Was 2021 the Year Psychedelics Conquered Capitalism?
Or was it the other way around?
Witnessing an entirely new industry being created from scratch is a rare and historic event, one that brings with it tremendous opportunity for investors and entrepreneurs alike.
If 2020 was the year psychedelics companies were placed on the map, 2021 was when they began expanding their territory and entering the realms of big finance and mainstream capital.
With scientific evidence for the therapeutic potential of psychedelic substances becoming harder to ignore, this year numerous companies developing psychedelic drugs into viable medical treatments received institutional support from major U.S. exchanges and legacy investment banks.
While overall sector performance became subpar during the latter half of the year, 2021 was definitely a win for the psychedelics sector, which is steadily building on a firm bedrock toward the development of a paradigm-shifting disruption in mental health treatment.
Psychedelics companies hit major U.S. exchanges
In 2021, the psychedelics industry disembarked on Wall Street, providing it exposure to millions of retail investors around the globe.
The 2020 go-public rush that launched dozens of psychedelics companies into venture exchanges in Canada and the U.S. OTC market became impossible to ignore when several of these companies began uplisting into major U.S. Exchanges like the NASDAQ and the NYSE.
In October, the number of psychedelics companies listed in the U.S. reached 50. Nine of these are currently listed on the NASDAQ and the NYSE, including:
- Atai Life Sciences
- Compass Pathways
- Field Trip Health, Inc.
- Seelos Therapeutics
- Enveric Biosciences
- Pasithea Therapeutics Corp.
- GH Research
- Cybin Corp
The first psychedelics ETFs are born
Growing attention towards the psychedelics space translated into the launch of the first psychedelics-focused exchange-traded funds.
The Horizons Psychedelic Stock Index ETF (NEO: PSYK) became the first ETF to focus solely on the psychedelics industry, debuting in Toronto’s NEO exchange in late January.
Horizons was followed by Defiance ETF, which launched the Defiance Next Gen Altered Experience ETF in May, becoming the first psychedelics ETF to go public in the U.S.
Both these ETFs are passive, meaning they each track a specific index that is restructured periodically.
In September, AdvisorShares launched the country’s first actively managed ETF covering the psychedelics sector: the AdvisorShares Psychedelics ETF.
Private funding nearly doubles
While many psychedelics start-ups chose to list on public exchanges as a strategy for raising growth capital, others relied on private placements, which reached record numbers in 2021.
According to a November report by CB Insights, equity funding in the space reached $595 million by the end of October, in 45 different deals. At that run rate, the company projects 55 overall deals this year, possibly surpassing $724 million by the year-end. This figure would double 2020’s added sum of $358 million.
CB Insights notes that almost half of the deals (48%) went into drug research and developing, a vertical with the sector’s highest barrier to entry, but also promises significant returns in the medium term.
This newly found capital availability made way for hundreds of new start-ups that sprouted around psychedelics. It is estimated there are at least 10 times as many private start-ups in the space as there are publicly-listed companies.
Investment banks jump into the mush rush
As yet another mark of psychedelics’ graduation into the big leagues of finance, several investment banks and financial services firms launched coverage of companies in the sector.
RBC Capital Markets, Cantor Fitzgerald, Credit Suisse, Citigroup, Aegis Capital, Berenberg, Canaccord Genuity, Cowen & Co, Roth Capital and Maxim Group now provide analysis on the most prominent psychedelics companies, with very promising ratings often in the Buy or Outperform categories.
Regulation, media presence and scientific progress
The financial tailwinds the psychedelics industry received this year are a reflection of events happening on a much broader scale, supported by an entire growing ecosystem composed of regulatory victories, private and academic research progress and a shift in public acceptance.
On the regulatory front, several new jurisdictions decriminalized psychedelic substances this year including Detroit, Seattle, four Boston suburbs and several cities in Massachusetts and California.
The progress of psychedelics legalization at the state level also reached unprecedented levels with a number of states, including Texas, California, Florida, Colorado, New York, Michigan, Massachusetts, Pennsylvania, Vermont, Iowa, Missouri, Connecticut and Maine, either presenting or passing bills meant to expand therapeutic access to psychedelic substances.
Scientific progress towards a better understanding of psychedelic molecules and their interactions with the human body and mind also grew substantially during 2021. Several universities and research institutions undertook new programs dedicated to the study of psychedelics, including New York University, UC Berkeley Center, UT Austin, Icahn School of Medicine at Mount Sinai and University of Wisconsin–Madison.
Academic research into psychedelics was also encouraged to grow via partnerships between for-profit companies and academic institutions looking to fund their research, like Mydecine Innovations’ (NEO: MYCO) research agreement with Johns Hopkins University and Atai’s Partnership With Harvard's Massachusetts General Hospital.
Lastly, the media played a substantial role in disseminating the therapeutic potential of psychedelic treatments. Psychedelics were featured in cover stories published in the New York Times, the LA Times and the Washington Post and became the central theme in several TV shows and documentaries, including "Nine Perfect Strangers," a miniseries starring Nicole Kidman, which made its debut on Hulu in August.