of drugs became more conventional, the term “psychedelic,” which means “mind manifesting,” was coined in the mid to late 1950s by Humphry Osmond, who successfully treated nearly 2,000 patients with an addiction to alcohol with LSD. Now in the collective conscious of the general population, the use of therapeutic psychedelics grew exponentially for the next decade, heralded as a viable medical treatment for disorders like addiction, PTSD, depression, and anxiety.
Then came the 1960s when there was a pendulum shift in the acceptance of psychedelics due to a confluence of societal and political pressures. Consequently, hallucinogenic drugs captured the attention of the counterculture as stories about bad trips and psychotic breaks began to circulate, overshadowing the medicinal benefits of these drugs and resulting in a “moral panic.” Unfortunately, research into the viability of using these drugs as a therapeutic treatment option for mental health conditions ground to a halt and efforts in drug development and delivery were abandoned due to unfruitful controlled clinical trial results, the pharmaceutical industry’s lack of interest in funding additional trials, tighter regulation of pharmaceutical research, and Richard Nixon’s “War on Drugs.”
Interest was renewed in the 1990s, spurred by the work of a researcher and psychiatry professor named Charles Grob, who is renowned for testing and gaining approval for the use of MDMA and psilocybin to treat anxiety in terminally ill cancer patients. Since then, countless studies have been completed that have shown that psychedelics are physiologically safe and do not lead to addiction, even though they are still illegal worldwide. For example, an article published in Nature Medicine in May 2021 presented the results of a clinical trial that concluded “MDMA-assisted therapy is highly efficacious in individuals with severe PTSD, and treatment is safe and well-tolerated.” A 2021 article published in JAMA Psychiatry presented the results from a clinical trial that found “psilocybin-assisted therapy was efficacious in producing large, rapid, and sustained antidepressant effects in patients with major depressive disorder.” Ketamine has proven to be an effective treatment for depression that does not respond to other treatments, and the use of psychedelic medicines in hospice/end of life care is also gaining steam among scientists and researchers.
Covid-19 and the ensuing pandemic have shined a light on the pervasiveness impact of mental health issues hampering people’s ability to function on a day-to-day basis. This increased awareness has helped push the advancement of the psychedelic drug space to the next level, leading to policy changes that have decriminalized some psychedelic drugs in places like Oregon, Santa Cruz, Oakland, Seattle, and Denver. Partnerships between established pharmaceutical companies and psychedelic biotech companies — such as Mindset Pharma (CNSX: MSET) (OTCMKTS: MSSTF) and Otsuka Pharmaceutical — are being forged to bring new psychedelic drugs to market.
What Should Investors Know as Psychedelics Make Their Way to Wall Street?
The bottom line: the future looks bright for psychedelic drugs and their foray into the mainstream.
According to some industry analysts, psychedelics are the next billion-dollar industry, illustrating the favorable trajectory in which this sector is headed. Of course, all of this bodes well for educated investors who understand their tolerance for risk and investment goals, as new investment vehicles come to market in North America that provide unprecedented access to this dynamic category.
Like the evolution of the cannabis segment, this industry is in its infancy right now as prior perceptions of recreational drug use break away, revealing the potential for an untapped, game-changing medical phenomenon. Regulatory hurdles are being stripped away at the same time as capital is being injected into the drug discovery and development pipeline, pointing to the continued expansion of the psychedelic space now and into the coming years.
Investors should educate themselves on the most effective means of tapping into this market now, or work with a financial advisor that can help them invest in this nascent sector. This sector is one to keep an eye on as it continues to evolve, with new products, like exchange traded funds (ETFs), becoming available to investors who are looking to take advantage of current market conditions.
Tim Collins is the CEO of Elemental Advisors Inc. and manager of the PSYK ETF
