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4 Best Psychedelic Stocks In Canada to Examine in July 2024

Best Psychedelic Stocks In Canada

4 Best Psychedelic Stocks In Canada to Examine in July 2024

The world of psychedelics in Canada has gained a lot of attention over the past few years.

As mental health disorders continue to pose a considerable challenge for millions of Canadians, the potential of psychedelic-assisted therapies has become a key focus for many biotechnology companies.

By investing in psychedelic stocks, you have the chance to support companies developing new treatments for mental health disorders such as depression, anxiety, and PTSD.

Here are some of the best psychedelic stocks in Canada that could see rapid growth. 

Background on Canada’s Psychedelic Industry

In recent years, Canada has become a hub for the development of psychedelic compounds to potentially treat a variety of mental health issues. Researchers are focusing on using psychedelic substances, such as psilocybin and MDMA, to address conditions like depression, PTSD, anxiety, and addiction.

As these clinical trials progress, legal access to psychedelic compounds within a therapeutic context is gaining momentum in Canada. In 2020, the Minister of Health granted exemptions under Section 56(1), allowing cancer patients to access psychedelics for end-of-life care and other medical purposes.

Marijuana legalization seems to have opened the doors for psychedelics as well. Oregon state kick-started the legal use of psychedelics in the US in 2020. 

Canada’s progressive stance on psychedelics is giving psychedelic stocks a boost as companies develop new and innovative treatment approaches to address the critical need for improved mental health care.

About 5.4% of Canadians suffer from major depression and 4.6% from anxiety. That’s about one in every ten people suffering from one of the two most prevalent psychological issues that can rob people of their ability to function properly.

A healthier alternative to current hard medicine for the psychological issues that plague one-tenth of the population in Canada could be a potential gold mine.

The Best Psychedelic Stocks In Canada 

Psychedelics haven’t formally entered the market yet in Canada, so it’s tough to label which ones are the “best.” And most companies behind psychedelic stocks in Canada are currently just raw investment potential. 

We don’t yet understand what the legal psychedelic market will look like and what the period between medical use legalization and recreational legalization would do to the perception and performance of these stocks, so this list could change drastically in the future.

A lot of these companies are trading on various stock exchanges in Canada. You will find:

  • Most psychedelic stocks in Canada on the CSE (CNSX)
  • A handful of psychedelic stocks on NEO, TSXV, and TSX

1. Bright Minds Biosciences

Bright Minds Biosciences Stock
  • Ticker: DRUG.CN
  • Forward Dividend Yield: N/A
  • Upcoming Dividend Date: Jul 19, 2024
  • Market Cap: $6.16 Million

Bright Minds Biosciences is a Vancouver-based company with its primary lab in Wisconsin, US. It’s a pharmaceutical company with four medical compounds in the pipeline, one of which is in the first phase of Clinical studies.

The company’s pipeline and entire research approach lean heavily towards psychedelics, and its pipeline represents the second generation of psychedelics, which puts it among the field pioneers.

The company is focused on developing novel treatments for pain indications and a variety of neuropsychiatric disorders (including addictions) and seizures, which is a massive target market in North America alone.

Since the company doesn’t have a market-ready product yet, we can’t evaluate its financials in a typical manner. But its balance sheet seems healthy. There is limited debt and a decent amount of cash on hand.

It recently consolidated its shares, which might indicate its aversion to funding its operations through share dilution (unless necessary).

Its ownership structure is also promising. Insiders own about 15.8% of the company, and its former Chief Scientific Officer, Alan Kozikowski, still owns over 10% of the company.

Apart from the CEO and CFO, the remaining ten members of the leadership team are directly associated with the medical industry, primarily pharmaceutical and neurology.

If you are considering this stock, remember that even the medicine farthest in the company’s pipeline is several years away from hitting the market.

Positive factors like psychedelic-friendly legislation or medical breakthroughs may expedite the process. Still, even they might not be enough to keep the company afloat if it doesn’t manage to raise enough cash.

The stock may gain strong positive momentum once its lead drug enters the phase-2 clinical trial.

2. Numinus Wellness

Numinus Wellness Stock
  • Ticker: NUMI.TO
  • Forward Dividend Yield: N/A
  • Upcoming Dividend Date: May 20, 2020
  • Market Cap: $12.82 Million

Numinus Wellness is a psychedelic-oriented wellness company that develops psychedelic-assisted therapies for a variety of conditions.

Its portfolio of psychedelic services currently includes eight distinct services, though three of them rely upon Ketamine, which is not psychedelic per se but exhibits similar properties.

The company is different from many others on this list for a couple of reasons. The first is that it’s a revenue-generating company, though its operating income is significantly higher than the revenue it’s currently generating. Secondly, it’s already using psychedelics like MDMA and psilocybin in its therapies.

The overall service portfolio of the company is significantly larger. It includes other therapies and assistance in clinical trials, making it an important part of the overall psychedelic industry in Canada. It also has five clinics in three Canadian provinces and seven in two US states.

This geographic reach is impressive, but the cost of maintaining a large team of clinicians and therapists is quite massive, hence the operational overhead.

This may be the reason behind its aggressive share dilution, which is higher than (ironically) many pre-revenue companies on this list. It more than doubled the number of outstanding shares between 2021 and 2023.

The stock seems to mimic a positive market-wide trend, like the post-pandemic optimism of the TSX, but it’s not following the current bullish trend in the psychedelic industry. The 5.5% inside ownership is also not on par with its industry peers.

You should understand that despite its many weaknesses, it may be the most well-positioned company to benefit from a mass acceptance of psychedelics.

If they become mainstream and are backed/recommended by a variety of physicians and psychiatrists, you might see Numinus getting a massive influx of new patients, and its revenues rise proportionally, and the stock might follow.

3. MindMed

MindMed Stock
  • Ticker: MMED
  • Forward Dividend Yield: N/A
  • Upcoming Dividend Date: Jul 19, 2024
  • Market Cap: $0

MindMed is a self-proclaimed leader in brain health, and even though it’s a bold claim, one edge this company has over most other psychedelic pharmaceutical companies is a mature portfolio of drug candidates currently in its pipeline. Three out of four of its product candidates are in phase-2 clinical trials.

So even though its products may take time to reach the market, they will do so en masse. It’s also targeting some of the most prevalent medical problems. That includes generalized anxiety disorder, with 2.4 million patients in Canada and 6.8 million in the US, and ADHD, with around 7.9 million patients in both countries.

Despite being pre-revenue, it’s one of the most well-funded Canadian psychedelic companies in Canada. Its assets have consistently grown over the last three years, and just its cash and cash equivalents are seven times higher than its total liabilities. The 10% insider ownership is also a promising endorsement.

Despite these considerable strengths, you might be surprised to know that it’s trading at a fraction of its peak-time price: Around $5.5 compared to $75 per share in 2021.

It’s following the industry’s bullish and bearish patterns, but it’s perhaps the best/safest pick considering its financial position and mature product line.

However, you should also keep in mind that it may not be strong enough to survive a market-wide negative trend.

4. Cybin

Cybin Logo
  • Ticker: CYBN
  • Forward Dividend Yield: N/A
  • Upcoming Dividend Date: Jul 19, 2024
  • Market Cap: $200.94 Million

Cybin is based in Canada, but it also has a presence in Ireland, which exposes it to the broader European market.

The company has four products in the pipeline, two of which are in phase-1 clinical trials, one early stage, and one ready to move to phase-2 trials. The most mature product is for the treatment of major depressive disorder, with millions of patients around the globe.

There is a significant disparity between the available treatment and the population segment that actually benefits from it (in the US), and Cybin aims to fill that gap. Its second clinical trial product is targeting generalized anxiety disorder.

The company’s core strength is its product patents and their promising results compared to conventional therapies. Almost 20% of the company is owned by insider individuals, indicating a significant degree of trust the company’s stakeholders have for its potential.

The finances of the company are healthy but not compelling. The operational expenses are quite high, and even though the current cash and equivalents are significantly higher than current liabilities, outside funding may be required to inspire confidence in investors.

If you are looking for a good deal, Cybin stock is currently heavily discounted and may respond positively to positive trends. But remember that as a pre-revenue company, negative trends like funding challenges or delayed clinical trials may darken its long-term prospects.

Cautionary Examples

Best Psychedelic Stocks In Canada Cautionary Examples

Before we get to the specific cons of investing in psychedelic stocks, there are three specific examples I want to share to highlight the risk of this sector. All three companies traded in the CSE, and over the years, the stock has dropped quite brutally. 

  • Nova Mentis Life Science saw its stock drop 99% in less than five years (between Jan 2018 and Sep 2022)
  • BetterLife Pharma saw the stock drop 99.3% in less than five years (between Dec 2017 and Sep 2022)
  • Core One Labs saw the stock drop 99.7% in less than four years (between Dec 2017 and Sep 2021)

Benefits And Shortcomings Of Psychedelic Stocks In Canada

The benefits of investing in some of the best psychedelic stocks in Canada start with the potential.

Since many of the companies cater to both Canada and the US, even if psychedelics are nowhere near being legalized here in Canada (federally), some US states have already started the process.

A decent demand and a few contracts across the border can push many of these stocks much higher, and you might see gains akin to marijuana stocks in their glory days. 

But as you might spot in the pattern of the stocks shared as cautionary examples, it doesn’t take a lot of time for the hype to drop down and ground your investment to practically nothing. So be very cautious about waiting too long before pulling out from psychedelic stock spikes.

The most significant shortcoming when it comes to psychedelic stocks is uncertainty. We don’t know when it will be legalized and how long you might have to wait to see positive movement in your psychedelic holdings. Even if medical use is legalized, what would the regulations be?

Substances like these, which don’t just numb the senses or create euphoria but also affect perception, are likely to be more harshly controlled than marijuana and its products. And it might also prevent or delay the legalization of recreational use. 

The second major shortcoming is the bad precedent set forth by marijuana stocks. Investors might start pulling out at the smallest hint of a dip to maximize their potential gains.

This might spiral into a snowball effect, pushing the stocks lower than they deserve to be. Understanding the market dynamics might be difficult for investors not familiar with volatile asset classes. 

Regulation and Legalization

When it comes to the regulation and legalization of psychedelic stocks in Canada, it’s important to understand the role of the key regulatory entities, such as the FDA, Health Canada, and the Minister of Health.

Health Canada supervises psychedelics under the Controlled Drugs and Substances Act (CDSA).

Substances such as lysergic acid diethylamide (LSD) and psilocybin mushrooms are classified as Schedule III controlled substances, meaning the sale, export, import, production, and possession are generally prohibited.

In recent years, however, the regulatory landscape has evolved. To support the growing research and potential therapeutic benefits of psychedelics, Health Canada has been granting exemptions for the use of psilocybin in end-of-life therapy and clinical research settings.

As an investor in the psychedelics sector, you’ll also want to be aware of the Cannabis Act. Similar to the cannabis industry, psychedelic businesses may need to obtain a cultivation license from Health Canada before they can operate.

Health Canada and the Canadian Food Inspection Agency are responsible for overseeing and regulating the sale and use of psychedelic products.

Is Psychedelic Therapy Legal In Canada?

No it is not. The substance psilocybin, a naturally occurring psychedelic found in mushrooms (informally classified as “magic mushrooms”), has been banned in the country since 1974

Conclusion

Understand that psychedelic stocks are longshots, and the chances of you waiting years before you can capitalize on the gains are quite high. I wouldn’t recommend investing a big portion of your portfolio into these stocks, unless you are prepared to lose it all.

And if you are not comfortable buying them just yet, it’s a good idea to start tracking the progress of some of the best psychedelic stocks in Canada so you will know exactly when to act. 

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