It started with cannabis. But now, it’s mushroom. Start-ups are making promising advances in treating depression and trying to bring illegal substances to the mainstream.

Projections for the industry vary but psychedelic business and media platform Psych’s recently released third Psychedelics as Medicine report claimed the market currently valued at $190million (£138million) could exceed $2.4billion (£1.74billion) by 2026.

But potential investors should remember that’s a bold projection from an organisation with a vested interest in the field’s success, and as with any fledgling industry, investing in psychedelic firms is a high risk endeavour.

However, many studies and trials have shown the potential benefits of psychedelics to treat certain mental disorders. The rapidly expanding legal marijuana industry is paving the way for future success.

Psychedelics may bring to mind ideas of trippy illegal drugs but promising medical advances are being made for treating mental illness

Although the idea of psychedelics can bring up thoughts about trippy, illegal drugs, there are promising medical breakthroughs being made in treating mental illnesses.

The topic of mental health is important in major Western economies. With more people accepting and openly talking about problems, improvements to the mental wellbeing are seen as a direct link with physical healthcare.

According to the World Health Organisation, depression is an epidemic worldwide. It affects more than 265 million people.

The number of cases of depression is increasing. Covid-19 lockdowns can also contribute to widespread mental problems. However, the acceptance of the use of psychotropics in medicine is growing.

Companies involved in this area are the leaders of the treatment. Many are performing tests with psychedelics which are not legal for personal use. This includes magic mushrooms, which grow naturally throughout Britain. It is illegal to have them.

Additionally, psychedelic treatment company investing can be compared to backing high-risk biotechs. Share prices could rocket or plummet depending on test results.   

What does the pioneer of psychedelic drugs do?

The early stages of psychedelics are disruptive. You can choose from many forms of psychedelic therapy. Some businesses use legal doses of DMT, psilocybin and ketamine.

What are the UK’s options for obtaining psychedelics from investors? 

If you’re keen to invest despite the risks, it’s possible but not so simple for UK investors. 

There is one problem: at the time this article was written, no UK stock exchanges had such companies.

US and Canadian shares can, however, be accessed through DIY investing platforms and popular trading apps, such as Trading 212 and Freetrade.

The extra cost of investing overseas with certain platforms should not be ignored by investors.  

Although ETFs, exchange traded funds (ETFs), that are exposed to psychedelics were launched only in the US. 

Unfortunately ETFs, like Horizons ETF North American Psychedelic Index (PSYK) and Defiance Next Gen Altered Experiences aren’t available on the likes of Freetrade, Hargreaves Lansdown, Interactive Investor and AJ Bell because they fall short of UK investment rules which state that retail funds must have a KIID (Key Investor Information Document).

A spokesperson for Freetrade says: ‘Effectively it’s a short two pager that outlines the strategy, risks, charges, and other considerations that investors should consider before investing.’

But that’s not to say that similar ETFs won’t be launched in the UK in the future.   

Last month Boris Johnson said he would examine the latest advice on the legalisation of psilocybin – a psychedelic found in magic mushrooms following calls from Tory MP Crispin Blunt, who highlighted its ‘exciting potential’ for the treatment of mental health conditions like depression, trauma, and addiction.

Alastair Moore, co-founder of The Hanway Company, which incubated UK-based psychedelic specialist research organisation Clerkenwell Health, says: ‘It is really one of the few new sectors trying to solve mental health – very few have fresh solutions. It’s early on so would have a potential of good returns.’ 

In addition to treating depression, psychedelics can also be used for other conditions. 

David Kimberley, analyst at trading app Freetrade, says: ‘UK-based Compass Pathways and US firm MindMed are both trying to develop treatments for various mental health problems, ranging from ADHD to depression, by using psychedelics.’

This space is home to Compass Pathways and MindMedicine as well as Alphagreen Group, Atai Life Sciences and Beckley Psytech. Novamind, Clerkenwell Health (Pastithea Therapeutics), Field Trip Health, and Braxia Scientific are just a few of the companies that operate in it.

Compass Pathways has a UK presence. Alphagreen Group and Beckley Psych are also present, as is Clerkenwell Health. Atai Life Sciences, a German biotech firm, holds the majority stake in UK-based Compass Pathways.

These companies and others are either in the US, Canada or both. The US legislation is more supportive of the use of psychedelics for treatment.

However, such investments are considered high-risk because most of them are still in the clinical trial phase. 

UK clinical psychedelic trial 

Only a handful of registered, limited-scale clinical trials are legal ways to get psychedelic treatments in the UK. They have started to occur in Britain. 

Pasithea Therapeutics, for example, launched a ketamine IV infusion treatment clinic at Zen Healthcare’s Knightsbridge clinic last month.

Compass Pathways, a British mental health company, announced this month positive results for psilocybin treatment it performed on 233 people in America, Europe and the UK. 

The company said the objective of the trial was to ‘find the appropriate dose for a larger, pivotal phase III programme’ which will begin next year. 

British mental healthcare company Compass Pathways announced positive results from therapy treatment using psilocybin, the psychedelic compound that naturally occurs in magic mushrooms, such as the liberty cap pictured that grows wild in the UK

British mental healthcare company Compass Pathways announced positive results from therapy treatment using psilocybin, the psychedelic compound that naturally occurs in magic mushrooms, such as the liberty cap pictured that grows wild in the UK 

But despite such clinical trials taking place on British soil, there’s still hesitancy about listing companies that specialise in this form of treatment in the UK. 

Therefore, many UK firms have flocked to the US or Canada to list on the Nasdaq or Toronto’s Neo Exchange, including Compass Pathways, Pasithea and MindMedicine Inc.

Alexej Pikovsky, CEO and founder of acquisition and incubation platform Alphagreen Group, which focuses on health and wellness brands, explains: ‘Most of the psychedelics for healthcare companies are listed in Canada. 

“Like Canada’s marijuana industry, Canada enjoys a very favorable regulatory framework when it comes cannabis and psychedelics listings. 

“A lot of US businesses” [specialising] in psychedelics also list in Canada.’

However, the lack of UK registration isn’t stopping early-stage investors from investing. Angel investors and celebrities are supporting these firms with investment.

For example, Beckley Psytech raised £58million in venture capital for its research programmes and Pasithea Therapeutics raised $24million (£17.39million) at its initial public offering (IPO) on the Nasdaq. 

It is risky and difficult to pick a winner in psychedelics.

You should not invest in a start-up that is psychedelic. Unless you’re an industry expert, it will be hard ascertaining which ones are likely to ultimately be championed by regulators and the medical profession.

Dennis O’Neill, president of Biomedican, says that many of these companies are no more than very weak concepts. 

He says: ‘Although the potential for psychedelics for treating a vast array of mental health problems is significant, there will be ultimately no more than a handful of companies that will be successful long-term.’

It will only be a small number of successful companies who will last the test of time. 

Distinguishing between those that are merely in the research and development (R&D) phase and those close to or in an actually doing business stage is vital, because this could determine how your investments perform.

Referring to Compass Pathways and MindMedicine as examples, Kimberley says: ‘As with cannabis, the efficacy of these treatments isn’t completely clear yet and both firms are focused heavily on R&D, as opposed to actually selling products.

‘That means neither firm has been able to deliver strong returns for investors so far, other than perhaps some speculators. 

‘Like lots of other early-stage medical companies, Compass and MindMedicine have seen erratic movements in their share price since going public.’

But Kimberley doesn’t put Field Trip Health in the same category. ‘Field Trip is a slightly different story. It is more like a high-end travel company than a medical business, as it operates clinics and supplies patients with legal doses of Ketamine.

‘That makes a path to profitability a bit clearer, and the firm is already making money from its business operations. The company also wants to develop its own psychedelic treatments. 

‘Again, that will take time to develop and get approval for, so it will be interesting to see how much it can grow the existing part of its business before that happens, if indeed it happens at all.’

They are more of a long-shot wager than an investment.

Many believe backing the winner of this sector without luck will prove difficult for average investors.

Investors who feel tempted to buy volatile stocks should adopt a portfolio strategy and limit their allocation to them.  

Kimberley explains: ‘Regardless of whether you’re selling psychedelics or a headache cure, finding a medicine that works and then getting it regulatory approval is a long, uncertain, and arduous process, with a low success rate.

‘What that tends to mean is investors treat them more like a long-shot bet. 

You can take the plunge now and buy. This will likely lead to trip-like dives and dips. 


Freetrade Analyst David Kimberley

‘There’s a good chance they won’t pay off, but if they do then you can see very high returns. However, hype can make things more complicated. If investors think something is going to be the next ‘big thing’ in the medical world, they’ll often pile into it.

‘Taking the plunge and buying now is likely to lead to some trip-like dips and dives. Waiting a while to see if they can make and sell products and services may mean less money but it’s also a lot less risky.’

When it comes to investing, doing your research can be very beneficial. But, with some luck, you might find some great deals by conducting in-depth research.

Dr. Tiago Reis Marques, CEO of Pasithea Therapeutics, says: ‘Pay attention to the expertise steering the company and where the investment will go.

‘Companies like us that have clinical infrastructure in place and a strong track record in academic and clinical research in this field will be able demonstrate to prospective investors that they can operate a profitable business and scale and grow. Bad actors or actions can occur in all sectors.’

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