In this article, we discuss 10 best psychedelic stocks to buy according to hedge funds. If you want to see more stocks in this selection, check out 5 Best Psychedelic Stocks to Buy According to Hedge Funds.
Data Bridge Market Research predicts that the psychedelic drugs market will expand at a compound annual growth rate (CAGR) of 16.3% over the next eight years, resulting in a market value of $6.85 billion by 2027. The primary drivers of this growth are expected to be the rising incidence of depression and other mental health conditions in the United States, as well as a growing acceptance of psychedelic drugs as a viable treatment for depression. As per a 2020 consensus, around 26% of individuals aged 18 or older in the United States were believed to experience a mental disorder that can be diagnosed within a year, and approximately 17.3 million adults in the country have had at least one significant depressive episode. Additionally, an estimated 40 million adults in the US have anxiety disorders. These figures are predicted to rise further as a result of the aftermath of the global pandemic, which highlights the need for effective treatment options.
Clara Burtenshaw, who is a partner at Neo Kuma Ventures, the most significant venture capital fund in Europe that invests in psychedelic firms like Atai Life Sciences and Compass Pathways, told CNBC on February 16, 2023:
“Psychedelic healthcare is a very exciting area because it’s really this apex of drugs, clinics and experimental treatments.”
Psychedelic substances are composed of different types of chemicals, including lysergic acid diethylamide (LSD) and compounds extracted from plants. These substances have the capacity to modify or intensify sensory perceptions, cognitive processes, energy levels, and have even been linked to fostering spiritual encounters. The global market for antidepressant drugs is projected to surpass $20 billion by the year 2030. Due to their mind-altering properties, substances such as ketamine, psilocybin, MDMA, and LSD remain unlawful in the majority of the world. However, certain investors are now optimistic that psychedelic treatments can obtain a portion of this enormous market share. Some of the primary players in the psychedelic market include Johnson & Johnson (NYSE:JNJ), Merck & Co., Inc. (NYSE:MRK), and AbbVie Inc. (NYSE:ABBV).
Our Methodology
We selected the following psychedelic stocks based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the fourth quarter of 2022. The list is arranged in ascending order of the number of hedge fund holders in each firm.
Photo by Егор Камелев on Unsplash
Best Psychedelic Stocks to Buy According to Hedge Funds
10. Cybin Inc. (NYSE:CYBN)
Number of Hedge Fund Holders: 3
Cybin Inc. (NYSE:CYBN) is a biopharmaceutical firm that concentrates on the creation of therapeutic drugs based on psychedelic substances. The company develops drugs to treat major depression, alcohol addiction, anxiety disorders, and neuroinflammation. The company has also created EMBARK, a form of therapy that combines psychedelics and psychotherapy. Cybin Inc. (NYSE:CYBN)’s headquarters are located in Toronto, Canada. The company reported that its cash reserves totaled C$22.5 million as of December 31, 2022, and C$20 million as of February 14, 2023. Cybin Inc. (NYSE:CYBN) also plans to cut down workforce by 15% for cost saving, as it is looking at improving operational efficiency and decreasing annual cash burn rate.
On December 15, EF Hutton analyst Elemer Piros initiated coverage of Cybin Inc. (NYSE:CYBN) with a Buy rating and a $3 price target. The analyst noted that Cybin Inc. (NYSE:CYBN) is working on developing new formulations and derivatives of psychedelic drugs. The analyst believes that Cybin has devised clever methods of modifying formulations and producing deuterated analogues of psychedelic substances, resulting in unique intellectual property.
According to Insider Monkey’s Q4 data, 3 hedge funds were bullish on Cybin Inc. (NYSE:CYBN), compared to 2 funds in the prior quarter. Samuel Isaly’s OrbiMed Advisors held the largest stake in the company, comprising 5.3 million shares worth $1.65 million.
In addition to Johnson & Johnson (NYSE:JNJ), Merck & Co., Inc. (NYSE:MRK), and AbbVie Inc. (NYSE:ABBV), Cybin Inc. (NYSE:CYBN) is one of the best psychedelic stocks to invest in.
9. Seelos Therapeutics, Inc. (NASDAQ:SEEL)
Number of Hedge Fund Holders: 4
Seelos Therapeutics, Inc. (NASDAQ:SEEL) is a New York-based clinical-stage biopharmaceutical company, focused on the development and commercialization of therapeutics for the central nervous system, respiratory, and other disorders. On March 10, the company announced that it is planning to raise nearly $11.24 million in gross proceeds via a registered direct offering of its common stock and warrants. It is one of the best psychedelic stocks to invest in.
On February 13, Seelos Therapeutics, Inc. (NASDAQ:SEEL) announced that it has completed the enrollment of its Phase II/III trial, which is part of the HEALEY ALS Platform Trial, for its investigational treatment SLS-005 that is being developed for the treatment of amyotrophic lateral sclerosis. Seelos Therapeutics, Inc. (NASDAQ:SEEL) is now planning to launch an Expanded Access Program (EAP) in late Q1 of this year. The EAP will be fully funded by a grant from the NINDS under the ACT for ALS program. The company intends to enroll 70 patients in an open-label study that will last for 24 weeks. The study will evaluate the efficacy of SLS-005 in patients with ALS who do not meet the requirements for other ongoing clinical trials, providing them with an opportunity to receive experimental treatment that would otherwise be unavailable to them.
According to Insider Monkey’s fourth quarter database, 4 hedge funds were bullish on Seelos Therapeutics, Inc. (NASDAQ:SEEL), compared to 9 funds in the earlier quarter. Jeffrey Gendell’s Tontine Asset Management is the largest stakeholder of the company, with approximately 5 million shares worth $3.3 million.
8. Mind Medicine (MindMed) Inc. (NASDAQ:MNMD)
Number of Hedge Fund Holders: 6
Mind Medicine (MindMed) Inc. (NASDAQ:MNMD) is a New York-based clinical stage biopharmaceutical company that develops novel products to treat brain health disorders related to psychiatry, addiction, pain, and neurology. The company had cash and cash equivalents of $142.1 million at December 31, 2022. It is one of the best psychedelic stocks to invest in according to smart investors.
On December 15, Elemer Piros, an analyst at EF Hutton, started coverage of Mind Medicine (MindMed) Inc. (NASDAQ:MNMD) with a Buy rating and a price target of $21. According to the analyst, Mind Medicine (MindMed) Inc. (NASDAQ:MNMD) has revitalized the clinical development of LSD, which is the oldest psychedelic substance in the Western world. The company has initiated the first randomized, controlled efficacy trial sponsored by the industry for any indication using LSD. Additionally, the company has sufficient cash reserves to support its operations for more than two years, as per the analyst.
According to Insider Monkey’s fourth quarter database, 6 hedge funds were long Mind Medicine (MindMed) Inc. (NASDAQ:MNMD), compared to 4 funds in the prior quarter. Anand Parekh’s Alyeska Investment Group is the largest stakeholder of the company, with 1.10 million shares worth $2.42 million.
7. COMPASS Pathways plc (NASDAQ:CMPS)
Number of Hedge Fund Holders: 10
COMPASS Pathways plc (NASDAQ:CMPS) is a London-based mental health care company that focuses on the treatment of treatment-resistant depression and post-traumatic stress disorder. The company reported cash and cash equivalents of $143.2 million as of 31 December 2022, compared to $273.2 million as of 31 December 2021. It is one of the best psychedelic stocks to invest in.
On December 15, EF Hutton analyst Elemer Piros initiated coverage of COMPASS Pathways plc (NASDAQ:CMPS) with a Buy rating and a $38 price target. According to the analyst, COMPASS Pathways plc (NASDAQ:CMPS) is likely to be the first company to use a psychedelic drug to treat refractory depression. The analyst believes that the company is in a strong position to introduce psilocybin to the global market for treatment-resistant depression, by conducting clinical trials that meet the requirements of regulatory agencies.
According to Insider Monkey’s fourth quarter database, 10 hedge funds were bullish on COMPASS Pathways plc (NASDAQ:CMPS), compared to 15 funds in the prior quarter. ARK Investment Management is the biggest stakeholder of the company, with 1.2 million shares worth approximately $10 million.
6. GH Research PLC (NASDAQ:GHRS)
Number of Hedge Fund Holders: 13
GH Research PLC (NASDAQ:GHRS) was incorporated in 2018 and is based in Dublin, Ireland. It is a clinical-stage biopharmaceutical company, engaged in developing therapies for the treatment of psychiatric and neurological disorders. The company reported that its cash holdings were $256.9 million as of September 30, 2022, compared to $276.8 million as of December 31, 2021.
On March 10, Canaccord maintained a Buy rating on GH Research PLC (NASDAQ:GHRS) but lowered the target price on the shares from $41 to $35. According to the firm, the estimated launch timeline for GH001 for TRD has been delayed by a year to 2028E, based on the assumed clinical trial timelines, which is the reason for the lowered target price.
According to Insider Monkey’s fourth quarter database, 13 hedge funds were long GH Research PLC (NASDAQ:GHRS), compared to 14 funds in the earlier quarter. Mark Lampert’s Biotechnology Value Fund / BVF Inc is the biggest position holder in the company, with 9.2 million shares worth approximately $90 million.
Like Johnson & Johnson (NYSE:JNJ), Merck & Co., Inc. (NYSE:MRK), and AbbVie Inc. (NYSE:ABBV), GH Research PLC (NASDAQ:GHRS) is one of the best psychedelic stocks to monitor.
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Disclosure: none. 10 Best Psychedelic Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.