In this piece, we will take a look at the 11 most promising psychedelic stocks according to hedge funds. If you want to skip our overview of the psychedelic industry and the latest news, then you can take a look at the 5 Most Promising Psychedelic Stocks.
The ability to use chemicals to alter one’s mind has been in play for human beings for hundreds if not thousands of years. Psychedelics have been used for thousands of years by ancient societies, and even in 2023, they remain a cultural significance for tribes in Latin America and Africa. One of the more well-known cultural psychedelics is the Ayahuasca, used by the indigenous peoples in South America.
A psychedelic is not your everyday drug or controlled substance. Unlike marijuana, cocaine, or other substances, psychedelics are quite strong, and for their users, they are a gateway to an alternate reality. Apart from Ayahuasca, other psychedelics such as N, N-dimethyltryptamine (DMT), Lysergic acid diethylamide (LSD), Mescaline, and Psilocin are chemically derived and purified forms that are quite strong as well.
There are several different use cases for psychedelics. One of the most well-known uses is for recreational purposes, with party goers often amplifying their experience by transporting themselves into their own ‘metaverse’. However, another use case for these drugs that has grown in popularity recently is medicinal use. A growing awareness about mental illnesses and diseases like depression has also made researchers look for alternative ways to treat these diseases. Depression, for those out of the loop, is a chemical imbalance in a patient’s brain, and psychiatry typically seeks to treat it through a combination of medicine and behavioral therapy. These drugs typically regulate brain chemicals called serotonin and dopamine due to their effects on the mood.
These days though, researchers are also studying if the use of psychedelics can prove to be beneficial for mental health patients. While it’s come under the media’s radar recently, research about the potential benefits of psychedelics for patients with mental health diseases is actually quite old. It first took place in the 1980s, but the steam died down once psychedelics were classified as Schedule I substances under the Controlled Substance Act.
Since it’s a controlled substance, medical research surrounding psychedelics is also limited to strictly controlled environments. After all, you cannot just simply go to your pharmacy and buy LSD, and as a result, researchers have to make sure that they follow stringent requirements when working with these substances. Additionally, as 2023 heads to a close, it has also marked a shift in the tide when it comes to psychedelic research as universities all over the world have now established their own centers. Universities such as Johns Hopkins, Imperial College, University of Texas, the Mount Sinai Medical School, and others have dedicated psychedelic research centers. At the same time, 2023 also saw Australia take the lead in the medical use of psychedelics as a treatment for treatment resistant depression and post traumatic stress disorder. Treatment resistant depression is one of the toughest diseases to beat since standard depression medication such as Selective Serotonin Reuptake Inhibitors (SSRIs) or Monoamine oxidase inhibitors (MAOIs) often fails to improve the patient’s quality of life.
The psychedelics authorized for medical use in Australia are substances that are typically found in the party drug ecstasy and magic mushrooms. Since the medicinal uses of psychedelics are still limited, market research reports peg the industry with double digit growth rates. For instance, one report that looks at the ‘advanced visualization market’ and it estimates that the market worth $2.3 billion in 2022 and is expected to grow at a compounded annual growth rate (CAGR) of 13.3% to be worth $6.4 billion by the end of 2030. The research identifies several factors that will prove to be tailwinds for the global psychedelic market. These include a rise in therapeutic applications, a rising awareness about mental health, a growing prevalence of mental health disorders, and growing research into these drugs.
Naturally, where there’s a market, there are companies seeking to use it to make money. This is also the case with the global psychedelic market, as several firms are developing the drugs and running programs to evaluate their efficacy. For instance, COMPASS Pathways plc (NASDAQ:CMPS) shared the results of its COMP360 psilocybin treatment’s phase 2 clinical trial in December 2023. In this study, 22 patients with post traumatic stress disorders resulting from adult trauma were evaluated. According to the company, the test subjects were given a 25mg single dose of the COMP360, and they did not face any adverse reactions or side effects. Compass Pathways is also running a phase 3 study program of its drug, which it states is the largest of its kind to be ever conducted. Crucially for current and future researchers though, since the trials are legally approved, their data is recorded and stored for further research to create a new avenue of treatment for depression patients.
Today, we’ll look at the most promising psychedelic stocks according to hedge funds. The top three psychedelic stocks are Intra-Cellular Therapies, Inc. (NASDAQ:ITCI), Alkermes plc (NASDAQ:ALKS), and Sage Therapeutics, Inc. (NASDAQ:SAGE).
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Our Methodology
To make our list of the most promising psychedelic stocks according to hedge funds, we ranked the holdings of the AdvisorShares Psychedelics ETF by the number of hedge funds that had invested in them as of Q3 2023 end.
11 Most Promising Psychedelic Stocks According to Hedge Funds
11. NRx Pharmaceuticals, Inc. (NASDAQ:NRXP)
Number of Hedge Fund Investors In Q3 2023: 3
NRx Pharmaceuticals, Inc. (NASDAQ:NRXP) is an American biotechnology company headquartered in Wilmington, Delaware. The firm is developing treatments for depression and other ailments. It progressed in its efforts to use ketamine for suicidality in depression patients in December 2023 by signing an agreement with Columbia University to share the data.
By the end of Q3 2023, three out of the 910 hedge funds part of Insider Monkey’s database had held a stake in NRx Pharmaceuticals, Inc. (NASDAQ:NRXP). It joins Alkermes plc (NASDAQ:ALKS), Intra-Cellular Therapies, Inc. (NASDAQ:ITCI), and Sage Therapeutics, Inc. (NASDAQ:SAGE) in our list of the most promising psychedelic stocks according to hedge funds.
10. Mind Medicine (MindMed) Inc. (NASDAQ:MNMD)
Number of Hedge Fund Investors In Q3 2023: 3
Mind Medicine (MindMed) Inc. (NASDAQ:MNMD) is developing treatments for anxiety, ADHD, and autism. The firm has beaten analyst EPS estimates in two out of its three latest quarters and the stock is rated Strong Buy on average.
As of September 2023 end, three out of the 910 hedge funds profiled by Insider Monkey were the firm’s shareholders. Israel Englander’s Millennium Management was Mind Medicine (MindMed) Inc. (NASDAQ:MNMD)’s largest shareholder due to its $743,297 stake.
9. Atai Life Sciences N.V. (NASDAQ:ATAI)
Number of Hedge Fund Investors In Q3 2023: 5
Atai Life Sciences N.V. (NASDAQ:ATAI) is a German biotechnology firm developing treatments for mental health disorders and opioid addiction. It ended its third quarter with $209 million in cash and equivalents which the company believes should be sufficient to fund its operations until 2026.
By the end of this year’s third quarter, five out of the 910 hedge funds covered by Insider Monkey had invested in Atai Life Sciences N.V. (NASDAQ:ATAI). The firm’s biggest investor is John Overdeck and David Siegel’s Two Sigma Advisors as it owns 107,500 shares that are worth $138,675.
8. Seelos Therapeutics, Inc. (NASDAQ:SEEL)
Number of Hedge Fund Investors In Q3 2023: 5
Seelos Therapeutics, Inc. (NASDAQ:SEEL) is developing ketamine based treatments for people with suicidal ideation and major depression. Its shares were under stress in December 2023 when the company announced that it plans to raise more capital through a mixed offering.
Insider Monkey dug through 910 hedge funds for their September quarter of 2023 shareholdings and found that five had invested in the company. Seelos Therapeutics, Inc. (NASDAQ:SEEL)’s largest shareholder is Hal Mintz’s Sabby Capital courtesy of its $2.1 million investment.
7. Vistagen Therapeutics, Inc. (NASDAQ:VTGN)
Number of Hedge Fund Investors In Q3 2023: 7
Vistagen Therapeutics, Inc. (NASDAQ:VTGN) is a small biotechnology company headquartered in San Francisco, California. The firm’s investors were dealt with shocking news in December 2023 when Jefferies downgraded the stock to Hold from Buy and slashed the price target to $0.20 from $8.
As 2023’s third quarter ended, seven among the 910 hedge funds tracked by Insider Monkey were Vistagen Therapeutics, Inc. (NASDAQ:VTGN)’s shareholders. Out of these, the biggest investor was Egen Atkinson and Michael Kramarz’s Commodore Capital through its $8.2 million stake.
6. GH Research PLC (NASDAQ:GHRS)
Number of Hedge Fund Investors In Q3 2023: 10
GH Research PLC (NASDAQ:GHRS) is an Irish firm seeking to use DMT to develop treatments for mental health ailments. Even though the firm has beaten analyst EPS in all three of its latest quarters, the stock is down by more than 40% year to date.
Ten out of the 910 hedge funds surveyed by Insider Monkey during Q3 2023 had invested in the company. GH Research PLC (NASDAQ:GHRS)’s largest shareholder is Mark Lampert’s Biotechnology Value Fund / BVF Inc as it owns $93.2 million worth of shares.
Intra-Cellular Therapies, Inc. (NASDAQ:ITCI), GH Research PLC (NASDAQ:GHRS), Alkermes plc (NASDAQ:ALKS), and Sage Therapeutics, Inc. (NASDAQ:SAGE) are some top hedge fund psychedlic stocks.
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Disclosure: None. 11 Most Promising Psychedelic Stocks According to Hedge Funds is originally published on Insider Monkey.
