Psychedelic stocks in focus with test trial results coming

The use of psychedelics for depression treatment has made substantial progress in recent years. And industry scientists and entrepreneurs in the industry are expecting FDA approval for its use in medical treatment as early as 2024.

Watch for: An important date is coming in the psychedelics industry. A Compass-sponsored trial is testing 3 different doses in over 200 patients — and the results are expected by the end of 2021.

Investing in the psychedelics industry has been anything but steady.

• Early hype in 2020 sent psychedelic stocks up triple digits — which died down at the start of 2021.
• The Defiance Next Gen Altered Experience ETF (NYSE:PSY) — a psychedelics ETF — is down 30% since its launch in May.

Two companies backed by investor and entrepreneur Peter Thiel have seen big upswings lately — likely in anticipation of the coming results. In the past month:

• Atai Life Sciences (NASDAQ:ATAI) — is up 27%.
• Compass Pathways (NASDAQ:CMPS) — is up 50%.

But there are still many roadblocks to commercializing psychedelics for medicinal purposes…

• Regulatory issues: In the US, psilocybin — an active ingredient in psychedelics — is classified as Schedule 1. Meaning “no currently accepted medical use and a high potential for abuse.”
• Slow progress: In 2019, Oregon legalized the use of psilocybin in supervised settings to treat depression — opening up the possibility for other states to follow.

Thinking of investing? Be prepared for a wild trip. Psychedelics are being compared to the early stages of cannabis legalization — which went through several cycles of boom and bust (currently in bust).

Unlike the cannabis industry, recreational use isn’t even on the tables yet (if ever). Even getting the drug approved for medical use would be a significant milestone for the industry.